Commercial energy glossary (Electricity & gas terms explained)

The rule-maker for Australia’s electricity and gas markets. The AEMC develops and maintains the National Electricity Rules, National Gas Rules, and National Energy Retail Rules. It is an independent statutory body that assesses rule change requests submitted by industry participants, governments, and consumer groups, and it advises Australian energy ministers on the development of energy markets and policy. The AEMC is one of three national energy market bodies, working alongside AEMO (which operates the markets) and the AER (which enforces the rules and oversees network pricing).

Operates Australia’s electricity and gas markets and manages system security and settlement processes. AEMO runs the National Electricity Market and the wholesale gas markets, matching supply and demand in real time and dispatching generation to keep the power system stable and secure. It also handles market settlement between generators, retailers, and network operators, publishes demand and pricing data, and leads long-term system planning through documents such as the Integrated System Plan. AEMO is one of three national energy market bodies, working alongside the AEMC (which makes the market rules) and the AER (which enforces the rules and oversees network pricing).

The regulator responsible for enforcing energy market rules and overseeing network pricing determinations. The AER monitors and enforces compliance with the National Electricity Rules, National Gas Rules, and National Energy Retail Rules, and takes action against breaches. It sets the maximum revenue that electricity and gas network businesses can recover through their charges, which feeds directly into the network tariffs passed through on business energy bills. The AER also sets the Default Market Offer, publishes wholesale market performance reports, and administers retail protections for energy customers. It is one of three national energy market bodies, working alongside the AEMC (which makes the market rules) and AEMO (which operates the markets).

Costs associated with maintaining grid stability and system services. Ancillary services keep the power system operating within safe technical limits, balancing supply and demand second by second, holding frequency and voltage within range, and providing reserves that can respond quickly if a generator or transmission line fails unexpectedly. AEMO procures these services (the largest category being Frequency Control Ancillary Services, or FCAS) and recovers the cost from market participants. For business energy customers, ancillary charges are a pass-through component of the bill: they are set through the wholesale market rather than by the retailer, and are broadly the same regardless of which retailer supplies the site.

A measure of total power supplied to a site, used in demand charge calculations. Apparent power (measured in kilovolt amperes, kVA) combines the “real” power that does useful work (running motors, lighting, and equipment, measured in kilowatts, or kW) with the “reactive” power that some equipment draws to operate but which performs no work. The ratio between the two is known as the power factor: the closer a site’s power factor is to 1.0, the more efficiently it uses the power delivered to it. Many network tariffs calculate demand charges on kVA rather than kW, so a site with a poor power factor (typically caused by motors, pumps, or air-conditioning) is billed for more capacity than it productively uses. Correcting the power factor, often by installing power factor correction equipment, can lower kVA demand and reduce these charges.

The core unit price charged per kWh (electricity) or per GJ (gas). It reflects the wholesale cost of electricity or gas, the retailer's hedging costs, and the retailer's margin. It excludes network, environmental, and metering charges.

An energy supply contract where electricity, network, environmental and other charges are combined into a single rate rather than itemised separately. Bundled pricing is commonly used for small and medium-sized business customers.

The maximum electricity output available at a given point. Capacity can refer to a single site or customer connection (the maximum power it can draw or export) or to the wider energy system (the total generation and transmission available across the market).

C&I refers to larger commercial and industrial business energy customers. Eligibility thresholds vary by state: in VIC the threshold is generally over 40,000 kWh per year; in NSW, QLD and ACT it is generally over 100,000 kWh per year; and in SA it is over 160,000 kWh per year. C&I customers are usually billed monthly and can access more sophisticated pricing options, including contracts priced against wholesale market conditions and the ability to lock in pricing for future periods. Unlike SME plans, C&I contracts are locked in for a fixed term, typically between one and five years. In many instances, this can be a benefit rather than a drawback: fixed-term contracts generally offer lower rates than SME plans, and for businesses using above the threshold, a C&I contract is typically more economical than remaining on a small market retail structure.

An intermediary that helps businesses compare retailers, run competitive tenders, and negotiate electricity and gas contracts. Find out more.

Remuneration paid to a broker by a retailer, typically incorporated into the contracted retail rate.

The agreed duration of an energy contract, commonly ranging from 24 months for small business customers, to one to five years for commercial customers.

The total electricity (kWh) or gas (GJ) used over a billing period.

Electricity charges based on the highest level of power drawn (kW or kVA) during a specified billing period. Demand charges are a component of the network tariff structure and are passed through to the customer as a non-contestable cost, regardless of which retailer supplies the site.

A regulated electricity price cap that applies to certain small customers in the National Electricity Market. Set annually by the AER, the DMO caps the price retailers can charge residential and small business customers on standing (non-market) offers in New South Wales, South Australia, and south-east Queensland. It was introduced in 2019 to protect customers who have never switched or shopped around from paying excessive rates. The DMO also serves as a reference price: retailers must express their market offers as a percentage above or below it, so businesses can compare competing plans on a like-for-like basis. Victoria sits outside the DMO and instead uses its own equivalent, the Victorian Default Offer (VDO). For most commercial customers the DMO is a safety-net rather than a target, as negotiated market contracts are generally cheaper than the capped standing-offer rate. Find out more.

The local network of poles, wires and substations that carries electricity from the high-voltage transmission network to homes and businesses.

The use of data, analytics and monitoring tools to understand and optimise energy usage. Energy intelligence typically involves analysing interval data, identifying consumption patterns, forecasting demand, and informing procurement or efficiency strategies. Find out more.

The practice of reducing energy consumption while maintaining the same level of operational output. In a commercial context, energy efficiency may involve upgrading equipment, optimising processes, improving building systems, or reducing peak demand to lower electricity and gas costs. Find out more.

A private electricity network serving multiple tenants within a single building or site.

The structured process of sourcing and contracting electricity or gas supply for a business. Find out more.

A licensed entity that sells electricity or gas directly to customers under retail contracts.

Government-imposed costs that support the development and implementation of renewable energy and energy efficiency projects, such as the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES). These are passed on to customers by retailers according to their obligations under various federal and state schemes. Because each retailer manages its renewable purchasing and trading differently, environmental charges are a contestable component: the actual cost varies between retailers depending on how each retailer manages its renewable purchasing and trading strategy.

Services used to keep the electricity grid stable by balancing supply and demand. Some businesses with flexible energy use, battery storage or onsite generation may be able to participate through an approved provider and earn revenue by supporting the grid when needed.

A contract where the energy unit rate is known in advance for the duration of the agreement. Fixed does not necessarily mean constant: a smoothed contract applies the same rate across the whole term, while a stepped contract changes the rate each year, with those future rates set and known upfront.

Wholesale market pricing for future supply periods, which influences retail contract offers.

A unit of measurement for natural gas consumption.

High-pressure pipelines that transport gas across regions before it enters local distribution networks.

An accredited renewable electricity purchasing option available to customers.

A risk management strategy used by energy retailers to reduce their exposure to wholesale electricity price volatility, typically executed through financial contracts.

Detailed energy usage data recorded at regular intervals, typically every 30 minutes.

A unit of electricity consumption representing one kilowatt of power used for one hour.

A unit of power measuring instantaneous electricity demand.

A unit of apparent power used when calculating certain demand charges.

A business classified as a large energy user based on its annual consumption rather than its industry. As a general guide, this includes businesses using more than 100,000 kWh of electricity a year or spending approximately $3,000 or more a month on energy. The consumption threshold is more than 40,000 kWh a year in Victoria and more than 160,000 kWh a year in South Australia. These customers are often referred to as commercial and industrial, or C&I, customers.

A representation of a site’s energy usage pattern over time.

Adjustment factors applied to account for energy losses during transmission and distribution.

A retail energy contract negotiated within the competitive market.

A unique identifier assigned to a gas supply point.

A group of business locations managed under coordinated energy procurement. Find out more.

The interconnected wholesale electricity market covering eastern and southern Australia.

The charge structure applied by a distribution network operator for using electricity transmission and distribution infrastructure. Network tariffs are assigned to a site by the distributor based on its load characteristics. They are not selected by the business or negotiated with a retailer, and the charges pass through to the customer regardless of which retailer is contracted.

A unique identifier assigned to an electricity connection point.

Third-party energy costs charged to a retailer and then passed on to the customer, rather than charges set by the retailer itself. These can include network tariffs, such as demand, consumption and fixed supply charges, as well as AEMO market fees and ancillary service costs. Pass-through charges may change when the relevant third party updates its rates. In some wholesale-aligned contracts, movements in the spot market price may also be passed through to the customer.

The highest level of electricity usage recorded during a defined billing period.

The coordinated management of energy contracts across multiple sites or jurisdictions.

A formal agreement between a business and an energy retailer for electricity or gas supply.

A rate automatically applied when a contract expires without renewal, often less competitive than negotiated rates.

The group of energy retailers engaged during a competitive tender process. See ours.

An additional amount incorporated into pricing to account for wholesale market volatility.

The financial reconciliation process between retailers and market operators.

In the energy market, a SME typically refers to a business that falls below the threshold for accessing wholesale market contracts: less than 40,000 kWh per year in VIC, less than 100,000 kWh per year in NSW, QLD and ACT, or less than 160,000 kWh per year in SA; or spending under approximately $3,000 per month on energy. SME customers are generally billed quarterly and supplied under small market retail structures. Unlike large business energy contracts, SME plans are not locked in for a fixed term, meaning customers can compare offers and switch retailers at any time. Find out more.

The wholesale market where electricity or gas is traded in real time.

A basic regulated electricity offer available to certain customers. Find out more.

A contract clause requiring payment for a minimum volume of energy regardless of actual usage.

A structured competitive procurement process where multiple retailers submit pricing offers.

A pricing structure where electricity rates vary depending on time of day.

High-voltage infrastructure transporting electricity over long distances, from where it is generated (power plants) to the distribution networks that serve cities and towns.

A contract structure where energy, network, environmental, market and other charges are itemised separately rather than combined into a single rate. This structure is commonly found on bills for large market customers, often referred to as commercial and industrial, or C&I, customers.

A regulated electricity price set by the Essential Services Commission in Victoria. The VDO acts as a price cap for certain small customers and provides a reference point for comparing market offers. Find out more.

The risk that actual energy consumption differs from forecast usage.