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Energy Charges

Your Energy Charges are the costs of raw electricity (kW) which the retailers purchase from the wholesale market and sell to you as the end user. The rates that you can secure are dictated by a wholesale commodity market which is driven by factors such as base generation, government policy, seasonal demand, and competition.

This section of the bill is one of the largest components of the overall bill and is the only major controllable cost in which your retailer is solely responsible.

The main components of this section:

• Peak
• Shoulder (NSW & ACT only)
• Off-Peak rates

These are the units of the cost charged by your supplier for varying periods throughout the day.

Network Charges

Electricity users who consume in excess of 160,000 kWh/pa ($40,000 approximately), and are on an unbundled agreement, will find a section labelled "Network Charges" on their bill.

The Network Charges cover the costs to maintain the grid infrastructure and the transport of the electricity from electricity generators across the electricity transmission and distribution networks to your site.

Network Charges generally account for 50 percent of a typical bill. They are reviewed on an annual basis and adjusted to reflect the costs of maintaining and upgrading the system.

The Australian Energy Regulator (AER) oversees networks and monitors compliance within the National Electricity Laws and Rules.

When are they reviewed?

Network charges are reviewed annually. From 1 July 2021, electricity users in New South Wales, Victoria, Queensland, South Australia, ACT and Tasmania experienced a change in their network charges.

How are network charges billed?

Network charges are billed under various regulated tariffs published by the networks. The charges will typically relate to:

• Consumption – how much electricity you use and at what times you use it.
• Demand/Capacity – the maximum amount of electricity you use or are allocated at one time.
• Access – a connection fee to the network calculated daily.

Network costs vary from tariff to tariff for each of the network providers. Your new network costs will be determined by applying your site-specific consumption and demand to the newly approved regulated tariff assigned to your site.

When will you know the impact of these increases on your bills?

The final details of the increases will be published by each individual network operator a couple of weeks before they become effective.

Environmental Charges

Environmental Charges are costs associated with complying with Government schemes which are aimed at promoting efficient use of energy, reducing greenhouse gas and funding renewable energy generation.

There are currently six schemes which apply to large businesses:

• LRET – Large Renewable Energy Target
• SRES – Small-scale Renewable Energy Scheme
• GGAS – Greenhouse Gas Abatement Scheme (NSW)
• ESS – Energy Savings Scheme (NSW)
• VEET – Victorian Energy Efficiency Target (VEET)
• QGS – Queensland Gas Scheme (QGS)

Are these schemes applicable to all states?

Both the LRET and SRES schemes are linked to the Federal Government's targets of 82% of energy generation from renewable sources by 2030. The other schemes are state-based and are regulated by the state governments.

The regulator estimates how many certificates will need to be surrendered for that year to meet the targets. Based on this estimate, the regulator determines a compliance percentage of the applicable certificates that the liable entity (your retailer) will need to purchase and surrender on behalf of their customers.

Market Charges

Market Charges are fees which are paid to the Australian Energy Market Operator (AEMO) to operate and maintain the National Electricity Market (NEM). There are two costs which are categorised under Market Charges:

• AEMO Fees – paid to AEMO on your behalf by your energy retailer, then passed on to you through your energy bill.
• Ancillary Fees – fees for activities undertaken to ensure safe and secure power delivery whilst maintaining the integrity and stability of power generation and energy demand.

Both these fees are paid by the Retailer on your behalf, and issued on your energy bill based on your energy consumption.

Other Charges

Depending on which electricity retailer and metering services you use, you may find some other charges on your electricity bill:

• Metering Charges
• Metering Data Services
• Service Charges
• Retailer Fees

These charges are set by either your electricity retailer or meter provider and hence actual charges on your bill may vary in quantity and price.

Loss factor? What are they?

As electricity flows through the transmission and distribution networks, energy is lost due to heating of conductors, caused by electrical resistance. These losses are equivalent to around 10 percent of the total electricity transported between power stations and market customers.

Energy losses on the network must be factored in at all stages of electricity production and transport to ensure the delivery of adequate supply to meet prevailing demand and maintain the balance of the power system. This means that more electricity must be generated than is required by consumers to allow for this loss during transportation.

The impact of network losses on retail prices is mathematically represented as Transmission Loss Factors (TLF) and Distribution Loss Factors (DLF). Loss factors are calculated and fixed annually. Site-specific loss factors are determined by location, connection type and level of voltage.

How are they shown on your bill?

All energy retailers must include loss factors as part of their electricity bills, but the way in which they are represented can change depending on the billing structure of your retailer.

Introduction to the National Electricity Market (NEM)

The National Electricity Market (NEM) and Western Australia's South-West Interconnected System (SWIS) are the largest electricity markets in Australia. The NEM covers Australia's eastern and south-eastern coasts and comprises five states: Queensland, New South Wales (including the Australian Capital Territory), South Australia, Victoria, and Tasmania.

The SWIS covers south-west Western Australia. Together the NEM and the SWIS cover eighty-six per cent and eight per cent, respectively, of Australia's electricity demand.

Rule change: Unaccounted for Energy (UFE)

Major reforms, including 5 Minute Settlements (5MS), have been introduced in the National Electricity Market (NEM). These reforms are the culmination of rule changes, innovative digital systems and extensive stakeholder engagement and partnership. AEMO also reports on unaccounted for energy (UFE) values as part of the Global Settlement, implemented from 1 May 2022.

What is Global Settlement?

AEMO is responsible for settlement in the National Electricity Market (NEM) – making sure market generators are paid for the energy they provide, and retailers pay for the energy their customers use. Global Settlement means AEMO settles the market using the same process for all electricity retailers, expected to lead to fewer settlement disputes and provide greater visibility of energy uncertainties, known as Unaccounted for Energy (UFE).

UFE refers to the difference between the amount of energy being drawn into a distribution zone and how much is picked up on the meters that has been consumed by end customers after technical loss factors are applied. There are many possible sources of UFE, including electrical losses, unmetered loads and estimation errors. Not all energy consumed is currently accounted for by electricity retailers.

Under the new AEMO rules

The cost of UFE, which was previously absorbed by the incumbent retailer, will be passed on to consumers. AEMO allocates UFE to energy retailers in the distribution area, pro-rated based on their "accounted-for" energy. This charge appears on customer invoices as a new line item labelled "AEMO UFE Charge."

Unaccounted for Energy will not be charged for these sites:

• Transmission Connection Points
• Market and Distribution-connected Generators (NMI Classification of GENERATR or NREG)
• Off-Market Embedded Network Child Sites

AEMO commenced allocating UFE charges to all energy retailers from 1 May 2022, passed through to business customers across all states.

Helpful resources

• Global Settlement and Market Reconciliation (AEMC)
• Delayed Implementation of Five Minute Settlement and Global Settlement (AEMC)
• NEM Five Minute Settlement Program (AEMC)

Environmental Charges are costs associated with complying with Government schemes which are aimed at promoting efficient use of energy, reducing greenhouse gas and funding renewable energy generation.

There are currently six schemes which apply to large businesses:

• LRET – Large Renewable Energy Target
• SRES – Small-scale Renewable Energy Scheme
• GGAS – Greenhouse Gas Abatement Scheme (NSW)
• ESS – Energy Savings Scheme (NSW)
• VEET – Victorian Energy Efficiency Target (VEET)
• QGS – Queensland Gas Scheme (QGS)

Are these schemes applicable to all states?

Both the LRET and SRES schemes are linked to the Federal Government's targets of 82% of energy generation from renewable sources by 2030. The other schemes are state-based and are regulated by the state governments.

The regulator estimates how many certificates will need to be surrendered for that year to meet the targets. Based on this estimate, the regulator determines a compliance percentage of the applicable certificates that the liable entity (your retailer) will need to purchase and surrender on behalf of their customers.

List of charges explained

A typical bill breaks charges down into Energy Charges (Peak / Off-Peak), Network Charges (Network Peak / Off-Peak, Demand Variable, Demand Capacity, Network Access), Renewable Energy Charges (VEET, SRES, LRET certificate costs) and Other Charges (AEMO Pool Fees, AEMO Ancillary Charge, Metering Charges, Retail Service Fee), plus GST.

RERT Charges – what are they?

Throughout the year, when the grid's available electricity supply cannot meet the forecast demand to maintain power system reliability, AEMO may request for emergency electricity reserves to be made available to the grid. Examples include during bushfires, heatwaves etc.

When this call is made, emergency sources such as generation (generators/batteries) or demand response are made available to increase the grid stability in that region during peak demand.

Demand response is the term used when large commercial users reduce their load or shut down power, enabling an increase in the electricity supply for that region, that are otherwise not available in the market.

This AEMO intervention mechanism is known as the Reliability and Emergency Reserve Trader (RERT) under the National Electricity Rules (NER). AEMO uses RERT as one of a number of mechanisms in the event that a critical shortfall in reserves is forecast.

When the emergency mechanism is activated, there are costs involved in administering the RERT process, and costs to compensate the large energy users who partake in the response.

These RERT costs are passed on by AEMO to retailers, and these charges then flow on to those customers who consumed electricity in that region during that time. Due to these RERT events, many commercial and industrial electricity users have received invoices with these additional charges listed.

RERT charges have two components

• Capacity or fixed charge: this payment is for contracted participants to guarantee they are available should AEMO need to stabilise the power system.
• Activation or variable charge: this charge is applied when an event occurs and the service is triggered.

Understanding Electricity Network Charges and Achieving Long-Term Savings

Energy cost is a significant component of operating expenses for businesses across a range of industries. Whilst negotiating a competitive rate on your energy bill is the logical place to start, there are a number of other controllable costs that are often overlooked.

Understanding network charges

Network charges refer to the implementation and maintenance of the physical infrastructure, namely the poles, wires and other equipment drawing power from the electricity grid. On average, network charges account for approximately 50% of a standard electricity bill. Historically, the biggest contributing factor behind electricity price movement on energy bills is due to changes to the network costs.

Energy users can influence the level of Peak Demand on the network and reduce this portion of their bill by ensuring that they are drawing power efficiently. Ongoing savings can be achieved via Power Factor Correction and Network Tariff Review.

What is the average ROI for a solar system?

For commercial solar systems, the return on investment (ROI) greatly depends on client electricity rates, STC (Small-scale Technology Certificate) or LGC (Large-scale Generation Certificate) availability, and electricity consumed on site versus electricity exported. The average New South Wales or Victorian business could expect a payback period of between 2.5 and 5 years. Considering the warranty offered on these products, a solar investment can help decrease the dependence on the grid considerably, giving peace of mind.

What is the average ROI for LEDs?

LEDs have the shortest average ROI when compared with other Energy Efficiency products. The average ROI for a NSW/VIC business is anywhere between 8 and 24 months. LEDs are a very durable method of lighting and last approximately 50 times longer than a typical incandescent bulb, or 20–25 times longer than a typical halogen bulb.

What are STCs and LGCs, and how do these evolve over time?

STC – A Small-scale Technology Certificate is a federal government incentive designed to encourage homes and businesses to install renewable energy systems. The scheme can offer an up-front discount to those who purchase solar systems for their homes or businesses, to a maximum of 99.9 kW size. The certificates can be traded to an energy retailer or used as a discount from the total cost of the system. STCs are available until 2030 and their value reduces each year until the 2030 deadline. For example, a solar system installed before 31/12/2019 would have an STC entitlement (value) for 12 years – this is an incentive to install a renewable energy system sooner rather than later.

LGC – A Large-scale Generation Certificate is the equivalent of one-megawatt hour (MWh) of net renewable energy generated by a solar PV system sized bigger than 100kW. LGCs are paid to the system owner depending on the energy generated. Like STCs, their availability expires in 2030 with their value reducing each year.

What kind of warranties apply to a solar system?

• Product warranty – the minimum warranty typically provided on solar panels is 10 years, although warranties can vary between brands. These warranties cover manufacturing defects on the product.
• Performance warranty – this type of warranty ensures the solar system always performs to the standards it has been designed for, taking into consideration annual degradation and other factors that could affect performance. PV panels typically carry a minimum performance warranty of 25 years.
• Workmanship warranty – this warranty covers defects related to the workmanship of solar installers not following the Clean Energy Council Accreditation Code of Conduct – for example, faulty or poor workmanship such as faulty wiring and labeling, and the use of modules and inverters that do not meet Australian standards.

What are feed-in tariffs and how do they work?

Ideally, all the energy generated by a solar system should be consumed on site to maximise savings. However, this is rarely possible (unless batteries are used) due to site operational factors. Any extra energy generated by a solar system can be fed back into the grid, in which case the system's owner is paid a per kWh fee from the energy retailer. The price paid for electricity fed into the grid is usually less than the retail price of electricity bought from the grid.

Which payment methods are available for Energy Efficiency products?

Energy Efficiency products can typically be purchased via:

• CAPEX
• Finance option
• Power Purchase Agreement (PPA)
• On-bill finance
• Upfront payment

What is Energy Procurement?

Energy Procurement is how a business sources, purchases and contracts the electricity and/or gas needed to power their operations. Some businesses have an in-house team while others seek the services of an energy broker.

How does energy procurement work for my business?

We begin by assessing your business's energy requirements, which involves your energy consumption profile as well as any specific operational needs, constraints, and renewable energy goals.

We are constantly tracking the energy market to identify industry news and how this impacts market dynamics. This enables us to then take your business's unique energy profile to suppliers with confidence. We evaluate potential retailers based on pricing, contract terms, customer service, and environmental sustainability.

We then request proposals from multiple suppliers and compare offers. We negotiate with selected suppliers to secure pricing and service agreements, exploring flexible contract options and renewable energy solutions to suit your business needs and goals. We present these offers to you and assist you in selecting a supplier to contract with. Once an agreement is reached, we continuously liaise with your retailer and help resolve any issues relating to your energy supply.

How long does the energy procurement process take to set up?

The duration can vary depending on a few factors, including the complexity of your business's energy needs, market conditions, and the specific services or solutions being implemented. A typical energy procurement process can be broken down into a few stages:

• Assessment and Planning (1 week – 2 months): assessing your business's energy requirements, identifying goals and priorities, and developing a procurement strategy.
• Supplier Evaluation and Analysis (1 week): evaluating potential suppliers, gathering quotes or proposals, reviewing supplier contracts, and conducting negotiations to secure competitive pricing and terms.
• Monitoring and Optimisation (Ongoing): after the contract is signed, ongoing monitoring, optimisation, and management of energy procurement activities to maximise cost savings and operational efficiency.

What if my business's energy needs change?

If your business's energy needs change, whether due to growth, operational changes, or other factors, we can help you adapt and optimise your energy procurement strategy accordingly. We will work with you to establish what impact these changes would have on your energy consumption patterns and supply, and what effect they would have on current and/or future contracts.

Can you provide energy procurement services to my business even though it has multiple branches?

Yes, of course. Whether your business has multiple branches in one state or multiple locations across Australia, we can negotiate electricity contracts in most areas of the National Electricity Market (NEM), which covers QLD, NSW, VIC, ACT and TAS, and the Wholesale Electricity Market (WEM), which covers WA & NT.

What does the cost involve?

The cost depends on the size of your business, which is determined early in the process. There are two ways that our fee can be paid:

• A c/kWh charge, added into the retailer rate provided in the contract – paid by the winning retailer, with no direct fee charged to you.
• A negotiated upfront fee, paid once the work is completed.