Understanding Your Electricity Bill

Electricity invoices for Large Market customers (typically customers who spend $15K or more per annum) are relatively complex. They contain plenty of good information, but the information is hard to find and the invoices can appear confusing. These invoices can be loosely divided into two components, the negotiated and the regulated components.

Negotiated

The negotiated segment of the bill includes the negotiated retail rates and the environmental levies as well as metering cost and the cost of any additional green energy that you may wish to purchase.

Retail: These are the raw retail rates that you negotiate with the retailer of your choice and they are usually the main focus of the electricity negotiation process. They are quoted for the Peak, Off-Peak and depending on your location, possibly the Shoulder period, free of line losses. Your electricity bill will then show the agreed rates, loss factor and the total retail cost adjusted for the losses. The average retail rate is currently at about $45/MWh with losses adding about 10%.

Environmental Levies: These are the environmental levies imposed on the retailers by the Federal Government and state governments. They include, for example, the Federal Government's MRET (Mandatory Renewable Energy Target) scheme which gives rise to the LREC (Large Scale Renewable Energy Certificate) and the SREC (Small Scale Renewable Energy Certificate) as well as the Queensland GEC (Gas Energy Certificate) and the NSW NGAC (NSW Greenhouse Abatement Certificate) etc. Depending on your location, they could add $15/MWh to your costs. It is important to note that the regulatory regime covering these levies does not regulate a retail pass through cost. The regime specifies participation levels for the retailers and penalty costs for non-compliance. Within this ceiling the retailers are free to manage their compliance costs and pass these costs through to their clients as they see fit. There is often significant differences between the compliance costs passed onto customers by the retailers and this should be considered when negotiating electricity supply contracts.

Metering: Large Market electricity customers are required by regulation to have a Type 4 interval meter. These meters, colloquially known as 'Smart Meters' or T4 meters measure energy use every half hour. They are also capable of being remotely read via the telephone lines and outputting data in an electronic format. The cost of supplying and reading these meters is usually passed on by the retailer at between $750 and $1,250 pa.

Regulated

Conversely, delivered domestic electricity prices are probably closer to $200/MWh so we can expect an increase of about 10%.

Network Use of System (NUoS) Fees: These fees are collected by the retailer on behalf of the Local Network Service Provider (LNSP) who owns, operates and maintains the 'poles and wires' that deliver the electricity to your door. Depending on your location, voltage and energy use pattern these fees will probably cost anywhere between $25/MWh and $40/MWh. In many cases there will be a choice of NUoS tariff and selection of the least cost tariff can mean significant savings.

Market Fees: For many users this is the smallest part of their electricity account with a total cost of about $1.50/MWh. Part of this will go to the Market Operator (AEMO) to recoup their costs and part will go towards the cost of providing ancillary services. Unfortunately, the cost of ancillary services varies each week, thus most retailers will bill an estimated cost for ancillary services and undertake an annual cost wash up.

Electricity Cost
* For more details on the tariff definitions in your area refer to Tariff Definitions.
Key Energy & Resources hold AFSL 281356. Advice contained herein is general in nature and been simplified to avoid confusion. It is not specific advice. Further personal advice should be sought from a qualified consultant before making decisions based on information contained herein.


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