Electricity retail and network services
On most electricity invoices received by Australian businesses, the following charges are shown separately:
- retail charges. These are the charges for the electricity which the retailer has purchased from the generator, then on-sold to the customer.
- network charges. These charges are for the use of the network (the system of ‘poles and wires’ used to transport electricity from the generator to the end-user).
The electricity networks are natural monopolies, and serve all the electricity customers in a geographic area.
Retailers, on the other hand, can sell to any customer in any network area.
Page 2 of a typical business electricity invoice, showing ‘retail’ (energy), ‘network’, and ‘other’ charges.
What are network tariffs?
A network tariff is a schedule of prices and a method of calculating the charge for the use of the network.
There is a different set of government approved network tariffs for each of the network service providers.
Network tariffs can include both commodity and demand charges:
- commodity charges are those based on the quantity of electricity (in kilowatt.hours) used by the customer.
The electricity used may be grouped into different time periods (e.g. on-peak, off-peak, shoulder), with different prices applied to electricity used in each period.
- demand charges, which are based on the highest rate that electricity was used (as this places a greater demand on the network and governs the capacity of wires, transformers and switchgear etc. which the network provider must invest in. Demand charges can be based on real power (kW) or apparent power (kVA). Apparent power charges more accurately reflect the demand placed on the network by the customer’s electrical load. The demand charge may be based on the highest demand in the month, or in the past year, or the highest demand ever.
While each distribution has dozens of tariffs, there will normally be three or four which are suitable for each customer, considering load, installed equipment.
Some tariffs are restricted to customer types (residential, business), areas within the network, types of controls (e.g. interruptible load).
It is the customer’s responsibility to select the network tariff which will result in the lowest total cost.
How can we help?
Genesis Now can assist you to minimise electricity network service charges by:
- analysing past smart meter data, to determine the most cost-effective network tariff,
- identifying ways to reduce peak electrical demand, as so reduce demand-based network charges.
- providing evidence that peak electrical demand has been reduced, in order to reduce the demand charged on a non-resettable tariff.
For further information on electricity network tariffs, contact us.
Electricity Network Providers:
The electricity network service providers are: