The Australian energy landscape is shifting. And the way customers use electricity is changing thanks to the wider integration of new technologies including battery storage and solar systems.
There has also been a recent change to the tariff structure that determines how much consumers and businesses pay for their electricity. This June, Energex released its Tariff Structure Statement, which governs the maximum amount of revenue it can recover from customers over the next five years.
In this article, we will explore the forces shaping the current electricity market and explain what the new tariff structure means for you and your business.
The state of the energy market.
Energex’s distribution area covers the metropolitan area of South East Queensland. It services more than 1.4 million consumers via a network of poles and wires covering over 50,000km.
The way that electricity services are used and priced in Queensland is changing. The rapid uptake of solar photo-voltaic (PV) generation is having an increasing impact on Energex’s distribution network. In response to these changing factors, there is large scale investment in new technologies as well as pricing changes designed to meet the evolving market.
The COVID-19 pandemic is also causing impacts to the electricity market as it has added to the risks and uncertainties facing commercial and industrial businesses as well as network businesses like Energex.
Over the 1 July 2020 to 30 June 2025 period, Energex needs to achieve $6 billion in revenue to cover their network costs. Energex’s pricing is subject to approval by the Australian Energy Regulator (AER), which regulates electricity pricing across all Australian states except for Western Australia. The AER determines how much money Energex needs for the safe and reliable operation of the Queensland network.
Every five years, Energex provides a submission to the AER on what they forecast their cost requirements will be and the final pricing decision is made by the AER to ensure retail electricity pricing is suitable and fair to all consumers. The current pricing for the coming five year period has now been approved by the AER however, the impacts the new pricing will have on Queensland customers hasn’t yet been fully explained to commercial and industrial businesses.
The AER accepted Energex’s operational businesses cost requirements although sought further justification for its capital spending plans. After providing additional material that further clarified its capital expenditure requirements, the AER was satisfied that the pricing was fair and in line with the needs of Queensland consumers and businesses. This included transitional arrangements in the first year of the regulatory period for consumers and retailers to adjust to the new tariff arrangements in light of the COVID-19 pandemic.
The capital expenditure costs will include costs needed to build Energex’s low voltage (LV) management platform that will utilise data to enhance the operating capabilities so consumers can maximise exports from solar PV systems without causing voltage problems in the LV network. This also gives consumers greater levels of control over managing their energy costs as increasing numbers of people choose to install battery and PV systems onto the network.
How the changes will affect you.
Energex’s distribution network charges make up around 35 percent of the total residential bill and 28 percent of the total small business retail electricity bill. Other components of the electricity bill include environmental policy costs, wholesale electricity costs, and retail costs.
Compared to current charges, the distribution network charges for a residential consumer will drop by around $73 (4.6 per cent) in the first year of the 2020-2025 period and then increase on average by $3 (0.2 per cent) annually over the next four years. For small business consumers, the distribution network charges will drop by around $82 (3.7 per cent) in the first year of the 2020–2025 period and then increase on average by $3 (0.1 per cent) each year over the next four years.
These bill impact calculations don’t take into account the Queensland Government’s electricity asset ownership dividend, which will offset the residential bill amount by $50 for each year over the 2020 to 2023 period. They also don’t include the household relief package for COVID-19 impacts announced by the Queensland Government, which will reduce the residential bill amount by a further $50.
Every business will be impacted differently depending on individual circumstances. This includes their electricity load profile and the timing they use the majority of their power in relation to demand peaks on the network. In general, the largest impacts will be for small businesses.
About Energy Partners.
Energy Partners are highly experienced energy management and electrical contracting specialists that service the South East Queensland market. The company is focused on assisting commercial and industrial businesses in optimising their energy usage through detailed energy analysis and load profile modelling to help reduce energy costs.
Optimised energy usage is a vital part of running any business and changes to energy supply and pricing mechanisms can be challenging for consumers to assess exactly how these will impact their operating costs and future business plans. Energy Partners understands these changes and the impacts it will have to Queensland businesses in the short and longer term.
We’re offering a free assessment to help you understand your business electricity load profile and can develop and implement a plan to reduce the impacts of the network changes on your business.