Consumption Prices Down but Services Prices Up

Consumption Prices Down but Services Prices Up

What is Network Tariff Reform and how does this affect you?

Network charges can make up more than 50 per cent of an electricity bill, but some businesses may not understand what network charges are. The following information will give an insight into how network charging works and what the Network Tariff Reform is.

What is Network Tariff Reform?

The Network tariff reform was passed by the AEMC in November 2014 directing all electricity distributors to transition to cost-reflective tariffs to ensure fairer and more equitable pricing from the networking body to customers. These changes were made to encourage and provide financial incentives for customers who use electricity outside of peak periods. This would lessen the pressure on the network at peak times, reducing the need to build more infrastructure resulting in less costs. The introduction of Time-of-Use (ToU) pricing provided opportunity for a customer to minimise energy usage and demand at a time when the network was under the most pressure. By encouraging the spread of a customers’ load profile with incentives of lower rates outside of peak times, demand would be lessened during those times resulting in less pressure on infrastructure and less risk of power outages.

Victoria was the first to roll out cost reflective ToU pricing as most customers were already equipped with adequate Smart Metering. From 01 July 2017 new capacity demand charges were introduced for business customers across Victorian networks. Retailers were given a grace period to implement these as the cost of ensuring the meters and systems could adequately manage the changes was substantial.

It was only from 1 January 2018 that the first customers really noticed these changes to their accounts.

What is happening with the latest Network Tariff Reform?

A move to demand capacity charges for small/medium consumers and ToU (Time of Use) network charges for large consumers not already on cost effective tariff pricing.
You could be reassigned to a new cost-reflective tariff which may mean a rise in price.
Some networks are however introducing transitional tariffs.
This new tariff system did start in 2017 but many of the retailers have not been able to manage these new charges in their billing system and were given a ‘grace period’ until 1 July 2018.
You can find the various changes in Queensland and New South Wales by following the links:

Queensland – Energex Changes
Queensland – Ergon Changes
NSW – Ausgrid Changes
What should you do now?

Contact Watt Utilities if you find your tariff codes have changed and we will review them to ensure they are the most suited to your site.

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When to Negotiate Electricity Contracts

When to Negotiate Electricity Contracts

When negotiating and renewing electricity contracts, it is all about timing. Securing a contract when the market is low is the key. There is no need to wait until your contract expires and this is where Watt Utilities can help.

Electricity contracts are like the stock market – they have ups and downs and volatility in trading. Pricing changes due to many factors including season – summer or winter, natural disasters, heat waves, cold snaps and other government changes in policy or legislation.

In a volatile market when securing a contract, pricing can shift drastically from one week to the next. Using a specialist who observes the price fluctuations daily can save you thousands of dollars over the term of your renewals.

If you are a business customer or body corporate that spends more than $1300 per month (rule of thumb) on your electricity account, you may be eligible to negotiate a Contestable Market Contract and the savings could be quite significant. If you are already on a contract the time to act is now. We are seeing savings of 8% to 52% off the bottom line. This is when the market is in its low.
How can the Contestable Market be low when the Tariff market is increasing? Simple answer, they are two different markets with different pricing rules. The Tariff Market is regulated pricing set by the competition authority in most states and they decide the increase in price. The Contestable Market customers negotiate their contracts at a time in the market when it has its highs or lows, like investing your money in the bank or creating a share portfolio.

So, what are your options if you spend a lot on electricity each month?

Do nothing and accept the increases but don’t complain later.
If you are a smaller customer on a tariff check, make sure you are on the correct tariff and request a discount from your retailer for a contract term.
Check your bill and if it is over $1300 a month engage a professional and reputable consultant to investigate if you are eligible for a Contestable Market Contract.
If you are in a contract, look at forward dating this to lock in rates.
Going from a tariff rate to a market contract is not a bad thing, and there are good savings to be made if executed correctly. Seek appropriate advice is essential as it is a big commitment and for Bodies Corporate the decision-making process must fit in with the good buying cycles. Going to a market contract you can make significant savings and minimise the increases you would otherwise pay if you remained on standard tariff pricing. This is because you can lock in peak and off-peak electricity prices under the contract, in which case the only increases are the regulated increases in the network and market charges. It is all about understanding the best month for your business to secure this contract.

Contact Watt Utilities today to discuss your options.

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