Frequently Asked Questions
IPART is happy to answer these frequently asked questions about our work. Use the filter menu if your question is specific to one industry, or click to expand any of the more general topics below. If your question remains unanswered, consider consulting our glossary, or please feel free to contact us.
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There are 3 regulated suppliers (or standard retailers) in NSW:
- EnergyAustralia, which supplies parts of Sydney, and the Central Coast and Hunter regions. For a map of its supply area, click here.
- Integral Energy, which supplies western Sydney, and the Blue Mountains, Southern Highlands, Illawarra and Shoalhaven regions. For its supply area, click here.
- Country Energy, which supplies the remainder of NSW. For its supply area, click here.
These are the retail businesses that supplied electricity before competition was introduced in 2002. They are now the ‘default retailers’, which means they are obliged to supply electricity to all small retail customers in their supply area who haven’t entered into a market contract. They must charge these customers the regulated retail prices.
The regulated suppliers used to be state-owned, but are now privately-owned. EnergyAustralia is owned by TRUenergy. Integral Energy and Country Energy are owned by Origin Energy. However, the new owners are continuing to use the existing brand names.
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Each regulated supplier has several different regulated prices. Click here for:
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IPART makes determinations on regulated retail electricity prices when the NSW Government asks us to do so. We were last asked to make a determination in 2009, for the period 1 July 2010 to 30 June 2013.
The Government gave us a detailed Terms of Reference, which required us to set regulated prices to recover the efficient costs of supplying electricity to customers on regulated contracts. These costs include:
- purchasing wholesale electricity from the National Electricity Market (NEM)
- paying the network businesses to use the transmission and distribution networks to transport electricity from the power stations to their customers’ properties
- complying with green schemes including the carbon pricing mechanism
- running the retail business (eg, connecting and disconnecting customers, reading meters, billing and dealing with customer enquiries) and earning a reasonable profit margin.
We undertook extensive, detailed research and analysis to forecast these costs in each year of the determination period. We also undertook annual reviews in 2011/12 and 2012/13 to update some of the forecast costs. Then we decided how much prices need to increase in that year to recover the updated forecast costs for that year.
Note that the prices the regulated suppliers (and other retailers) pay for using the transmission and distribution networks are regulated by the Australian Energy Regulator (AER). Therefore, we do not need to forecast the costs of using the networks: we use the network prices the AER has set for the distribution businesses.
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Regulated prices will increase by an average 18% across NSW from 1 July 2012. Around half this increase is due to the introduction of the carbon pricing mechanism. The other half is due to growth in network charges. For more information about the changes in regulated electricity prices from 1 July 2012, see our Fact Sheet.
Electricity retailers usually increase their unregulated (or market) prices roughly in line with the change in regulated prices. They generally face similar cost increases as the regulated suppliers. In addition, they generally set their market prices with reference to the regulated price (eg, their prices might be 5 to 10% less than the regulated price available in a certain area).
The chart below shows how a typical regulated customer’s electricity bill has increased in NSW over the past 5 years. It also shows what has been driving the increase in bills:
- Rising network costs have been the biggest contributor to the increase in electricity bills. These are the costs of paying the network businesses to use the transmission and distribution networks to transport electricity from the power stations to their customers’ properties
- The next biggest contributor to bills has been the introduction of the carbon pricing mechanism (which commences on 1 July 2012)
- The costs of purchasing energy, complying with various State and Commonwealth green schemes, and the costs associated with running a retail electricity business have all added similar amounts.
Contribution to increases in nominal bills over the past 5 years in NSW ($ pa, nominal, inc GST)
Note: Network includes contribution towards the Climate Change Levy. Energy, carbon and green costs include losses. Retail costs include the retail margin. Typical bill calculated assuming consumption of 7MWh per year.
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IPART does not set a specific price for each regulated retail price on offer in NSW – we only determine the average amount (in percentage terms) by which each regulated retailer can increase its regulated prices. The regulated retailer must then set its individual prices so that, on average, they do not increase by more than the amount we determined.
This means that a regulated retailer can increase one regulated price by more than the average amount, as long as it increases another by less than the average. A regulated retailer can also increase one component of a regulated price by more than the average amount, as long as it increases another component by less that this amount. For example:
- It may increase the ‘service availability charge’ by more than the average amount, but increase the ‘consumption charges’ by less than this amount. If you are a small electricity user, this might mean that your bill increases by more than the average percentage increase announced by IPART.
- In addition, the amount you are billed for electricity depends on how much electricity you use, as well as the price you are charged. Therefore, if you have used more electricity than you did in the same period the previous year, your bill might increase by more than the average percentage increase in prices.
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- Find a better price offer from a retailer. Many electricity retailers offer to supply customers on market contracts at a discounted price. Go to My energy offers to find out what market offerings are available in your area, or click here for more information.
- Reduce your electricity consumption. IPART’s household surveys show that many of the households who struggle to pay their bills use more than twice the average level of electricity consumption in NSW. The average level is around 7,000 kWh per year or 1,750 kWh per quarter for residential customers. For information on how to reduce your consumption, click here.
- Make sure you are receiving any government assistance you are eligible for. Both the NSW and Federal Governments provide certain people and households with rebates on their electricity bills – click here for more information. You may also be eligible for another form of help, such as through the Energy Accounts Payment Assistance Scheme, or the Home Power Savings Program.
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We are required to set regulated prices to reflect the costs of supplying electricity to customers, and when these costs go up, prices must also go up.
IPART’s pricing determinations are conducted as transparent and consultative review processes. We consider a lot of information, including information from many different stakeholders. We also seek expert advice and undertake extensive analysis. We are confident that we estimate the costs of supplying electricity as accurately as possible (with regard to the requirements of the terms of reference), and set prices that will recover these costs. We cannot reconsider these prices.
If you have a problem or dispute with your retailer about billing or another matter, you can contact EWON for help in resolving your dispute. However, EWON has no role or authority in setting prices. This means it is not able to investigate complaints about price increases. But it can review whether the relevant charges and prices have been correctly applied to your account.
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Each regulated supplier has at least 2 types of charges for residential customers:
- A ‘service availability charge’, which applies to the number of days you were connected to the electricity supply via that retailer during the billing period. This charge is expressed as cents per day.
- ‘Consumption charges’, which apply to the electricity you consumed during the billing period. These charges are expressed as cents per kilowatt hour (kWh).
Each of the regulated suppliers has a range of different consumption charges. Most commonly, the rate you are charged depends on the type of meter or meters installed at your property. For example, while the names of these prices vary slightly, all 3 regulated suppliers have:
- An ‘all day’ price. This price applies to premises with a standard electricity meter. For EnergyAustralia and Integral Energy, this price is an ‘inclining block tariff’ which means that there is:
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one rate (cents per kWh) for electricity consumed up to and including certain thresholds (eg, 1,000 kWhs per quarter), and
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another (higher) rate for electricity consumed above this (and potentially other) threshold(s).
- One or more off-peak prices. These prices apply to the electricity consumed by appliances that are controlled by the network and only run at off-peak times (such as certain hot water systems) and are attached to a separate meter. These are also called controlled load prices.
- Time-of-use prices. These prices apply to properties with a time-of-use meter. They include different rates (cents per kWh) for electricity consumed during the peak periods, shoulder periods and off-peak periods (of demand on the electricity network).
In addition, Country Energy has a range of ‘obsolete’ regulated prices. These prices are a historical legacy, and will be removed over time. They are not available to new customers or customers who move to a non-obsolete price upon their return to Country Energy as a regulated customer.
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Because the maximum level of demand for energy in NSW at any time of the day or year is growing rapidly, the electricity network businesses have to invest in new infrastructure so they can meet this demand. For example, network investment and network prices have increased by more than 90% in real terms over the last 5 years.
One of the ways governments and energy businesses are trying to manage these price increases is by managing the growth in peak demand for electricity. And one of the ways they are doing this is by introducing smart or time-of-use meters.
These meters enable your electricity distributor to measure the amount of electricity you use at different times of the day, and charge you a higher price for the amount you use during peak periods of demand and a lower price for the amount you use in off peak periods. This provides you with an incentive to shift your electricity consumption to times when there is less demand, where this is possible. (For example, you may be able to do this by using timers to turn on major appliances, like dishwashers, late at night.) If enough people respond to this incentive, it should reduce the need for further investment in networks in the future and therefore limit future increases to electricity prices.
In some areas smart meters are now the standard meter installed when customers require a new meter, such as in new properties or where their electrical installation is being upgraded. EnergyAustralia is also undertaking a program to replace existing meters with time of use meters for all customers who consume above 15 megawatt hours (MWh) of electricity per year, as well as rolling out Smart meters region-by-region.
If you don’t want to be billed on a time-of-use basis, you should contact your supplier to see whether this option is available.
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Many of the costs incurred in supplying small retail customers on regulated prices are fixed. This means that they do not vary with the amount of electricity used by the customer. For example, these include the costs of:
- operating a 24-hour-a-day control centre
- providing an emergency and technical response team
- operating billing and accounting systems
- providing access to the network infrastructure.
The service availability charge or “fixed component” on your electricity bill recovers these fixed costs. This charge ensures that all customers make a reasonable contribution to the overall cost of making the supply of electricity available.
The service availability charge is not the same as network charges. The network charges include both fixed and variable costs components, so they are incorporated into the service availability charge and the consumption charges you pay your retailer.
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It is important for all electricity consumers that the transmission and distribution networks have sufficient funds to operate and maintain their network infrastructure, and to make appropriate investments in extending and improving this infrastructure. This is necessary to ensure that all consumers continue to receive a high-quality, reliable electricity supply. But it is also important that the network businesses are efficient and deliver their services at the lowest cost.
The Australian Energy Regulator’s role is to get this balance right, when it sets network prices. In doing so, it is guided by the National Electricity Rules, which are set by the Australian Energy Market Commission. These rules also apply to distribution and transmission companies in other states, whether they are state-owned or private businesses.
All the network businesses in NSW are state-owned, and the profits they make are paid to the NSW Government in the form of dividends. These dividends represent a return on the Government’s investment in the businesses, and contribute to its consolidated revenue. This revenue is used to deliver services provided by the state, including health, education and public transport.
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IPART sets regulated prices so they reflect the costs each regulated supplier incurs in supplying electricity to its customers on regulated contracts. These prices differ because each regulated supplier:
- Incurs different network costs. Each retailer has to pay the companies that own and operate the transmission and distribution networks in NSW for using these networks to deliver electricity from the power stations its customers. To recover these costs, the regulated retail prices include network charges. Because network costs are different, the network charges included in their regulated retail prices are also different.
- Has a different regulated load profile. Each retailer must purchase enough electricity from the National Electricity Market to supply its regulated customers (its regulated load). If this amount varies a lot from day to day or season to season, it will face higher costs. For example, Integral Energy’s regulated load varies considerably throughout the year because many of its customers live in western Sydney, and these customers’ electricity consumption varies a lot depending on the temperature. (For example, it goes up in summer when more customers use air conditioning.) Conversely, Country Energy’s regulated load is less variable, because the area it covers is more geographically diverse. This means changes in temperature in one part of this area do not have such a large impact on the total amount of electricity its customers use.
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Each regulated suppliers’ historical prices are available below:
A time series of regulated retail electricity prices in NSW is also provided here. These prices are a weighted average across NSW. The link contains a price index from 1992/93, and indicative customer bills based on regulated prices from 1999/00.
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Residential parks owners in NSW (including caravan parks and manufactured home estates) cannot charge their metered occupants more than the regulated retail prices of the regulated supplier in their area (ie, EnergyAustralia, Integral Energy or Country Energy). This includes usage charges (expressed as $/kWh), and the service availability charge (expressed as $/day that electricity is supplied). Click here for regulated prices.
Where the electricity supplied to the metered occupant is at a rate of less than 60 amps, there are additional restrictions related to the maximum service availability charge the park owner can charge.
The Office of Fair Trading has specific guidance on customer service standards applied to caravan parks – click here for more information.
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The carbon pricing mechanism commenced 1 July 2012. The carbon price is fixed at $23 per tonne of CO2e in 2012/13 and will increase by 2.5% (plus inflation) for the first two years. After 3 years, it will transition to a market-based (floating price) scheme.
By placing a price on carbon emissions, the mechanism pushes up the cost of electricity generation and wholesale electricity prices. In turn, this will increase electricity retailers’ costs and thus retail electricity prices.
In our framework for setting regulated prices, the efficient increase in the regulated suppliers’ costs due to the carbon price is included in these prices. Unregulated market prices also increased, to reflect the retailers increased costs.
Based on our modelling for the 2012 annual review of regulated electricity retail prices, we estimated the carbon price added around $168 to a typical electricity bill in 2012/13. However, this can vary a lot depending on your electricity consumption. For more information, see our Fact Sheet.
If you are concerned that the impact of the carbon price has been misrepresented or overstated in relation to goods or services, you can contact the Australian Competition and Consumer Commission (ACCC). The ACCC has set up a carbon claims hotline on 1300 303 609, or alternatively, click here.
Remember, most households will receive compensation (such as tax cuts and pension increases) which are expected to offset all or most of the increase in electricity prices due to the carbon price – click here for more information.
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IPART is required to set regulated electricity prices at levels that reflect the costs of supplying electricity to customers on regulated contracts. This means everyone who is connected to the electricity system and consumes electricity bears the cost of their own actions. It is a user pays approach to pricing.
In addition, setting regulated prices at cost reflective levels means that retailers who offer market prices can vigorously compete for customers, which should lead to improvements in the efficiency of all retailers.
If regulated prices were set below cost reflective levels in some parts of the NSW retail electricity market (such as rural and regional areas), then retailers would not be attracted to those parts of the market, and so customers in those areas would not be able to benefit from competition.
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The NSW Government offers subsidies to certain customers, including:
- Rebates for holders of Pensioner Concession Cards, Gold Cards (War Widow, War Widower Pension, Totally and Permanently Incapacitated, Disability Pension) and Health Care Cards and recipients of the Family Tax Benefit A or B.
- Medical energy rebates and life support rebates for people with certain medical conditions.
- Energy Accounts Payment Assistance Scheme vouchers (EAPA) for households struggling to pay their energy bills due to financial crisis or other emergency situations.
Click here for more information on these rebates and other assistance.
The Government also runs a Home Power Savings Program which provides free home power assessments to eligible households to identify ways to save power in the home, and a free Power Savings Kit. Click here for more information.
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In Australia, there is a National Electricity Market that operates under a set of National Electricity Rules. Both the Federal and State Governments and a range of administrative and regulatory bodies make decisions that affect electricity prices, as illustrated in the diagram below.
The Standing Council on Energy and Resources (SCER) comprises Energy Ministers from the Federal and State Governments. The SCER is the national policy and governance body for the Australian electricity and gas markets.
The Australian Energy Market Commission is the rule maker and developer for the nation's energy markets.
The Australian Energy Regulator (AER) is responsible for regulating the transmission and distribution network businesses, and determining the prices they can charge for the use of their networks. In making its determinations, the AER takes account of the costs the network businesses incur in providing and maintaining the networks. These costs are influenced by:
- the National Electricity Rules
- the licence obligations the State Governments impose on the network businesses (eg, the standards related to the quality and reliability of the electricity supply that the networks must meet).
State-based regulators, such as IPART, are responsible for determining the regulated retail prices (in the states where regulated prices exist). These regulators take account of the costs the regulated retailers incur in supplying electricity. These costs are influenced by the network prices they must pay, as well as the licence obligations Governments impose on the retailers.
In addition, both the State and Federal Governments can make broader policy decisions that affect electricity prices. For example, both the NSW and Federal Governments have implemented schemes designed to mitigate climate change and encourage greater use of renewable energy. These schemes also influence the costs that electricity retailers incur, and so affect prices.
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On 4 August 2011 IPART received a terms of reference from the Premier of NSW asking us to undertake a review of solar feed-in tariffs.
The review was requested after the closure of the NSW Government’s Solar Bonus Scheme, which provided a subsidised feed-in tariff to eligible customers. The combination of generous state and federal government subsidies for customers installing PV units together with falling capital costs led to a strong uptake under the Solar Bonus Scheme. The generosity of the subsidies and higher than expected uptake of solar PV have resulted in higher than anticipated costs.
Currently NSW customers who buy and install solar panels can still access an upfront subsidy through the Federal Government’s RET scheme, and connect their new system to the grid. But now the Solar Bonus Scheme is closed they cannot receive the subsidised feed-in tariff. However if customers export excess electricity to the grid they may receive a subsidy-free feed-in tariff from their retailer that reflects the value to the retailer of the electricity exported.
We were asked to investigate and recommend a ‘fair and reasonable’ value for electricity exported to the grid, and how Government might ensure or encourage retailers to offer a feed-in tariff that reflects this value.
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The terms of reference for the review asked IPART to complete two main tasks.
The first task was to recommend a ‘fair and reasonable value’ for the electricity generated by small-scale solar PV units and exported to the grid. This feed-in tariff applies to customers who are not participants in the Solar Bonus Scheme. The feed-in tariff should be set so that electricity prices do not increase and so that it does not require funding from the NSW Government and is consistent with national principles for feed-in tariffs.
The second task relates to mitigating the ongoing costs of the Solar Bonus Scheme to the Government and taxpayers over the remaining 5 years of the scheme’s life by requiring electricity retailers contribute to the costs of the scheme.
The full terms of reference for the review can be downloaded here.
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IPART’s final report was released in March 2012. The main findings and recommendations from the Solar Review are:
q For new customers with solar PV units and ‘net metering’ the largest ongoing financial benefit is likely to be savings on electricity bills as a result of less energy being purchased from retailers (all else being equal). We estimate that a typical customer with a 1.5 kW solar PV system would save around $300 per annum on their electricity bill, and earn around $50 per annum from a subsidy-free feed-in tariff.
q The fair and reasonable value for a subsidy-free feed-in tariff in NSW is in the range of 5.2-10.3 cents per kilowatt hour (c/kWh) in 2011/12. We expect this range will be higher in 2012/13 due to the introduction of the Carbon Pricing Mechanism. IPART will update this range each year to help customers understand the value of the electricity their PV unit exports to the grid.
q We recommend that all retailers should contribute to the costs of the Solar Bonus Scheme, starting from 1 July 2012. This contribution reflects the financial gain that retailers make under this scheme.
More information can be found in our fact sheet and final report.
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Customers who are part of the Solar Bonus Scheme will continue to receive their statutory feed-in tariffs (either 60c or 20c per kilowatt hour) until the scheme closes.
However, our recommendation that all retailers contribute to the costs of the Solar Bonus Scheme from 1 July 2012, may mean that any payments your retailer provides you above the statutory rates are reduced or eliminated. We made this recommendation because from 1 July 2012, all electricity customers in NSW will be paying extra on their electricity bills to recover the costs of the Solar Bonus Scheme. Therefore, by reducing the costs of the Solar Bonus Scheme we are reducing future electricity price increases for all customers.
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IPART’s myenergyoffers website provides information on feed-in tariffs available in your area.
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The NSW Department of Trade & Investment, Regional Infrastructure & Services has developed some frequently asked questions about solar PV systems and the Solar Bonus Scheme. This includes information about Solar Bonus Scheme eligibility, tariff payments and metering arrangements. These frequently asked questions are located here: http://www.dtiris.nsw.gov.au/energy/sustainable/renewable/solar/solar-scheme/questions.
IPART also has a fact sheet which explains the characteristics of PV systems in NSW and some key messages for those thinking of installing a system.
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The electricity you export to the grid has a value to your retailer, but this value is less than the full retail price. This is because the retailer still incurs certain costs on the electricity you export to the grid. For example, if the electricity you export to the grid is ‘sold’ to another customer, the retailer is still required to pay network costs on the energy you export (these are the costs of transporting electricity across the transmission and distribution system). These network costs represent around half of a customers’ retail bill.
If retailers were required to pay households the full retail price for electricity exported to the grid they would be incurring a loss which may have implications for their financial viability and ultimately the competitiveness of the retail market.