South Australian Energy Prices July July 2014

Transcription

1 South Australian Energy Prices July July 2014 An update report on the SA May Mauseth Johnston August 2014

2 Disclaimer Theenergyoffers,tariffsandbillcalculationspresentedinthisreportandassociated workbooks should be used as a general guide only and should not be relied upon. The workbooks are not an appropriate substitute for obtaining an offer from an energyretailer.theinformationpresentedinthisreportandtheworkbooksisnot providedasfinancialadvice.whilewehavetakengreatcaretoensureaccuracyof theinformationprovidedinthisreportandtheworkbooks,theyaresuitableforuse onlyasaresearchandadvocacytool.wedonotacceptanylegalresponsibilityfor errorsorinaccuracies.thestvincentdepaulsocietyandalvissconsultingptyltddo not accept liability for any action taken based on the information provided in this reportortheassociatedworkbooksorforanyloss,economicorotherwise,suffered as a result of reliance on the information presented. If you would like to obtain informationaboutenergyoffersavailabletoyouasacustomer,gotoaer s Energy MadeEasy websiteorcontacttheenergyretailersdirectly. SouthAustralianEnergyPricesJuly2014 AnUpdateReportontheSouthAustralianTariffNTrackingProject bymaymausethjohnston MayMausethJohnston,August2014 AlvissConsultingPtyLtd ABN StVincentdePaulSocietyandAlvissConsultingPtyLtd Thisworkiscopyright.ApartfromanyusepermittedundertheCopyrightAct1968 (Ctw),nopartsmaybeadapted,reproduced,copied,stored,distributed,published orputtocommercialusewithoutpriorwrittenpermissionfromthestvincentde PaulSociety. Contacts:GavinDufty ManagerPolicyandResearch,Victoria Phone:(03)

3 2 Acknowledgements This project was funded by a research grant from the Consumer Advocacy Panel ( as part of its grants process for consumer advocacy projectsandresearchprojectsforthebenefitofconsumersofelectricityandnatural gas. Theviewsexpressedinthisdocumentdonotnecessarilyreflecttheviewsofthe ConsumerAdvocacyPanelortheAustralianEnergyMarketCommission.

4 TheSATariffHTrackingProject ThisprojecthastrackedelectricityandgastariffsinSouthAustraliafromJuly2009to July2014,anddevelopedaspreadsheetNbasedtoolthatallowsconsumeradvocates tobuildontheinitialanalysisandcontinuetotrackchangesastheyoccur. Thefirst reportforthesatariffntrackingprojectwaspublishedinaugust2012andthisupn datereportfocusesonpricechangesthathaveoccurredoverthelastyear. Wehavedevelopedfourworkbooksthatallowtheusertoenterconsumptionlevels and analyse household bills for regulated/standard gas and electricity offers from July2009toJuly2014,aswellascurrentpublishedelectricityandgasmarketoffers postthepriceresetsinjuly2012,2013and Workbook1:ElectricitystandingoffersJuly2009NJuly2014 Workbook2:GasstandingoffersJuly2009NJuly2014 Workbook3:ElectricitymarketofferspostJuly2012NJuly Workbook4:GasmarketofferspostJuly2012NJuly2014. The four workbooks and the reports can be accessed at the St Vincent de Paul Society swebsite: 1 Allmarketoffersarepublishedoffersanddonotincludespecialoffersthatretailersmarket throughdoornknockingcampaignsorbrokers.weusetheaer s Energymadeeasy website aswellastheretailersownwebsitestocollectmarketofferforthetariffntrackingtool.the TariffNTrackingtooldoesnotincludeanyadditionaldiscountsorbonusesbutkeymarket offerfeaturesarelistedinthespreadsheets.thisreportcontainsanalysisofsomeofthose features. 2 Thisworkbookalsocontainselectricitymarketoffersthattookeffectuponthe deregulationoftheretailmarketinfebruary2013.! 3

5 NoteregardingtheRepealofthecarbontaxbill On23June2014theGovernmentreintroducedtheCleanEnergyLegislation(Carbon TaxRepeal)Bill2013[No.2]intheHouseofRepresentatives.Thebillrepealsthesix Actsthatestablishedthecarbonpricingmechanism.TheSenatepassedthebillon 17July2014andwecanthussoonexpectchangestoSouthAustralianelectricityand gasprices. As the methodology of the Vinnies TariffNTracking project is based on providing annual price updates as of July every year, we do not believe the repeal of the carbontaxisareasontodelaythisproject.rather,weseepricechangesduetothe repealasaseparateprojectintheshorttermandnotethatitsimpactshouldalsobe evidentinthefollowingtariffntrackingupdateforsouthaustralia. 4

6 TableofContents Acknowledgements 2 TheSATariffHTrackingProject 3 NoteregardingtheRepealofthecarbontaxbill 4 Keyfindings 6 1.EnergypricechangesfromAugust2013toJuly Standingoffersvs.marketofferspostJuly Electricitystandingoffersvs.marketofferspostJuly Gasstandingoffersvs.marketofferspostJuly Supplycharges Electricitysupplycharges Gassupplycharges 31 4.NetworkchargesandthebillHstack 22 5

7 Keyfindings Intermsofgeneraltrends,thetariffanalysisfoundthat: 3 Annual electricity costs for standard contract customers have typically increased by around 170N190 (or 7%) since August See chart 1 below. Standard contract customers with a typical consumption level (6,000kWh/annum, single rate) will have an annual electricity bill of approximately2,500.seechart1below. Typical consumption households on the standard contract price now pay between 125 and 145 more per annum in electricity costs compared to whattheydidpriortoderegulationinfebruary2013.seechart1below. Significantgaspriceincreasesmeanthatannualbillshavetypicallygoneup by120n140(or12n14%)sinceaugust2013.seechart3below. Standard contract customers with a typical consumption level (21,000Mj/annum)willhaveanannualgasbillofapproximately1,160.See chart3below. Households that signed up to AGL s standing offer prior to deregulation in February2013andarenowonAGL stransitionaloffer,arecurrentlysaving approximately170perannuminelectricitycosts(comparedtothestandard contract prices) The transitional offer did, however, increase by as much as thestandardcontractpriceinjuly2014.seechart3below. Typical consumption households on the standard contract price now pay between230and250moreperannumingascostscomparedtowhatthey didpriortoderegulationinfebruary2013.seechart4below. Four retailers (AGL, Origin, Energy Australia and Lumo) have electricity marketofferratesabovethestandardcontractrates(priortodiscounts).see section2.1below. Byswitchingfromthestandardcontracttothebestelectricitymarketoffer, households with a typical consumption level may save 515 per annum 3 Thesecalculationsarebasedonincreasesinthestandingofferforsinglerateelectricity customersusing6,000kwhperannum,increasesinthestandingofferforcontrolledload electricitycustomers(typicallyallnelectrichouseholds)using7,500kwhperannum(thereof 20%offNpeak)andtheincreaseinthestandingofferforgascustomersusing21,000Mjper annum. 4 AsSouthAustraliaderegulatedtheretailmarketinFebruary2013andthefollowingprice resettookeffectinaugust2013,thechartsinsection1comparepricesasofjuly2012 (pricespriortoderegulation),february2013,august2013andjuly

8 (includingdiscountsandpayontimediscounts).householdscurrentlyonthe transitional offer may save 345 per annum if switching to one of the best marketoffers.seesection2.1below. Customersthathavedifficultypayingtheirbillsontimeshouldbeawareof discounts conditional upon prompt payment. Two of the electricity market offersproduceannualbillsabovethestandardcontractratesforlatepaying customers.seesection2.1below. The difference between electricity market offers is also significant. The difference between Dodo and Energy Australia s market offers for typical consumptionhouseholdsis490perannum(includingdiscountsandpayon time discounts). AGL, Momentum, Origin and Energy Australia are the retailers that produce the highest bills for this consumption level (6,000kWh/annum,singlerate).Seesection2.1below. AGListheonlyretailerthatoffersgasasastandNaloneproduct(Simplyand Alintaonlyoffersgasasaduelfuelproduct)andhasmarketofferrates(not including discounts) that are lower than the standard contract rates. See section2.2below. Gas customers with typical consumption may save 95 per annum by switching from the standard contract to the best standnalone gas market offer(includingdiscountsandpayontimediscounts).seesection2.2below. Some retailers have very high supply charges. A customer on Lumo s electricitymarketofferwillpay70moreperannuminfixedsupplycharges comparedtoacustomeronthestandardcontract.seesection3. Since 2009 the Network Use of System (NUOS) charges have increased by 100% for average consumption households while the overall retail bill has increasedby66%.seesection4. 7

9 1.EnergypricechangesfromAugust2013toJuly Householdsonthestandardcontractpricewithaverageelectricityconsumptionnow paybetween125and145moreperannuminelectricitycostscomparedtowhat theydidpriortoderegulationinfebruary2013.duetotheinitialdropinstandard contractpriceshowever,theannualcostofelectricityhasincreasedby170n190 sinceaugust2013. Chart1Differencestotheannualcostofstanding/standardcontractelectricityoffersfrom 2012to2014.Basedonannualconsumptionlevelof6,000kWhforsinglerateand7,500kWh perannum(thereof20%controlledload),gstinclusive Annual&bills&()& 2,800! 2,700! 2,600! 2,500! 2,400! 2,300! 2,200! 2,100! 2,000! 1,900! 1,800! 1,700! 1,600! Single!rate! Controlled!load! Jul;12! Feb;13! Aug;13! Jul;14! Furthermore, as the South Australian Government negotiated a two year price freeze of the retail component of AGL s standard contract offer, customers that wereonagl selectricitystandardcontractofferpriorto31januarywillcontinueto receive lower bills. Importantly though, the price freeze only applies to the retail component of electricity bills and as the transitional offer rates increased significantlyinjuly2014(seechart2below)weassumethisreflectsanincreasein the network costs. See discussion in regards to network charges in section 4. Nonetheless, almost 1 ½ year since deregulation, customers on the standard offer prior to deregulation (and now on the transitional offer) are saving approximately 170ontheirelectricitybills. 5 AsSouthAustraliaderegulatedtheretailmarketinFebruary2013andthefollowingprice resettookeffectinaugust2013,thechartsinthissectioncomparepricesasofjuly2012 (pricespriortoderegulation),february2013,august2013andjuly

10 Chart2Differencestotheannualcostofthestanding/standardcontractandthetransitional electricityofferfromfebruary2013tojuly2014.basedonannualconsumptionlevelof 6,000kWh,singlerate,GSTinclusive 2,600! 2,500! Annual&bills&()& 2,400! 2,300! 2,200! 2,100! 2,000! Feb;13! Aug;13! Jul;14! 1,900! Standard!contract! Transitional! In terms of gas, the Government did not negotiate an ongoing price freeze with OriginEnergyandpriceshaveincreasedsignificantlysincetheinitialpricedropof1% infebruary Gasbills,asofJuly2014,are12N14%higherthantheywerein Augustlastyear. Householdsonthestandardcontractpricewithaveragegasconsumptionnowpay between 230 and 250 more per annum in gas costs compared to what they did priortoderegulationinfebruary2013.seechart3below. 6 SeeOriginEnergy,MediaRelease,18December2012at 9

11 Chart3DifferencestotheannualcostofgasStandingoffers/StandardcontractsfromJuly 2012toJuly2014,21,000Mjperannum,GSTinclusive 1,200! 1,100! Annual&bills&()& 1,000! 900! 800! 700! 600! Jul;12! Feb;13! Aug;13! Jul;14! 500! Adelaide! Port!Pirie! Whyalla! Mt! Gambier! Riverland! Table 1Differencetoannualbillsforelectricity(standardcontract)bytarifftypeAugust 2013 July Singlerate(6,000kWh) Tworate(7,500kWh, 20%controlledload) Difference %Difference 7% 7% Table2Differencetoannualbillsforgas(standardcontract)byareaAugust2013 July Adelaide PortPirie Whyalla MtGambier Riverland Difference %Difference 14% 12% 12% 12% 12% 7 Singleratecalculationsarebasedonhouseholdconsumptionof6,000kWhperannumat therateoftheretailstandingoffers.thetwonratecalculationsarebasedonhousehold consumptionof7,500kwhperannum(thereof20%controlledoffnpeakload)attherateof theretailstandingoffers. 8 BasedonOrigin sstandingoffergasratesforcustomersusing21,000mjperannum. 10

12 2.Standingoffervs.marketofferspostJuly Electricity:Standingoffervs.marketofferspostJuly Chart 4 below shows that households using 6,000kWh per annum(single rate) will have an annual electricity bill of between 2,250 and 2,670, and that the transitionalstandingoffernolongercontainsthelowestrates.furthermore,chart4 showsthatwhileeightoftheretailershavemarketofferratesbelowthestandard contract(whencalculatedasannualbillsandnotingthatthischartisbasedonrates priortoadditionaldiscounts),fourretailers(agl,origin,energyaustraliaandlumo) havemarketofferratesthatarehigherthanthestandardcontract. Chart4Electricityoffersasannualbills,postJuly2014,Singlerate,notincludingdiscounts, 6,000kWhperannum(GSTinc) 2,800! Annual&bill&()& 2,600! 2,400! 2,200! 2,000! 1,800! 1,600! Chart5belowshowsasimilartrendforhouseholdswithcontrolledoffNpeakload. 9 ThesearemarketofferscollectedfromtheAER swebsite( theretailers ownwebsitesinthetwofirstweeksofjuly2014.notethatretailersmay changetheirmarketofferratesatanytime. 11

13 Chart 5 Electricityoffers as annual bills, post July 2014, Controlled load, not including discounts,7,500kwhperannum,thereof20%offnpeak(gstinc) 3,000! Annual&bill&()& 2,800! 2,600! 2,400! 2,200! 2,000! 1,800! Asstatedabove,thecalculationsforthemarketoffersincharts4and5arebasedon rates only(cost per kwh and fixed charges) and do not include other market offer features such as discounts on consumption rates, vouchers, signnup credits, loyalty bonusesanddiscountsifbillsarepaidontime. Consumers assessing market offers should take these additional features into accountaswellasbeingawareofcontractconditionssuchaslatepaymentfees,the lengthofthecontractandfeesforexitingthecontractearly. Chart 6 below shows the difference in annual bill between the standard and transitional offer (lines), as well as market offers including pay on time discounts (POT)andmarketoffersincludingguaranteeddiscountsonly(exPOT).Itshowsthat market offers(including discounts and pay on time discounts) can produce annual bills that are around 515 less than the standard contract and345 less than the transitional standing offer. These differences are significantly greater compared to lastyearwhenthepotentialsavingwas280and110respectively.however,late paying consumers (and thus unlikely to achieve the bills estimated including POT) shouldbeextracautiouswhenchoosingamarketoffers,especiallyiftheycurrently areonthetransitionaloffer. 12

14 Chart 6ElectricityofferspostJuly2014asannualbills,Singlerate,6,000kWh(GSTinc). Marketoffersincludingpayontimediscountsandexcludingpayontimediscounts 10 Annual&bill&()& 2,900! 2,700! 2,500! 2,300! 2,100! 1,900! 1,700! 1,500! Market!(ex!POT)! Standard!contract! Market!(inc!POT)! Transitional!offer! 2,900! 2,700! 2,500! 2,300! 2,100! 1,900! 1,700! 1,500! The difference between the best and the worst market offer is also significant. Dodo s offer is approximately 490 less than Energy Australia s market offer post discounts(and pay on time discounts) for households with this consumption level. Figure 1 below shows estimated annual bills for electricity market offers post discounts. 10 Calculationsincludediscountsoffusageorbillaswellaspayontimediscountsoffusage orbill. 13

15 Figure1Lowesttohighestannualbills(inclGST)formarketofferspostJuly2014,including discountsandpayontimediscountsnhouseholdsconsuming6,000kwhperannum(single rate) 11 Dodo 1,975 RedEnergy 2,074 Alinta 2,121 SimplyEnergy 2,134 Powerdirect 2,211 QEnergy 2,240 PacificHydro 2,249 LumoEnergy 2,256!! AGL 2,311 Momentum 2,387 OriginEnergy 2,406 EnergyAustralia 2,466 Thediscounts(includingpayontimediscounts)usedtoestimatetheannualbillsfor chart6andfigure1aboveareshownintable3below.table3alsoshowsother contract terms and features, such as early termination fees, associated with these market offers. Some of the retailers have multiple market offers and may offer higherdiscountsthanthoselistedhere.however,ifthediscountishigherthelength ofthecontracttermisgenerallylonger,andviceversa. 11 Thesebillestimatesarebasedonratespublishedontheretailers websitesduringthefirst twoweeksofjuly2014anditmustbenotedthatretailersmaychangetheirratesatany time.additionaldiscountsforcustomerschoosingtopaybydirectdebitarenotincludedin thesebillcalculations. 14

16 Table 3 Published electricitymarketoffers taking effect after July 2014: Key additional featuresandcontractconditions Discounts Fixed term Early Termination Fee Late Payment Fee Payontime discounts AGL^ 2%off 2years Upto %offusage Yes usage Origin^^ No 1year No 12 11%offusage Yes Energy Australia 4%off usage 3years Upto90 No 3%offusage No Simply No 2years Upto95 No 15%offusage No Alinta No No No No 15%offusage No QEnergy 5%off 1year No No usage Lumo No 2years 75 No 12%offbill No Powerdirect 12%off 3years No No usage RedEnergy No 2years Upto95 No 10%offbill No Dodo No No No No 20%offusage No Momentum No 1year 75 No No No PacificHydro No 1year No No No No Other ^AGL sofferincludesafurther2%offconsumptionratesifbillsarepaidbydirectdebit ^^Origin sofferincludesafurther1%offconsumptionratesifbillsarepaidbydirectdebit ThePriceandProductInformationStatementsdonotstipulatewhetherlatepaymentfeesapply. Powerdirect sdiscountonusagedoesnotincludecontrolledoffnpeak. Note:Examplesofotherfeaturesincludeloyaltybonuses,creditstotheaccountuponcommencinga contractandshopvouchers. Payontimediscountsarebecomingincreasinglycommonfeaturesofenergymarket offers.insouthaustralia,thedifferenceinannualbillsbetweenthosepaidontime andthosepaidlatehasincreasedsincelastyear. 12 Payontimediscountscombined withlatepaymentfees,meansthatsouthaustralianhouseholdscanbesignificantly penalised for late payment. Or conversely, South Australian households can be significantlyrewardedforpromptpayment.itdoes,however,highlightanissuethat negativelyimpactsonhouseholdswithcashnflowproblems. 12 SeeStVincentdePaulSociety,South)Australian)Energy)Prices)July)20128July)2013,)An) update)report)on)the)vinnies )South)Australian)Tariff8Tracking)ProjectbyMayMauseth Johnston,September

17 Table4:Difference()inannualbillbetweenpayingallbillsontimevs.payingallbillslate (basedon6,000kwhperannum,singlerate,4billsperannum).electricityofferstaking affectafterjuly2014. DifferenceJuly2014 Standardcontract/transitionaloffer 51 AGL 185 Origin 310 EnergyAustralia 70 Simply 325 Alinta 325 QEnergy 60 Lumo 310 Powerdirect 51 RedEnergy 230 Dodo 430 Momentum 0 PacificHydro 0 ThePriceandProductInformationStatementsdonotstipulatewhetherlatepaymentfees applyandthesecalculationsdothereforenotincludealatepayment. Table 4 above shows that paying late can become very expensive on some market offers.householdswithdodo,origin,simply,alinta,andlumo,forexample,canbe between310n430worseoffiftheypaylatecomparedtopayingontime.chart7 belowshowstheestimatedannualelectricitybillforcustomersthatalwayspayon timeandforthosewhoalwayspaylate,forpublishedelectricityoffers. Chart7Estimatedannualbillforcustomersthatpayontimevs.paylate,electricityoffersas ofjuly2014,singlerate,6,000kwh(gstinc) 13 Paid!on!time! Paid!late! Annual&bill&()& 2,900! 2,700! 2,500! 2,300! 2,100! 1,900! 1,700! 1,500! 13 Annualbillcalculationincludesdiscounts,payontimediscountsandlatepaymentfeesas perenergyoffer. 16

18 2.2Gas:Standingoffervs.marketofferspostJuly There are very few gas market offers in South Australia and the only area where there is more than one market offer is greater Adelaide (households in the other areas only have access to Origin s market offer). As such, the below analysis only comprisesstandardcontractsvs.marketoffersinthegreateradelaidearea.chart8 below shows that market offer rates (excluding additional discounts) can be both lowerandhigherthanthestandardcontract(dependingontheretailer).however, the two retailers with the lowest rates (Simply and Alinta) do only offer gas in conjunctionwithanelectricityoffer. Chart8GasofferspostJuly2014,asannualbills(21,000Mjperannum) Annual&bill&()& 1,300! 1,200! 1,100! 1,000! 900! 800! 700! 600! 500! 400! Standard! contract! AGL! Origin! Energy! Aus! Simply! Alinta! Thecalculationsforthemarketoffersinchart8aboveincludetheirratesonly(cost per MJ and fixed charges) and do not include other market offer features such as discounts on consumption rates, vouchers, signnup credits, loyalty bonuses and discounts if bills are paid on time. As such, consumers assessing market offers shouldtaketheseadditionalfeaturesintoaccountaswellasbeingawareofcontract conditionssuchaslatepaymentfees,thelengthofthecontractandfeesforexiting thecontractearly. Chart9belowshowsthedifferenceinannualbillbetweenthestandardoffer(line), and market offers (including pay on time discounts (POT) versus offers including guaranteeddiscountsonly(expot)).itshowsthatmarketoffers(includingdiscounts andpayontimediscounts)canproduceannualbillsthatarearound215lessthan thestandardcontractbutwenotethatthisisaduelfuelgasoffer(onlyavailablein conjunctionwithelectricity).agl,originandenergyaustraliaaretheretailersthat 14 ThesearemarketofferscollectedfromtheAER swebsite( ortheretailers ownwebsitesinthetwofirstweeksofjuly2014.notethatretailersmay changetheirmarketofferratesatanytime. 17

19 offergasasastandnaloneproduct,andthemaximumsavingthatcanbeachievedfor averageconsumptionhouseholdsswitchingtoastandnalonegasofferis95. Chart9GasofferspostJuly2014asannualbills,21,000Mj(GSTinc).Marketoffersincluding payontimediscountsandexcludingpayontimediscounts 15 Annual&bill&()& 1,300! 1,200! 1,100! 1,000! 900! 800! 700! 600! 500! 400! Market!(ex!POT)! Market!(inc!POT)! Standard!Contract! AGL! Origin! Energy!Aus! Simply! Alinta! 1,300! 1,200! 1,100! 1,000! The difference between the best and the worst standnalone gas market offers is lower. AGL s offer is approximately 60 less than Energy Australia s market offer post discounts (and pay on time discounts) for households with this consumption level.figure2belowshowsestimatedannualbillsforstandnalonegasmarketoffers postdiscounts. Figure2Lowesttohighestannualbills(inclGST)forgasmarketofferspostJuly2014, includingdiscountsandpayontimediscountsnhouseholdsconsuming22,000mjper annum ! 800! 700! 600! 500! 400! AGL 1,065 OriginEnergy 1,098 EnergyAustralia 1,122 Thediscounts(includingpayontimediscounts)usedtoestimatetheannualbillsfor chart9andfigure2aboveareshownintable5below.table5alsoshowsother 15 Calculationsincludediscountsoffusageorbillaswellaspayontimediscountsoffusage orbill. 16 Thesebillestimatesarebasedonratespublishedontheretailers websitesduringthefirst twoweeksofjuly2014anditmustbenotedthatretailersmaychangetheirratesatany time.additionaldiscountsforcustomerschoosingtopaybydirectdebitarenotincludedin thesebillcalculations. 18

20 contracttermsandfeatures,suchasearlyterminationfees,associatedwiththese marketoffers. Table5PublishedgasmarketoffersintheAdelaidegaszonepostJuly2014:Keyadditional featuresandcontractconditions Discounts Fixed term Early Termination Fee Late Payment Fee Payontime discounts AGL^ 2%off 2years Upto %offusage Yes usage Origin^^ No 1year No 12 7%offusage Yes Energy Australia 4%off usage 3years Upto90 No 9%offusage No Simply No 2years Upto95 No 10%offusage Yes Alinta No No No No 10%offusage No Other ^AGL sofferincludesafurther2%offconsumptionratesifbillsarepaidbydirectdebit. ^^Origin sofferincludesafurther1%offconsumptionratesifbillsarepaidbydirectdebit. Gasoffersonlyavailableinconjunctionwithelectricity(dualfueloffers). Note:Examplesofotherfeaturesincludeloyaltybonuses,creditstotheaccountuponcommencinga contractandshopvouchers. 19

21 3.Supplycharges 3.1Electricitysupplycharges Thesupplychargeisafixeddailychargethatispaidinadditiontotheconsumption charges for electricity used. High supply charges result in low consumption households paying a proportionally higher cost per unit of energy than high consumptionhouseholds.thishassignificantequityimplicationsassomecustomer classescharacterisedbylowandfixedincomealsouselesselectricitythanthesouth Australianaverage.Pensionersmakeuponeoftheselowerconsumptiongroups. 17 Consumers shopping around for a better market offer should thus be aware that someretailoffershavesignificantlyhighersupplychargescomparedtoothermarket offers as well as the standard contract. Chart 10 below shows the daily supply charges(centsperday)forthevariousoffersavailablepostjuly2014.lumo shigh supply charge (approximately 90 cents/day) means that customers would pay 70 more per annum in fixed supply charge on this offer compared to the standard contract. Chart 10Dailysupply charges for electricity (single rate and controlled load), standard contractandmarketofferspostjuly2014(incl.gst) Cents&per&day& 90! 85! 80! 75! 70! 65! 60! 55! 50! 17 ABSsurveydatashowsthathouseholdswithgovernmentpensionsandallowancesas theirmainsourceofincomehaveameanweeklyelectricityconsumptionofapproximately 122kWhandthathouseholdswithwagesandsalariesastheirmainincomesourceuse approximately20kwhmoreperweek(142kwh/week).seeabs,4670.0)household)energy) Consumption)Survey)2012,Table8,September2013.Furthermore,Victorianconsumption surveyshavefoundthatconcessioncardholdersingeneral,andhouseholdsontheaged concessioninparticular,havelowerconsumptionthanthegeneralpopulation.seevictorian) Utility)Consumption)Household)Survey)2007byRoyMorganResearchforDept.ofHuman Services,Finalreport,April2008,p75.Thelowerconsumptionlevelsamongaged concessioncardholdersrelatestotheaveragesizeofthesehouseholds.pensioners,asa customergroup,areonaveragesmallerhouseholds(fewerpeople)comparedtothe populationonawholeandthishasanimpactontheirconsumptionlevels. 20

22 3.2Gassupplycharges Thepricediscrepancybetweenthedifferentretailers supplychargesisevengreater for gas. Chart 11 showsthat Energy Australia s high supply charge of 99 cents per daymeansthatcustomerswouldpay95moreperannuminfixedsupplychargeon thisoffercomparedtothestandardcontract(approximately75cents/day). Chart11Dailysupplychargesforgas,standardcontractandmarketofferspostJuly2014 (inclgst) Cents&per&day& 100! 95! 90! 85! 80! 75! 70! 65! 60! 55! 50! Standard! contract! AGL! Origin! Energy! Aus! Simply! Alinta! 21

23 4.NetworkchargesandthebillHstack The South Australian electricity network, SA Power Networks, introduces new Network Use of System (NUOS) charges as of 1 July every year. 18 TheseNUOS chargescomprisetransmissionuseofsystem(tuos)anddistributionuseofsystem (DUOS) and the retailers can, and generally will, build changes to the NUOS (in relationtobothshapeandprice)intotheirretailtariffs. The chart presented in this section shows that NUOS charges have increased over the last 5 years and that the NUOS currently accounts for 47% of an average consumption customer s bill. 19 Since 2009, retail prices have increased by approximately 66% in South Australia, while the NUOS charges have increased by 100%.Seechart12below. Over the same time period average energy prices (and demand) has consistently fallenandthusresultedinadecreasingenergyvalue.theenergysupplyassociation Australia(ESAA)statesthat: In the 2008N09 financial year energy value was recorded as 10.2 billion, meaningthatrevenuesareover40percentdowninthreeyears. 20 Itmustbenotedthatthespotpricerevenueisonlyanindicatoroftotalgeneration revenueasthemajorityoftheelectricitysoldiscontractedinadvance.however,the spot price will impact on the price retailers negotiate for new contracts and you wouldthusexpecttoseeafallingwholesalecostcomponentofthetotalbillstack overthis5yearperiod.furthermore,asthefallingenergyvaluementionedaboveis NEM wide, we have sought to assess South Australian specific indicators of falling electricity generation costs. Interestingly, the reserve plant margin, which is the amountofexcessgenerationavailablewithinagivenregion,increasedsignificantly in South Australia from 2010/11 to 2011/12. In 2010/11 the reserve plant margin 18 SAPowernetworkswaspreviouslyknownasETSAUtilities 19 Note:TheAustralianEnergyMarketCommissionestimatedthatnetworkcostswould accountfor55%ofcustomers billsin2014/15basedonthenetworkcostsaccountingfor 17.42centsoutofatotalof31.71cents/kWh.SeeAEMC,2013ResidentialElectricityPrice Trends,FinalReport,13December2013,p78.Toaccountforthedailysupplycharge,the AEMC sanalysismultipliedthedailysupplychargeby365daysanddividedbyannual consumption(kwh).thevariablecharge(cents/kwh)wasalsomultipliedby365daysand dividedbyannualconsumption(kwh)andthesumofthesetwovaluesrepresentthefinal averageunitprice(c/kwh).seeaemcreport,p3,fn19.aemcalsoassumesanannual consumptionof5,000kwhperannumforsouthaustralia.seeaemcreport,p4.our methodologydiffersfromtheaemc s.wecalculatenuoscosts(excludinggst)andretail costs(includinggst)asannualbillsbasedoncentsperkwh(includinganystepchanges) andcentsperdayforthesupplycharge.ifweexcludethegstfromthejuly2014bill calculation,thenuosproportionis52%(insteadof47%). 20 ESAA,ElectricityGasAustralia(EGA)2013,p36 22

24 was just under 29% in South Australia but the following year this had increased to justover50%. 21 Chart12showsannualretailbills(solidline),NUOSchargesasannualcost(dotted line)andnuosasproportionofannualbill(columns). Chart12SAPowerNetworks:Retailbillperannum,NUOSchargesandNUOSasproportion of total bill from 2009 to 2014 (based on the regulated/standing offer retail tariff, single rate,6,000kwhperannum) 22 &per&annum& 3,000! 2,500! 2,000! 1,500! 1,000! 500! 0! 2009! 2010! 2011! 2012! 2013! 2014! 100! 90! 80! 70! 60! 50! 40! 30! 20! 10! 0! %&of&annual&cost& proportion!%! NUOS!()! Retail!()! 21 ESAA,ElectricityGasAustralia(EGA)2013,Table2.9,p25.Notethatgenerationfigures arereportedfortheactandnswcombined. 22 Basedontheregulated/standingofferratesfrom2009to2014,presentedasannualbills forhouseholdsusing6,000kwhperannum(flatrate).theannualnuoschargeshavebeen calculatedbyallocating1,500kwhperquarter(againbasedonannualconsumptionof 6,000kWh)tothestepchargesstipulatedintheNUOS.TheannualNUOScostalsoincludes fixedcharges. 23