New tariffs for electricity networks that will take effect in 2017 will assist consumers in making better choices about their electricity use.
Using the new tariffs, electricity retailers will be able to design offers for customers that best meets their needs and support how they want to use electricity—their solar panels, air conditioners, charge their batteries or electric vehicles.
“Distribution networks are developing new tariffs that reflect the costs of different patterns of use. This will allow customers clearer choices and they will be able to directly benefit if they use electricity at times that don’t increase costs for the networks,” AER Board member Jim Cox said.
The three NSW electricity distributors—Ausgrid, Essential Energy and Endeavour Energy—have developed tariff structure statements where they set out new tariff approaches they consider achieve these goals. The new tariffs have been submitted to the AER for assessment. The AER’s role is to ensure the proposed tariff structure statements comply with the National Electricity Rules.
The AER draft decision supports some of the proposed tariff changes sought by the NSW distributors that will allow consumers clearer consumption choices. In particular, Ausgrid’s approach to a wider application of time of use tariffs for residential and small business customers.
“This is a positive step towards cost reflective tariffs. This should make it clear to consumers how they can save money by changing their energy usage patterns,” Mr Cox said.
“Through lower prices at off peak times and higher prices during peak periods, these new tariffs will give customers more control over their electricity bills.”
If customers move usage from peak periods when the network faces its highest demand pressure to lower priced off peak periods, there will be less need for new network investments and this will defer costly network upgrades. The investment needed to meet peak demand has contributed to the electricity price increases experienced by Australian consumers in recent years.
However, other aspects of Ausgrid’s proposal raise a number of issues that need to be addressed, such as the need to ensure that proposed tariffs are technology neutral. This will mean that network charges are based on when customers use electricity, rather than the type appliances they own.
Ausgrid, Endeavour Energy and Essential Energy’s tariff structure statements also continue their existing suite of declining block tariffs. We do not consider these reflect the pricing principles in the Rules. This is because these tariffs do not signal when the networks might be congested or constrained or when there is spare capacity.
The changes will not affect the total revenue these businesses are allowed to recover. The distributors spent considerable time consulting with their customers about their proposed new network tariffs.
Distribution charges make up around 40 per cent of a customer’s final bill in NSW. It will be up to retailers to decide how and if they pass on the distributors’ network tariff structures and price signals to users.
For large commercial and industrial customers there are no changes to existing tariff structures where demand-based charging already exists.
The draft decision is available on the AER website. The distributors’ revised tariff structure statements are due by 4 October 2016. We also welcome submission on the AER’s draft decision from all stakeholders which should be provided to the AER also by 4 October 2016. The AER will make a final decision on the tariff structures in February 2017.