History of the Victorian Electricity Market
Throughout most of the 20th century, the Victorian Government owned and controlled the entire electricity sector. The State Electricity Commission of Victoria (SECV) was formed in 1921 charged with generation, transmission, distribution and retail of electricity. As was the trend for many industries in the late 20th century, the electricity and gas sectors began a process of deregulation and the SECV was disaggregated in 1993, and progressively privatised from 1995 to 1999. The roles of the commission were broken up into generators, distributors and retailers. At this time, there were only three energy retailers – AGL, Origin Energy and EnergyAustralia (formerly TRUenergy).
In January 2002, the Victorian Government became the first in Australia to introduce Full Retail Competition (FRC), enabling new retailers to compete in the energy retail sector. Tariff rates would continue to be set by the three incumbent retailers but were subject to strict regulatory controls by the state government. The deregulation of the energy sector became a hot political topic, and after much research and debate, the Victorian Government completely deregulated the energy market in 2009.
Victorian Electricity’s Market Today
A deregulated energy market means that electricity retailers are free to charge whatever they want. The idea behind this market structure is that electricity retailers are incentivised to provide quality, low-priced services in order to attract market share. In recent years, Victoria has seen an explosion in the number of energy retailers entering the market, making the state the most competitive in Australia.
Retail markets are the final link in the energy supply chain. The retailers purchase electricity from wholesale market distributors and sell it to customers. For most households, your energy retailer is the only point of contact you will need to involve yourself with.
There are more than 20 energy retail companies now operating in Victoria and some of the newest to the industry include GloBird energy, Online Power and Gas, Sumo Power and Blue NRG. But the big three – AGL, Origin and EnergyAustralia – still hold a combined market share of around 70%.
Electricity distributors own and maintain the distribution networks, including the power poles and lines that feed electricity to your property. There are five distributors in Victoria, each operating in separate areas of the state. If your home loses power, the electricity distributer is who you contact – not the retailer, so ensure you know which distributor services your area.
- Citipower:Area served – Melbourne City and inner suburbs
- Jemena: Area served – Northern and south-western suburbs
- Powercor Australia: Area served – Western suburbs and western Victoria
- AusNet Services: Area served – Outer northern and eastern suburbs and eastern Victoria
- United Energy Distribution: Area served – Southern suburbs and Mornington Peninsula
Despite the Victorian energy sector being extremely competitive, electricity prices have climbed steadily since deregulation, with a study conducted by ‘Carbon and Energy Markets’ suggesting that electricity rates have tripled since 2008. The majority of this increase is coming from the ‘fixed’ portion of your power bill. Fixed costs can vary considerably across retailers, so be weary of what you’re being charged.
Your Electricity Bill Explained
Your electricity bill is filled with a lot of information, and it’s perfectly reasonable if you don’t quite understand all the charges. The pricing structure that electricity retailers use is called a ‘tariff’ (not to be confused with an import tax). The tariff level you are charged will vary depending on your retailer and location. A tariff is made up of two parts:
A fixed charge: Also referred to as a supply or service charge, this is a flat rate charge imposed for the expense of remaining connected. It remains the same regardless of energy usage and is displayed separately under your power bill summary.
A variable/demand charge: Dependent on the amount of electricity your household uses, this is measured in Kilowatts per hour (KWh) and is recorded by an electricity meter.
Types of Electricity Tariffs
- Single rate – A rate that remains the same regardless of the time of day or year.
- Block rate – A usage rate calculated based on blocks of usage. With tariff blocks, you pay one rate or charge for the first part of usage, and then you pay a different rate for the next part(s) of your usage. A block can be either a day month or quarterly usage.
- Controlled/Dedicated load – Controlled load is a separate steam of electricity. You may have a controlled load if you use an electric hot water system or slab heating. Your electricity retailer charges you a different rate for your general electricity usage and your controlled load.
- Time of use rates – Many energy retailers offer plans that charge a different rate at different hours of the day. Rate times often marginally vary depending on your retailer, so you will need to contact your provider for full details.
Off-peak – During hours of low electricity usage, many electricity plans will charge a substantially lower rate. As a general rule, the off-peak hours are usually from 11pm to 7am.
Shoulder – A shoulder rate is applied during periods of mild electricity usage. This rate is usually applied during mid-day.
Peak – A peak rate is charged at times of heavy electricity demand. Peak times are usually between 6pm and 9pm, but times can vary slightly between retailers.
Additional Fees & Charges
These are the additional expenses added onto your account which many consumers often overlook.
- Establishment fee – A fee charged for setup and connection.
- Termination fee – A fee charged for early exit of a contract.
- Payment processing fee – Like with many services, there is often a nominal charge for processing your payment.
- A late payment fee – Usually a flat fee charged on overdue electricity bills. Payment times can be negotiable to help you avoid this charge.
Most energy retailers offer discounts on a part of your power bill, but only if you meet specific requirements.
- Pay on time discount – A discount for paying your energy bill by the due date. Not all retailers offer pay on time discounts and the amount discounted varies between retailers. Discounts usually range from 5% to 15%, but have been known to go as high as 35%. Some discounts apply to your entire bill, but others take the discount from just one part of the total amount.
- Loyalty discounts – Like many other industries, some electricity retailers reward long term customers with reduced electricity charges.
- Feed-in tariff – An electricity rebate for households that ‘feed in’ to the grid, mainly made possible by generating solar power using solar panels.
- Bundle discount – Some electricity retailers which also operate in other industries (such as natural gas or telecommunications) offer discounts when you hold multiple accounts.
Some electricity retailers provide extra incentives to encourage consumers to switch to their service. For example, AGL customers can earn Flybuys points when they pay their bills and Lumo Energy offers Velocity Frequent Flyer points. Promotional offers, such as an increased pay on time discount, are also common.
There are a number of state and federal electricity concessions available to concession card holders and those experiencing hardship. A concession card includes a pensioner card, health care card or DVA gold card.
Annual Electricity Concession (AEC) – A 17.5% electricity discount available to eligible concession card holders. Concession households with annual electricity bills in excess of $2,882 will need to apply for the ‘Excess Electricity Concession’ to receive the discount.
Controlled load electricity concession – A 13% discount on controlled load usage charges for hot water or slab heating for households with dual element or smart electricity meters. This is only available to concession cardholders.
Supply charge concession – A discount on the electricity service charge where a household has a lower variable charge than the fixed charge. The discount reduces the fixed charge to the cost of the total electricity usage for the billing period. This is only available to concession cardholders.
Utility Relief grant – A grant provided to low income households stricken by financial hardship. To be eligible you must be a concession card holder who can satisfy a number of financial hardship criteria.
Non-Mains Energy Concession – A rebate for remote concession card holders who rely on generators, LPG, firewood or who access non-mains electricity via an embedded network for cooking, heating oil and hot water. The rebate amounts for 2015 are available on the human services website that is linked.
Life Support concession – If you’re using a life support machine, this concession provides a discount every quarter equal to the cost of 1,880 kWh of electricity (470 kWh per quarter) on your electricity bills.
Medical cooling concession: A 17.5% concession available to households with one or more residents who have a medical condition that makes it difficult for them to regulate their temperature. The concession applies in the hottest months from 1 November to 30 April.
Understanding Meter Readings
Meters are devices used to record the amount of electricity used by a home or business. In Victoria, smart meters have been installed in most properties, though some customers continue to use traditional meters.
Smart meters send meter readings directly to your electricity distributor, bypassing the need for a meter-reader to physically visit your premise.This also allows for live usage data to be tracked via web portals for consumers who purchase or receive electricity through AGL, Australian Power & Gas, EnergyAustralia, Powershop, Lumo Energy, Origin Energy, Jemena, AusNet Services and United Energy.
Additionally, the Victorian Government’s Energy Saver Incentive scheme currently subsidises in-home displays, giving customers access to real-time information about their energy consumption, enabling consumers to take a detailed look at exactly when and how they are using electricity.
Doubt has recently been cast over the effectiveness of smart meters however, with some reports claiming that Victorians have largely ignored smart meters.
According to the Victorian Government, 2.8 million homes and businesses now have smart meters installed as part of a rollout scheme that commenced in 2009. Prior to 30 June 2014, households and small businesses were eligible for a rebate of $250. This rebate remains available to premises which do not have a smart meter installed due to fault or delay on the electricity distributor’s behalf.
For those who expressly choose to continue using traditional meters, electricity distributors on behalf of retailers can reclaim any costs associated with the manual meter reading as an added fee on your electricity bill.
For those with traditional meters, you will notice under the ‘meter readings’ section of your electricity bill that there is an ‘A’ or an ‘E’ next to your usage measurement.
An ‘A’ means ‘Actual’, meaning someone came to your household to get an actual reading. An ‘E’ means estimated, meaning that the retailer has estimated your usage. This is usually done when the retailer is unable to read your meter or your meter is inaccessible. If the estimate is too high or too low, your next bill will include a credit or an additional amount to pay. This means you only pay for the electricity you use. If you need a little more help understanding your bill, EnergyMadeEasy has an interactive bill to help you out.
Below is an example of what your electricity bill should look like. Image sourced from the Victorian government electricity initiative – SwitchOn.
Finding the Right Electricity Retailer
Victorians are spoiled for choice when it comes to electricity retailers, so there is no reason to be stuck with a bad deal. A good place to start when comparing different electricity retailers is Canstar Blue’s customer satisfaction ratings to find out how Victorian customers rate their providers. If you’re just looking to find the cheapest tariff, the Victorian Energy Compare website will help you find the best plan appropriate to your location and energy usage. There are also various websites dedicated to helping you compare tariffs and prices, including our partners Switchwise.
Negotiate Your Power Bill
The electricity sector has become so competitive that customers can have a surprising amount of negotiation power over their electricity plans. If you find a better deal with another provider and are considering a switch, then give your current retailer a call first to see if they can match that price or perhaps beat it. It may be that you’re not on the best plan with your existing retailer.
If you ever feel aggrieved by your energy retailer and believe there has been some form of misconduct such as an unfair bill or general failure to honor your agreement, then you can contact the Energy and Water Ombudsman (Victoria) which will investigate on your behalf for free.
Renewable Energy Options in Victoria
Thinking of going green? Most major electricity retailers now offer ‘environmentally-friendly plans’, most of which are accredited under the GreenPower Accreditation Scheme. By signing up to such a plan, you are instructing your retailer to source a percentage of its energy from renewable sources equivalent to the amount agreed in your plan. This could be as little as 10%, or as much as 100%, but it’s wise to check how much extra such a plan will cost you.
Installing Solar Panels
Solar energy has grown increasingly popular largely due to rising electricity prices and environmental concerns, and thanks to technological leaps, solar power is more viable than ever. Solar PV (photovoltaic) Panels allow you to generate your own power by transforming the suns photons into useable electricity. This reduces the amount of grid energy your home must draw, helping reduce your electricity bill.
Solar Energy Incentives
Aside from the reduced dependency on grid energy, there are two major incentives to install solar power. They are small-scale technology certificates (STCs) and feed-in tariffs (FiTs).
Small-scale Technology Certificates
Under the Small-scale renewable Energy Scheme (SRES), households that install a form of renewable energy generator (wind, hydro or solar) may be eligible for a rebate in the virtual form of STCs. Depending on the size of the installation and geographical location, a person may be eligible to receive a number of small-scale technology certificates. The number of certificates that you will receive can be calculated using the small generation unit calculator.
Federal law requires energy retailers to purchase a certain amount of these certificates each year, so these certificates can be sold for cash. The easiest option is to allow the installer to sell these certificates on your behalf, however if you want to maximise your return, you can sell these certificates in an open market where price is set by market forces, or you can sell them for a fixed price of $40 per certificate via the STC clearing house.
Eligible premises are able to export excess solar energy on to the power grid in return for a ‘feed-in’ tariff, helping further reduce your bill. The feed in tariff rate depends on your electricity retailer, geographical location and supply and demand.
Find a Solar Retailer
There are many solar retailers and panel installers operating in Victoria. To be eligible for the above-mentioned ‘Small-scale Technology Certificates’, the solar panels must be installed a Clean Energy Council (CEC) accredited company. Retailers can also voluntary sign up to the CEC’s code of conduct, demonstrating the company adheres to best-practice installation. For these reasons, it’s in your best interested to make ensure that your retailer and/or installer are an accredited company and is a signatory to the code of conduct.
Other Solar Considerations
Before making the decision to install solar, here are a few things that you should ensure or consider.
- You are the property owner.
- Your roof is large enough (usually requires a 15 square meter minimum).
- The roof is strong enough to support the weight of solar panels.
- Your roof has access to sunlight and is not shadowed by trees.
- Your home faces the right direction. Only north-facing panels will produce at full capacity.
- Check if any local government permission is required.
- Get multiple quotes to make sure you find the right deal.
Following this guide, you can hopefully now navigate the seemingly daunting Victorian electricity market with a lot more confidence. If you haven’t reviewed your electricity plan in a while, there is no better time than now to get out there and find the best deal.