Real Energy study uncovers hidden changes to network prices

A study of actual power bills paid by businesses before and after the introduction of the carbon price on 1 July has found the carbon price had only a modest impact on power prices. But the study has uncovered previously unreported increases of up to 75% in the charges imposed by some electricity networks.

In a study of 66 large business power users, the average price increase was 18.6% between June and July although the increases ranged as high as 53% and as low as an actual fall of 5%. The carbon price added on average 11% but the impact for the item listed usually as “carbon charge” on the bill varied from 5 to 15%, reflecting other changes in the bill’s components.

The real surprise was the changes in the “demand charges” imposed by some electricity networks, which is the charge imposed for the maximum power demand for that month. For the sites supplied by the major Ausgrid network in NSW, the demand charge rose by between 69 and 75%, while the charge for the Energex network in Brisbane was up between 29 and 46%. For the three sites reviewed in Adelaide with a demand charge, peak demand charges rose 25%. In Victoria, the highest increase in the demand charge was 12%.

Big Switch Projects’ Managing Director Gavin Gilchrist said: “While everyone’s been focused on the carbon price, many electricity companies have imposed an historic shift in the way business is charged for power, one few would be aware of. The new price structure surely is designed to encourage business to curb maximum peak power demand. Hitting business with these charges without telling them is like imposing double demerit points for speeding next weekend without telling anyone. It’s not going to change behaviour unless business is aware it’s happening.

“Or is the new price structure to protect network revenue at a time when overall power use is generally falling?

“The study also highlights a major failure in the electricity market. The networks driving these changes are monopoly businesses. In the Sydney CBD, office building owners in this study have been hit with an increase in peak demand charges of 75% while in Melbourne those in this study had a demand charge increase of only 12%. It’s not clear why this is happening.

“Twelve sites in the study had demand charge increases of over 50%, 18 had increases of between 20 and 50%, 17 had increases from zero to 20%, and 11 had no increase.”

The Real Energy Price study was done using actual electricity bills for June and July 2012 for 66 large business consumers, mainly office buildings but including a hotel, a large club, a hospital, two factories and a shopping centre. Of the 66 businesses, 20 were in NSW, 18 in Victoria, 20 in Queensland, six in South Australia and one each in the ACT and Northern Territory.

About this study

The Real Energy Price study was compiled by energy-efficiency advisors Big Switch Projects. Big Switch Projects is a Sydney-based energy efficiency firm mainly servicing the Australian large commercial building market with energy-efficiency reviews, upgrade strategies and NABERS Energy ratings.

The bills viewed were for June and July. The report has taken until now to publish because July bills are often not issued to large business customers until mid to late August. Big Switch Projects then needed to request the data from clients and other study supporters, enter the data manually from each bill and complete the analysis.