IN­VES­TI­GA­TOR

BARELY A MONTH GOES BY WHEN WE DON’T READ OR HEAR ABOUT HOW EN­ERGY PRICES ARE SPIRALLING UP­WARDS. BUT WHERE DOES THE MONEY GO?

PC & Tech Authority - - CONTENTS -

Where does the power in my power bill go?

Some of the money you send to your re­tailer does the elec­trons that flow into your gad­gets but much of it pays for in­fra­struc­ture, me­ter read­ers, data man­age­ment and other parts of the power sys­tem.

We of­ten hear about the elec­tric­ity spot or whole­sale price. But it’s not the only mar­ket price for en­ergy. Re­tail­ers (the com­pa­nies that send you your power bill) can con­tract di­rectly with gen­er­a­tors and ef­fec­tively by­pass the whole­sale mar­ket.

“Their prices are fixed by reg­u­la­tors as they op­er­ate as reg­u­lated mo­nop­o­lies”

THE WHOLE­SALE PRICE

If you’re us­ing power from the Na­tional Elec­tric­ity Mar­ket (NEM), that elec­tric­ity is pro­duced from a num­ber of dif­fer­ent gen­er­a­tors that bid en­ergy into the sys­tem. The sup­ply and de­mand bal­ance is man­aged by the mar­ket op­er­a­tor, the Aus­tralian En­ergy Mar­ket Op­er­a­tor (AEMO). They fig­ure out how much power is needed to sup­ply the mar­ket ev­ery five min­utes and de­cide which gen­er­a­tors get used, based on the cheap­est way to sup­ply the mar­ket.

Let’s say the mar­ket needs 10mWh for the next five min­utes and there are five gen­er­a­tors in the mar­ket. Here’s what the five gen­er­a­tors bid into the sys­tem:

• Gen­er­a­tor 1 can bid 2MWh at $5 and 3MWh at $6

• Gen­er­a­tor 2 can bid 1MWh at $2 and 3MWh at $4

• Gen­er­a­tor 3 can bid 4MWh at $7 and 3MWh at $10

• Gen­er­a­tor 4 can bid 2MWh at $4 and 7MWh at $9

• Gen­er­a­tor 5 can bid 6MWh at $8 and 3MWh at $12

In this sce­nario, the least ex­pen­sive way to ful­fil the 10mWh need would be:

• Gen­er­a­tor 1’s 2MWh at $5 bid and 3MWh at $6

• Gen­er­a­tor 2’s 1MWh at $2 and 3MWh at $4 bids

• 1MWh of the 2MWh at $4 bid from Gen­er­a­tor 4

In this case all three gen­er­a­tors will be paid $6 per MWh as there’s no way of trac­ing which elec­trons are used.

THE OTHER MAR­KET

Elec­tric­ity re­tail­ers can en­ter into con­tracts with gen­er­a­tors that spec­ify that the re­tailer’s cus­tomers will use a cer­tain amount of en­ergy over a pe­riod at an agreed price. This pro­tects the re­tail­ers and, in the­ory, us from the price volatil­ity of the spot mar­ket.

When you see the elec­tric­ity price spike, it’s im­por­tant to re­alise the spot mar­ket is only part of the story.

GET­TING THE ELEC­TRONS TO YOU

Once those elec­trons are pro­duced, they get to you via the trans­mis­sion and dis­tri­bu­tion net­works. Those net­works cost money to build, main­tain and op­er­ate. So, their costs get added to our bills as sup­ply charges and you pay them whether you use a sin­gle elec­tron or not. Their prices are fixed by reg­u­la­tors as they op­er­ate as reg­u­lated mo­nop­o­lies.

The dis­tri­bu­tion net­works also col­lect your me­ter read­ings and process the data, so it can be used. So, that’s an­other thing that needs to be paid for.

DO WE NEED SHOPS?

What value re­tail­ers add to the chain other than pre­par­ing and send­ing your bill? Those con­tracts I men­tioned ear­lier pro­tect us from spot mar­ket volatil­ity. Re­tail­ers have an invisible role in pro­tect­ing us from the minute-by-minute fluc­tu­a­tions of the mar­ket which can vary be­tween a man­dated max­i­mum of $13,500/mWh to a min­i­mum of -$1000/mWh.

They also pro­vide us with a sin­gle pint of con­tact into a com­plex mar­ket in case we have a prob­lem.

WHO GETS THE MONEY?

Re­tail­ers only earn mar­gins on power bills of be­tween 10% and 20% typ­i­cally al­though, de­pend­ing on whether you’re tak­ing ad­van­tage of dis­count­ing that can get a lit­tle higher.

The trans­mis­sion and dis­tri­bu­tion col­lect about 40% of what you pay with gen­er­a­tors col­lect­ing just a quar­ter of the cash.

Those num­bers vary from state to state as the rules for how prices are set vary.

NEED HELP? EVER HAD AN IS­SUE AS A CON­SUMER? IN­VES­TI­GA­TOR CAN HELP.

If you’ve had an is­sue or had some­thing hap­pen and you think in­ves­ti­ga­tor could help, email your prob­lem to in­ves­ti­ga­tor@pcan­dtechau­thor­ity. com.au

AN­THONY CARU­ANA has worked for al­most ev­ery ma­jor mast­head in the Aus­tralian IT press. As an ex­pe­ri­enced IT pro­fes­sional – hav­ing worked as the lead IT ex­ec­u­tive in sev­eral busi­nesses, he brings a unique in­sight to his re­port­ing of IT for both busi­nesses and con­sumers.

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