Network tariffs and charges
About network tariffs
There are two main tariff components to your electricity bill:
- A retail component, to recover the purchase cost of energy from the generator
- A network component, to recover the network costs (both distribution and transmission) of delivering energy to your premises. This is a regulated charge levied by the distribution businesses to which the customer is connected (UE), and by the transmission company that owns the transmission assets (AusNet Services).
Network tariffs are directly charged to your retailer by your distributor. Network tariffs are regulated by the Australian Energy Regulator (AER) and represent the cost component referred to as “Network Use Of System” (NUOS). The NUOS is made up of two principal components – Standard Distribution Use of System (DUOS) and the Transmission Use of System (TUOS) – which are added together.
The DUOS component covers the operations and maintenance cost and investment return on our network assets. These assets include zone substations, distribution lines and distribution transformers.
The TUOS component covers the use of transmission power lines/towers and terminal stations.
For all billing enquiries, please refer to your electricity retailer for assistance. The contact details for your retailer can be found on your electricity bill.
Tariffs and charges
When we receive a request to connect customers to the network (basic or negotiated), there are one-off connection costs and an annual meter cost that we incur and pass onto our customers. The Australian Energy Regulator has approved charges for the services identified in the Summary of UE Schedule of Charges, which includes the following key section:
- For Alternative Control Services:
- That are fee-based, the charges are listed for each of the services
- That are metering services, the charges are listed for each of services
- That are quoted services, the charges are based on the level of work that is agreed with the customer.
- For Unregulated Services, Metering Services Charges> 160MWh and Labour Rates the charges are listed for each of the services.
These charges cover our costs for items such as labour, materials, site visits and administration.
Network tariff reform
Tariff Structure Statement
On 25 September 2015 we submitted our first Tariff Structure Statement (TSS) proposal to the Australian Energy Regulator (AER) following more than 12 months of consultation with consumer advocates, customers, retailers, government, industry bodies, other network businesses and regulators.
The TSS is part of national reforms to pricing structures for electricity networks. The Australian Energy Markets Commission (AEMC) made a series of changes to network pricing rules in November 2014 that aim to achieve three objectives:
- Better signals of the cost drivers of distribution networks
- Explicit consideration of the impact of changing tariffs
- Transparency and greater certainty as to the tariff strategies that will be employed during a regulatory period.
The need for tariff reform
We support tariff reform. New pricing structures are one part of a suite of complementary initiatives that will contribute to more effective management of peak demand, which will in turn contribute to more efficient capital investment and savings to customers. These changes will not result in additional revenue for our business.
Current tariff structures for the majority of our customers do not reflect the costs of building and maintaining the network to meet their needs. Since around 2010 this has emerged as a problem, as average demand and peak demand have uncoupled. After decades of relatively consistent growth in peak and overall demand, average demand has declined while peak demand has continued to grow.
We currently charge customers for network services on the basis of usage, but we build to meet peak demand. The alternative to building capacity for peak demand is both clear and unacceptable – less reliable power supply when our customers need it most. Charging on a basis that does not reflect the cost of building for the peak has contributed to price increases, even as some customers use less energy overall. By introducing a price signal that reflects the cost of building to meet the peak demand, we will incentivise the reduction of these rare peaks. Any avoided investment in capacity will ultimately save customers money.
Changes to tariffs are just one way to better manage peak demand. Our Summer Saver trials are another good example of ways we are trialing to reduce peaks and save customer money.
The purpose of tariff reform is not to penalise customers for their past investment decisions. Rather, it is to ensure that the correct signals are in place for the next wave of technological innovation (such as battery storage) and that customers understand and respond to these signals.
By introducing more cost reflective tariff signals will we be able to reduce what we spend on building and maintaining the network for the benefit of all customers, and in doing so continue to deliver safe and reliable electricity at the lowest possible cost.
Following our own consultation in the development of this proposal, the AER will now undertake its own public consultation on the Victorian proposals, including:
- Release of an issues paper (expected towards the end of 2015)
- Draft decisions by 22 February 2016
- Final decisions by 29 July 2016 on the Victorian TSS proposals.
For further information on the AER consultation process, please visit:
We encourage anyone who is interested to get involved.