Energy pricing

Residential and small business customer energy pricing

Understanding how energy pricing works

What are some of the factors that influence our energy rates?

In supplying electricity to you Powerdirect incurs a range of different costs including the four categories explained below:

Wholesale market cost

This is the amount we pay to purchase sufficient electricity to supply our customers.

Electricity can be bought directly from a wholesale electricity market where most businesses that generate electricity sell their output, for example, coal or gas power stations, or wind farm and hydro scheme operators (electricity generators). The price of wholesale energy is determined by conditions in the wholesale market, including supply and demand conditions.

Network costs

Different companies are involved in the delivery of electricity to homes and businesses. They are called electricity distributors and electricity transmission businesses.

The activities performed by these businesses include building and maintaining the transmission and distribution networks of electricity poles and wires, to transport the energy from electricity generators to end-users.

We have direct and indirect costs in arranging the supply of wholesale energy and network services used in supplying gas and electricity to our customers.

Government green scheme costs

We have direct and indirect costs associated with a range of federal and state government green schemes that promote a sustainable energy industry. These schemes include renewable energy schemes and energy efficiency schemes.

Energy retail component

As an energy retailer, we are the face of the industry to our customers. We manage a lot behind the scenes to ensure that our customers’ homes and business have access to electricity at competitive prices. The cost of doing so is recovered through our energy rates.

Our business activities include purchasing wholesale energy and network services, assisting customers with queries about their energy plans, usage or bills, requesting distributor services on behalf of our customers such as connections and disconnections when moving house, and calculating and sending energy bills.

Other activities we perform include managing our compliance obligations, and sending our customers the details of their energy plans, and all of the other important information they need to know about us as their energy retailer, the industry and their supply of electricity in general.

When setting our energy rates it is important for us to offer competitive electricity plans, to be able to provide excellent service and value to our customers, and to ensure the continued support of our shareholder investors.

What are the different types of energy charges on a bill?

There are two types of energy charges that appear on most customers’ energy bills:

Daily supply charges (service or supply charges)

A daily supply charge is a charge that applies for supplying electricity to your property for each day of the billing period. Daily supply charges are not related to the amount of energy used during the billing period.

Daily supply charges cover some of the costs of maintaining and operating the distribution and transmission networks, and some of the operational costs of servicing our customers.

Usage charges

Usage charges are calculated per kilowatt hour (kWh), for electricity, for the amount of electricity used at a home or business during the time period covered by a bill. Usage charges also cover some of the costs of maintaining and operating the distribution and transmission networks, and some of the operational costs of supplying our customers.

The majority of costs associated with government green schemes are generally recovered through the usage charges.

The actual amount of the usage charges that appear on an individual customer’s bill depends on how much energy they use, as measured by their meter and multiplied by the usage rates that apply under their energy contract.

Why can neighbours have different size bills?

It's possible that two similarly sized houses right next to each other, that are billed for the same time period and pay the same energy rates under identical energy plans, might have very different amounts on their energy bills.

This can be due to a number of physical factors about the property, the number of occupants or the way the occupants use energy.

For example, one home may have double glazed windows, or more insulation and weather proofing, making it more energy efficient. One house may have a solar power system that generates electricity.

One home may use energy efficient lighting, and the other may have a large number of inefficient down lights installed. A heated and filtered backyard pool can add significant cost to a household electricity bill.

One home may have more energy-hungry appliances, such as plasma screen televisions, or mobile devices that require recharging every day. A second fridge can also add considerable cost to a household electricity bill.

The household occupants may use their appliances at different times of the day, which matters if different rates apply to usage that occurs during peak, off-peak or shoulder times of the day.

One home may have more efficient heating, or cooling, or the heating or cooling might be set to different temperatures. One occupant might do more loads of washing. One occupant may line dry their clothes, while the other uses a tumble dryer.

All of these factors will combine uniquely for every household, which may result in quite different amounts when the energy bill arrives.

How does my electricity meter affect my energy rates?

Your meter type and configuration determines the electricity rates available to you.

Traditional electricity meters don't record when you use electricity, they only record how much you have used in total since the last time the meter was read. If you have a pool pump, slab heating or storage hot water, then traditionally you might have a separate controlled load meter through which these facilities operate during off-peak times, with off-peak rates applying to their usage.

However, new smart meters record when electricity is used in half hourly intervals, and this is reported back to energy retailers on a daily basis. Because of this, smart meters also support a flexible pricing structure, in which different electricity rates can apply at different times of the day.

With a flexible pricing structure, higher amounts might apply during peak hours, with lower rates applying during off-peak and shoulder times of the day. A smart meter and flexible pricing structure may enable you to lower your overall electricity usage costs by shifting some of your electricity usage outside the peak times.

For example, running energy-hungry appliances such as a dishwasher or clothes dryer during the off-peak period will help you take advantage of lower off-peak rates.

How do solar power systems impact electricity bills?

Installing a solar power system can result in a significant reduction of overall bill amounts.

A solar power system harnesses energy from sunlight via solar panels on the roof and converts it into electricity. Generating electricity in this way is considered environmentally friendly as it produces no direct greenhouse gas emissions.

With a net metered solar power system, the electricity that is generated is used by the home or business, and any excess electricity (where the solar power system is generating more than is being used in the home or business at any point in time) is fed back into the electricity grid.

With a gross metered solar power system, all the electricity that is generated is fed back into the electricity grid.

Customers with either a net or gross metered solar power system are paid for the excess electricity that is fed back into the grid in the form of solar feed-in credit on their electricity bills.

So a net metered solar power system reduces the amount of electricity that homes and businesses need to buy for use during the day. Plus, the feed-in credits for solar electricity not used by the home or business and fed into the grid helps off-set the cost of electricity that is purchased from the grid.

With a gross metered solar power system all the solar electricity generated is fed into the grid, for which the home or business will receive feed-in credits, but all the electricity used by the home or business is drawn from the grid and paid for under the customer’s energy plan.

Solar feed-in tariffs, which are used to calculate solar feed-in bill credits, differ from state to state and may depend on when a solar feed-in agreement was entered into and the type of metering that is set up.

The amount of any solar feed-in credits received will depend on geographical location, the size of the solar power system installed and, in the case of net metered systems, the energy usage of the home or business at the time the solar power system is generating electricity.

Installing a solar power system can reduce the size of electricity bills, and can significantly do so depending on size of the particular system installed.