Regulatory determinations provide an indication on carbon pass throughs
Last Updated on Thursday, 05 July 2012 15:08
Energy consumers received some indication on carbon pass through amounts in modelling done for the state based regulators in NSW, QLD and SA for the upcoming bundled tariff changes for small site customers. These tariffs are publicly available and published for approval from the state based regulators. This provides a level of transparency and a general indication of the translation of the carbon price on large market energy bills.
Due to the deregulation of large market contracts, variances can occur between retailers, as there is no requirement to publish standard rates. Therefore, the carbon pass through approach will vary amongst retailers. Energy Action believes that retailers will be incorporating the carbon pass through into energy rates as a price increase (carbon adjustment), whilst some may include a new line item.
What are carbon pass throughs?
A carbon pass through is the increased cost directly related to the carbon price, which will be passed on to end-use consumers i.e. the measure of how much of the carbon price will be passed through on your electricity bill.
Regulatory Determinations
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NSW – IPART and Frontier Economics/AGL
In NSW, the state based regulator IPART has included in their draft proposal for electricity tariffs a carbon pass through of 88% which is a impact of around $20/MWh. This number is then adjusted for losses and included in the retailer’s energy purchasing costs. AGL, the largest default gas retailer in NSW, has proposed a carbon pass through based on both Scope 1 (direct) and Scope 3 (wellhead and transmission) emissions as published by National Greenhouse Accounts. The proposed pass through is $1.52/GJ which is then adjusted by retail operational costs and retail margin to be $1.78/GJ.
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QLD – QCA and ACIL Tasman
In QLD, the cost of carbon was based on the AFMA Australian Carbon Benchmark Addendum methodology as per the recommendation from ACIL Tasman. The report estimates an average NEM carbon intensity of 87% which means a pass through amount of $20.01/MWh. The QCA report provides carbon pass through cost adjusted for each network area and tariff type which range from $21.48-21.74/MWh.
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SA – ESCOSA and AGL/Origin Energy
In SA, Origin Energy, the default gas retailer, has made an application to the state energy regulator, ESCOSA, to pass through the cost of the carbon pricing scheme to small gas consumers. The proposal also covers both Scope 1 and 3 emissions. These factors result in a total carbon pass through of $1.50/GJ which is then adjusted for retail margin to be $1.70/GJ. The default electricity retailer AGL has also made an application to pass through costs based on the average NEM carbon intensity (similar to QCA determination) which results in a pass through estimation of $21.16. This price is then adjusted for the 1 August start date, losses and retail margin to be $27.37 in the first year.
Please note at the time of publication these submissions were in there draft stage and are currently open for review. Final determinations may vary from the results of these findings.
How Energy Action’s estimates matched up
In July 2011, Energy Action’s Activ8 subscribers received a carbon impact email with estimates for pass through costs. The calculations used in these reports closely align with the above determinations (see table below).
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State
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Commodity
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Draft Regulatory Decision
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Energy Action Estimate
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NSW
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Electricity
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2.02 c/kWh
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2.04 c/kWh
|
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QLD
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Electricity
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2.00 c/kWh
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2.02 c/kWh
|
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SA
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Electricity
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2.16 c/kWh*
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1.56 c/kWh
|
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NSW
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Gas
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$1.52/GJ
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$1.50/GJ
|
|
SA
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Gas
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$1.50/GJ
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$1.42/GJ
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*Note that the difference in the SA electricity carbon pass through is due to the proposal from AGL to use the NEM wide carbon intensity rather than a state based intensity which is lower in SA.
Energy Action is currently planning another email distribution with updated carbon price impact reports, based on your most recent consumption data. This should provide Activ8 subscribers with a more accurate picture of expected increases in energy costs. Energy Action will be reviewing the upcoming regulatory determinations and will be posting important information on changes to costs regarding the carbon price in following monthly reports and on our website.
To review the above mentioned reports please follow the links below: