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Network Tariffs - Explained

Network Tariff

Your electricity bill can have 18 lines or more, which highlights the complexity of the electricity sector and, while your energy consumption has a direct impact on the total amount, you have come to accept that some of the costs detailed in your bill are fixed – like network charges – and you can’t do anything about it. Are you right? Not exactly. Once a year, your business gets the chance to lock in substantial savings if they are eligible to switch to a better network tariff. 

What is a network tariff review?

Every year, the Australian Energy Regulator (AER) requires electricity distribution businesses to submit a pricing proposal outlining proposed network prices to take effect from the start of the next regulatory year for their network. The tariffs set out in each distributor’s annual pricing proposal must match those approved by the AER in their tariff structure statement. In Victoria, 2017 is the first year where this has become mandatory.

The AER approves the proposals if they comply with rule requirements, any applicable distribution determination and if all associated forecasts associated with the proposals are reasonable.

And why do I have a network charge on my bill?

The network tariff is what networks charge for you to use their infrastructure (poles and wires) to get you the electricity your business consumes.   

Network tariffs sound like a fixed cost, but could my business be on a better tariff?

The network providers also offer detailed information on the AER website explaining annual tariff changes along with the eligibility criteria with respect to each network tariff. 

With this information – the eligibility criteria and an understanding of your electricity usage – it is possible to compare your current network tariff with the other network tariffs that are available to see whether there is any benefit in moving to a more cost-effective format. 

This is similar to comparing the cost of a monthly train ticket with the cost of purchasing multiple daily tickets to establish which is more cost-effective considering your particular use of that service.  The network tariff’s eligibility criteria in this example would be whether or not you are entitled to a concession ticket.

Sounds great! How do I get on a better tariff?

Undertaking this optimisation is complex and requires a detailed review of your business’s historical electricity usage behaviour, including the impact of your time of maximum use (demand) and actual use (volume) through the course of various periods designated by the tariff as more or less costly.  These periods could include a combination of Peak, Off Peak, Shoulder and other network-defined periods.

Network charges constitute over 50% of a typical energy bill, so it’s no surprise that businesses pounce on the small window of opportunity that comes up once a year during which they can confirm whether they are on the best tariff and switch if they aren’t. 

Find out more about the process here and get in touch with us to see how we can help your business.