The electricity industry is a complex one, not just for you, the end-user, but also for the retailers, distributors and generators who make up the industry and deal within the large amount of legislation and regulations that are constantly changing.

The retailer is the company that is responsible for passing onto you the costs that are set by others in the industry like government-set environmental targets and companies which deliver electricity to your home or business (distribution and transmission networks).

Below we've tried to explain what some of these pass-through charges are and where they come from.

Network Charges

Network charges reflect the increased cost of distributing electricity and maintaining the infrastructure, the 'poles and wires', and is charged by the network companies to all retailers. Different states have different network characteristics and require greater expenditure on capital investment and maintenance.

The network (transmission and distribution) component of electricity prices usually makes up 40-45% of the energy bill.  The amount is regulated by the Australian Energy Regulator and is set at such a level that the businesses can operate effectively, conduct required capital works and generate a profit. The continued rise of network pass through charges has been linked to increased peak demand, increasing new connections and aging infrastructure.

Environmental

Environmental scheme charges are a combination of State and Federal Government policies related to renewable energy and energy efficiency. These have experienced considerable increases in recent years and make up approximately 5-8% of total price.  They are varied usually on an annual basis by government authorities. These costs will continue to increase as governments strive to attain increasingly ambitious renewable and energy efficiency targets.

Small-scale Renewable Energy Scheme (SRES) and Large-scale Renewable Energy Target (LRET)

Both of these environmental schemes were created and are managed by the Office of the Renewable Energy Regulator, in order to:

• encourage the additional generation of electricity from renewable sources;
• reduce emissions of greenhouse gases in the electricity sector; and
• ensure that renewable energy sources are ecologically sustainable

Retailers are required to purchase Small Scale Technology Certificates or ‘STCs’ on behalf of customers. This is an environmental charge legislated by the government to support the growth of the renewable energy sector. This cost is currently a component of your rates and will be adjusted to reflect the yearly indicative target as released by the Office of the Renewable Energy Regulator. For more information visit www.orer.gov.au.

VEET

The VEET scheme is a Victorian Government initiative aimed at promoting energy efficiency.  The scheme was established under the Victorian Energy Efficiency Target Act 2007. Initially it only focused on residential accounts however from 1 Jan 2012 the VEET scheme will cover all Victorian energy users. For more information visit www.veet.vic.gov.au. 

NSW Environmental Schemes

ESS and GGas are two environmental schemes run by the NSW Government. 

GGAS is a mandatory greenhouse gas emissions trading schemes, which commenced under the Electricity Supply Act 1995 on 1 January 2003. Its objectives are to reduce greenhouse gas emissions associated with the production and use of electricity, and to develop and encourage the reduction of greenhouse gas emissions from non-electricity related activities. For more information visit www.greenhousegas.nsw.gov.au.

The Energy Savings Scheme (ESS) commenced on 1 July 2009. The ESS is designed to increase opportunities to improve energy efficiency by placing obligations on parties to undertake or pay for energy efficiency programs, and rewarding companies that undertake eligible projects that reduce electricity consumption or improve efficiency. For more information visit www.ess.nsw.gov.au.

Carbon Tax

The imminent Carbon Price introduction is estimated to increase residential energy bills by a further 10% based on a Carbon Price of $23 per ton. Momentum has introduced a new product that protects customers from the July 2012 increase. SmilePower provides new customers with added price certainty with no carbon tax surprises. Watch the short video below on 'The Winners and Losers of the Carbon Tax', presented by Nigel Clark, Managing Director of Momentum Energy.

Consumer Price Index - CPI

As outlined in your Terms & Conditions, Momentum may revise your electricity rates in line with the Consumer Price Index (CPI). This is a measure of inflation reported by the Australian Bureau of Statistics.

How can customers minimize the impact?

1. Choose the right contract

Customers should look for energy contracts that minimise energy rate variation mid contract. This information can be found in their terms and conditions. It is important to note that customers on an open contract (or no minimum term) are more susceptible to price fluctuations.

Customers who sign a fixed term contract with Momentum enjoy price protection for the duration of their contracts, with the exception of CPI and the recovery of costs imposed by network companies and Government sanctioned environmental and energy schemes.

2. Focus on Energy Efficiency

There are also a number of energy efficiency initiatives that customers may implement to reduce their consumption and their bill. To help customers do this Momentum provides efficiency tips for businesses and residential customer.