In South Australia there are three basic tariff structures for business:
Single Rate Tariff: the customer pays a set rate (which varies slightly between summer and winter). Currently this rate is around 36 cents plus GST per kWh of energy that is consumed
Business 2 Tariff: the customer pays a rate of around 37 cents per kwh for electricity consumed between 7am to 9pm, Monday to Friday (peak rate). At all other times the customer pays 20 cents per kWh (off peak rate).
Demand Tariff: This is for large energy users. Their bill is split into three main categories, whereas the above tariff structures are bundled into one amount.
- Supply Charge; this is what you pay for the actual energy you consume. The Carbon Tax amount (about 2 cents per kwh) is included in this amount.
- Network Charges: This is what you pay to get the energy from the power station to your business; this is in effect a transport charge and is collected by your retailer, but is paid to SA Power Networks.
- Other Charges: these are a number of separate charges that are set out on the bill, such as the amount you pay for your meter, for the renewable energy target and the operation of the national electricity network
Take advantage of our Propitiatory Bill Analysis service
It is critical for businesses to understand where you sit with your current tariff structure, including
your network charges. We have found that approximately 60% of businesses that we review are on the incorrect tariff structure. This can be very costly for the business, inflating the profits of the energy retailers, as well as the network providers.
To illustrate the cost of being on the incorrect structure, I would like to draw a couple of examples from our client base.
We were recently engaged to review the energy costs of a professional services firm and determined that were on a single rate tariff, but in fact should have been on a demand tariff structure. By changing these structures the client has saved 47% on a $55k pa bill.
In another example we advised a client with multiple meters and services across their business. By consolidating some of these services we were able to reduce their $176k pa bill by $26k.
Another complexity for business customers is some potential upcoming changes that are being sought by SA Power Networks. A number of circumstances are combining to create a potential problem with our maximum demand in SA, particularly on those 40-degree summer days. With the Playford Power Station at Port Augusta only operating at a low capacity and likely to close in the near future, the supply of power at peak times is in question. SA Power Networks are actively trying to influence peak demand with pricing mechanisms. The upshot here is that SA Power Networks are seeking regulatory approval to shift all business customers to a Demand Tariff. This will have significant implications for business and could potentially lead to significantly increased energy costs.
The message is clear; How you use your power, as well as how much you use will be critical business decisions in the future for high energy use organisation’s and having a good understanding of this sector will be a required tool for all business owners and managers.
We regularly consult to organisations on their billing structures and consider this “low hanging fruit” for the reduction of energy charges.