From time to time, the energy market is subject to price changes. We’ll make sure we give you advanced information about the changes, why they are changing, and how they affect your business.
Capacity charge changes
To ensure there’s enough electricity to meet the highest demand periods (generally during the hottest days of the year), the Australian Energy Market Operator (AEMO) encourages investment in electricity generation and Demand Side Management (DSM) through a capacity mechanism. The capacity mechanism includes setting capacity prices for generation and DSM capacity which is factored into your capacity charge, as defined in the New Capacity Charge Formula.
|Effective||1 October 2018|
|2018 rate||On 1 October 2018 the reserve capacity mechanism in the Wholesale Electricity Market Rules changed. Some of the key elements in your capacity charge are Monthly Reserve Capacity Price is $11,563.37 & Monthly DSM Reserve Capacity Price is $1,969.27|
|What this means for you||
If you have an Electricity Sales Agreement which can sometimes be referred to as an unbundled agreement, your capacity charges will change from 1 October 2018. Your individual capacity charge is affected the above capacity prices and by your business’s consumption during the highest demand periods. For more information see our frequently asked questions below.
Changes to capacity charges: Your questions answered
How and when you run your business has an impact on your energy bill. To help you make sense of how capacity charges are calculated and charged, we’ve answered the most frequently asked questions about the capacity market in WA.
- Does everyone pay capacity?
Yes, all customers contribute to the cost of capacity. Capacity costs are calculated by the AEMO, your share of capacity costs are calculated by Synergy in accordance with your terms and conditions of supply. The amount you pay depends on how your business contributes to peak system demand. This is to make sure the cost of capacity is allocated to everyone fairly.
- How does my usage impact my capacity costs?
Capacity charges are payable for each capacity year from 1 October to 30 September. To keep things fair, your capacity charges are calculated based on your usage during the 'Peak Trading Intervals' for the previous capacity year.
The Peak Trading Intervals are determined by AEMO who identify the 12 trading intervals (half hourly periods) for the preceding capacity year based on the four days that had the highest demand for electricity in the SWIS between 1 December and 31 March. The three trading intervals (half hourly periods) in which electricity demand was at its highest on these days are the Peak Trading Intervals.
The median amount of electricity your business uses in the Peak Trading Intervals is known as your Median Peak Load (MPL) and used to calculate your capacity charge for the next capacity year. The higher your MPL, the higher the capacity charge will be for your business.
- How is capacity managed?
As the market operator, AEMO has responsibility for managing capacity in the SWIS and does this through the administration of the Reserve Capacity Mechanism. The Reserve Capacity Mechanism is an element of the WEM that is designed to ensure that there is enough generation capacity available each year to meet demand at any time including during peak system demand periods.
Through the Reserve Capacity Mechanism, AEMO pays generators for making their generation available to meet demand for electricity at all times including peak system demand periods. The total costs associated with obtaining this capacity are then allocated to electricity users (including your business) based on their contribution to peak demand the previous year.
- Is there a way to reduce capacity charges?
To reduce your future capacity charges you can look to reduce your electricity consumption between 3pm and 8pm during the hottest days between December and March when demand is generally highest.
It’s important to note that what you use during peak periods from December to March this year won’t have an impact on your capacity charge until the following capacity year, which starts on 1 October each year.
- What impacts capacity prices?
The Reserve Capacity Price and Demand Side Management Reserve Capacity Price are part of the Reserve Capacity Mechanism and determined by AEMO. These prices are used to calculate your capacity charges and are influenced by a number of factors including: type of generation plant in the SWIS, new generation or expansions, forecast peak demand and system security requirements.
- What is capacity?
Capacity represents the need for adequate generation resources to ensure WA’s electricity supply is reliable and the demand for electricity can be met at all times.
To understand how the capacity market works in WA, it helps to know these key terms:
- SWIS – This is the South West Interconnected System, which is the grid (or electricity distribution network) that covers the south-west of WA.
- WEM – This stands for the Wholesale Electricity Market, which is the electricity market for the SWIS.
- AEMO – The Australian Energy Market Operator is the body which oversees the operation of the WEM which includes the electricity and capacity market.
- What were the Peak Trading Intervals for this capacity year?
The Peak Trading Intervals determined by AEMO which were used to calculate capacity charges for the capacity year beginning 1 October 2018 and ending on 30 September 2019 were:
Date Peak Trading Interval 15th Feb 2018
5:00PM to 5:30PM
5:30PM to 6:00PM6:00PM to 6:30PM
12th March 2018
5:30PM to 6:00PM
6:00PM to 6:30PM6:30PM to 7:00PM
13th March 2018
5:00PM to 5:30PM
5:30PM to 6:00PM6:00PM to 6:30PM
21st March 2018
4:30PM to 5:00PM
5:00PM to 5:30PM5:30PM to 6:00PM
- What’s a capacity year?
This is the period from 1 October to 30 September each calendar year for which the amount of capacity required is determined and capacity charges allocated.
- When does peak demand occur?
Peak demand is based on the overall electricity demand in the SWIS, which includes both business and residential energy consumption.
It is therefore impacted by weekends, public holidays and school holidays and will be highest when both businesses and residential households are using electricity at the same time. Demand for electricity also tends to rise when temperatures increase. For example, when we experience consecutive hot days, air conditioners are in constant use to combat accumulated heat in buildings and homes.
Solar PV installation helps to reduce the amount of demand on the system (or demand to be supplied from generation) during the day but later in the day it becomes less effective and can also be unpredictable.
Usually peak demand occurs on weekdays between 3pm – 8pm.
Small-scale Renewable Energy Scheme (SRES) charges
Supports the investment in smaller technologies such as rooftop solar panels and solar hot water heaters through the generation of Small-scale Technology Certificates (STCs). The number of of STC’s to be purchased each year is calculated using the Small-scale Technology Percentage (STP) published by the Clean Energy Regulator..
|Effective||1 January 2018|
|2018 rate||17.08% STP|
|If you have an Electricity Sales Agreement, your SRES charges are likely to change. The STP has increased from 7.01% in 2017, largely due to a higher than estimated number of small scale solar PV installations in Australia. Learn more at the Clean Energy Regulator or see our frequently asked questions below.|
Large-scale Renewable Energy Target (LRET) charges
Supports the development of large projects including wind farms and solar power stations by legislating demand for Large-scale Generation Certificates (LGCs). The number of LGC’s to be purchased each year is calculated using the Renewable Power Percentage (RPP). which changes annually and is published by the Clean Energy Regulator.
|Effective||1 January 2018|
|2018 rate||16.06% RPP|
|If you have an Electricity Sales Agreement, your LRET charges are likely to change. The RPP has increased from 14.22% in 2017. Learn more at the Clean Energy Regulator or see our frequently asked questions below.|
- What is the Renewable Energy Target?
The Renewable Energy Target (RET) is an Australian Government scheme designed to reduce emissions of greenhouse gases in the electricity sector and encourage the additional generation of electricity from sustainable and renewable sources.
- The Large-scale Renewable Energy Target (LRET), encourages investment in large renewable power stations like wind farms and large scale solar farms to achieve 33 000 gigawatt hours of additional renewable electricity generation by 2020. The annual target will be rising each year in order to achieve this target.
- The Small-scale Renewable Energy Scheme (SRES), supports small-scale installations like household solar panels and solar hot water systems.
- What does the Renewable Energy Target mean for my energy costs?
In order to meet the Federal Government’s Renewable Energy Target (RET) Synergy is liable to purchase a certain amount of renewable energy for you each calendar year. This is done through the purchase of renewable certificates from large renewable power stations and the owners of small-scale systems who are eligible to create certificates for every megawatt hour of power they generate.
- For the Large-scale Renewable Energy Target these certificates are known as “Large-scale Generation Certificates” (LGCs). The number of LGCs to be purchased each calendar year is calculated using the Renewable Power Percentage (RPP), set annually in the Renewable Energy (Electricity) Regulations 2001 (Regulations. For example for 2017 the RPP is 14.22% which means Synergy must purchase LGCs for 14.22% of your energy consumption; and
- For the Small-scale Renewable Energy Scheme Synergy purchases “Small-scale Technology Certificates” (STCs). The number of STCs to be purchased is calculated using the Small-scale Technology Percentage (STP), set annually in the Renewable Energy (Electricity) Regulations 2001 (Regulations). For example in 2017 STP is 7.01% which means Synergy must purchase STCs for 7.01% of your energy consumption.
- How are Renewable Energy Target charges shown on my bill?
For customers on a Business Flexi product, your RET charges are built into your existing energy rates and supply charge.
For customers on an Energy Sales Agreement, you can see a line item on your bill for Small-scale Renewable Energy Scheme charge and Large-scale Renewable Energy target charge.
- Why are the Renewable Energy Targets changing?
The Clean Energy Regulator (CER) publishes binding STP and RPP rates by 31 March each year and then backdates this charge to 1 January, going out to December of the same year.
The CER has announced the following:
Scheme Rates 2017 2018 Small-scale Renewable Energy Scheme STP 7.01% 17.08% Large-scale Renewable Energy Target RPP 14.22% 16.06%
- How are these rates derived?
The RPP and STP are broadly derived by calculating the required renewable power generation (either large scale or small scale) by the amount of electricity used in the country (not including self-consumption by customers of the electricity generated by their PVs, and not including electricity consumed by Emissions Intensive Trade Exposed activities). Note these are federal schemes and therefore include renewable power generation in all of Australia, there is no assessment of the state based renewable power.
- Why have they changed?
- The Large-scale Renewable Generation Target increases each year until 2020 until it reaches the 33,000 GWh mandated by the government.
- For the past few years the electricity consumed in Australia has not changed much, however the renewable target increases each year.Therefore the RPP needs to be adjusted upwards to ensure the target is met.For 2018 the renewable target has increased to 28,637 from 26,031 in 2017 – an increase of around 10%.
- For the STP there is no generation target. The generation volume is determined by the estimated number of STCs to be created in the year (from Solar PVs, solar hot water systems, heat pumps etc.). The estimated generation volume is also adjusted based on the previous year’s target and actual small renewable system installations.
- It is important to note that the generation of STCs is deemed over the lifetime of the installation of the small scale renewable energy. This means there is more volatility in STP and it can increase or decrease year to year.
- In 2017 the adjustment from 2016 was a substantial negative volume leading to a lower STP. For 2018 the increase in STP can largely be explained by removal of the previous year’s adjustment combined with significantly greater installation of new solar PV systems than was forecast by the CER.
- Who is impacted by the change?
For customers on a Business Flexi product, your RET charges are built into your existing energy rates and supply charge and there is no change to your charges.
Any customers on an Energy Sales Agreement will be directly affected.
- When will Synergy start charging the new rates and what does this mean for my energy charges?
If you are on an Energy Sales Agreement your bills so far this year before the CER published the new rates were based on 2017 rates.
Now the official rates are published by the CER, Synergy will adjust your bill to backdate the commencement of the official 2018 STP and RPP rates to 1 January 2018.
- What is Synergy doing to inform its customers of the new rates?
Synergy will be sending our customers written communication informing them of the impact of the binding STP and RPP rates for 2018.
The RRP has increased compared to the 2017 rate consequently for your LRET charges you can expect the charge to increase.
The STC has increased compared to the 2017 rate consequently for your LRET charges you can expect the charge increase.
- Where do I go for more information?
You can visit the Clean Energy Regulator’s website.
The Economic Regulation Authority has approved there will be no increases to the price Western Power charges Synergy to access its electricity network.
|Effective||1 July 2018|
|2018 charge||There will be no further increases for 2018/19|
|For customers on a fixed-term Synergy Business Plan or Electricity Sales Agreement these changes will be passed through to the rates your business pays.|
Electricity - Government regulated tariffs (standard contracts)
The setting of electricity retail tariffs is determined by the state government and is assessed as part of the annual state budget process every year.
Gas distribution charges
The Economic Regulation Authority has approved changes to the price ATCO Gas Australia charges to distribute gas through its network.
|Effective||1 January 2018|
|2018 rate||Please contact your account manager to confirm increase (if applicable)|
|What this means for you||For customers on a fixed-term Gas Sales Agreement - Form of Agreement these changes may be passed through to the rates your business pays.|
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