Past consultation information

We started a network tariff reform journey in 2013 to deliver fairer pricing signals for the use of our electricity network.  This has seen an extensive engagement program of activities. 

The key documents and stakeholder submissions are shown below.

July 2015 - Network tariff changes introduced

Here we detail the outomes of our 2015-16 engagement.

Documents Published
Consultation Paper Our Network Tariff Reform Report Amended (PDF File, 1.3 MB) 21 Aug 2015
Stakeholder Session - Tariff structure statement meeting notes and presentations (PDF File, 2.8 MB) 21 Aug 2015
Understanding electricity demand charges for business (PDF File, 1.2 MB) 28 Jan 2015
Network Tariffs - A guide for customer using more than 40GWh (PDF File, 114.6 KB) 30 Jun 2015
Network Tariffs - A guide for customers using 4GWh to 40GWh (PDF File, 90.3 KB) 30 Mar 2016
Network Tariffs - A guide for customer using 100MWh to 4GWh (PDF File, 358.1 KB) 30 Jun 2015
Network Tariffs - A guide for customer using less than 100MWh (PDF File, 114.2 KB) 30 Jun 2015

May 2015 - Pricing proposal submitted

This was the 2015-16 Pricing Proposal approved by the Australian Energy Regulator (AER).

Documents Published
Pricing Proposal 2015-16 for AER Approval AMENDED.pdf (PDF File, 1.2 MB) 3 Jun 2015
Pricing Proposal 2015-16 Appendix 1 Network Tariff Tables AMENDED (MS Excel Document, 365.3 KB) 3 Jun 2015
Pricing Proposal 2015-16 Appendix 6 Expected Price Trends AMENDED .xlsx (MS Excel Document, 343.4 KB) 3 Jun 2015

March/April 2015 - Information webinars

Here are the webinars we presented to support engagement.

Customers using more than 4GWh

This covered the network tariff reforms for customers using more than 4GWh of electricity per year. Watch the following video or alternatively review MORE than 4GWh slide presentation (PDF 1.0 mb) and the additional Questions & Answers document (PDF 60.8 kb).

Transcript

In terms of today's agenda, we'll start today with some opening remarks from Ergon Energy's Chief Executive, Ian McLeod. We'll then hear an overview of the network tariff reform journey so far from Brendon Crown and we'll then take five minutes to address some of your preliminary questions.

The second part of the formal presentation will be about the case for change, including an overview of items still to be considered and the feedback received by Ergon Energy to date.

To close the session, we will be taking your questions.

To get things started and to set the scene for today's webinar, I would like to introduce to you Ian McLeod, Ergon Energy's Chief Executive, to make his opening remarks. Thanks Ian.

Thank you very much for that. Welcome everybody. I do want to talk about where Ergon is going and what's happening in the industry and what's happening around electricity supply and I will talk to this slide a bit.

We saw change start to happen around 2007 and 8 particularly with the valuation put on carbon, some investment in the networks over the mining boom period etc and the introduction of clean tech technology and other distributor resources.

So when we look at a slide like this we can see what was a typical customer probably five to ten years ago where they're totally dependent on the grid and we see the value proposition moving for the customers actually over into the customers' installations themselves like solar PVs on rooves, solar hot water systems, potential battery storage, electric vehicles.

So the whole business model is certainly changing and because of that we have to make sure that tariffs and the signals that we send match and deliver the best economic outcome for Queensland.

The asset at the end of the day, its utilisation is quite challenging, it obviously peaks in the summer, we have to have the assets there to meet that peak but through better pricing and signalling we can actually take some of those peaks off the network and the technology is now there to do that.

So the network tariff reform started around 2012/2013 and we wanted to get the underlying network price signals correct so that we were sending signals to ensure the efficient utilisation of the network and ensure that the customer value proposition increased.

So we started a bit of a reform there and what we're looking to do is really to deliver on our purpose of sustainable, affordable electricity supply for regional Queensland.

We want to actually drive the economy. What's important to us is peace of mind and that peace of mind is really about...we've been out and engaged with our customers and they're saying, well, peace of mind is really important.

We want you there after the storm, we want reliable supply, we want it to be safe and we want it to be dependable, we want it to be there when we need it.

So that's a key driver for us. The other one is customer choice. So again, referring to the slides you can see customers today have a lot more choice than they had before in terms of how they get their energy.

Some of those will continue to become more commercially viable as time goes on and we need to be cognisant of that so customers are becoming part of the solution and they're utilising those solutions to get better lifestyle outcomes.

To do all those things at the best possible price, we're trying to avoid investing into the network and I know there's statements out there that Queensland, New South Wales invest because we can.

Well, we're going to be about 22% or $1.7B under what the regulator allowed us, so we do see flattening, reducing prices going forward over the next five years for the network part of the business which is about half the electricity costs.

So because the way the customers are using energy is changing we have to look at the tariffs.

There's a lot of fixed infrastructure but there, it's an $11B asset, we can't certainly take it away. In the majority of cases it has to be serviced, it has to be maintained and the trees have to be cut.

Now, the business has had tariff models before. We're really about volume based charging which works very well in an increasing market but unfortunately most of our costs, or a lot of our costs are, are fixed.

So, we're looking at the way we change those tariffs to send the right signals to customers who are on the peak and ensure that the network is able to be maintained and customers do have peace of mind.

So, I guess in summing up we need to be able to work together to get the right outcome.

We don't want price shock out there with customers, we actually want to drive the long term costs of the grid down so that we have sustainable energy prices.

We do want an open access platform for our grid so people can connect distributed energy resources and use them efficiently and in a way that reduces costs for everybody.

So I'm pleased with the response we've had to today's session and don't hesitate to get involved in the discussion and provide feedback.

Thank you.

Thank you Ian for your comments and for providing us with some context on Ergon Energy's network tariff reforms.

Before I handover to Brendon Crown to provide an overview of the network tariff reform journey so far, we'd like to get a sense from you how you rate your understanding of network tariff reforms.

Could I please ask you to take a moment to respond to the poll on your screen?

The question is: How would you rate your understanding of network tariff reforms?

The four options are:

  • No exposure, until today
  • Limited/some understanding
  • Sound understanding, or
  • High level of expertise 

(Paused for poll responses). 

So, the majority are saying there's only limited or some understanding.  Thank you for that. We'll keep that in mind as we proceed. 

I would now like to introduce you to Brendon Crown,  Ergon Energy's Manager of Regulatory Determination and Pricing.

Brendon will be giving us an overview of Ergon Energy's network tariff reform journey so far.  Thanks Brendon.

Thank you Sarah and thank you Ian. Thank you everyone for attending today. We appreciate the time you've taken Ian to come along.  Hopefully that emphasises how important this journey is to Ergon Energy.

We also appreciate the time taken from all of you to have a look and skim through the webinar. 

Why are we changing our network tariffs? I think Ian summed it up quite nicely.  It is a question that we do get asked quite often from our customers.

In short, it's because the way our customers are using the network is changing, and we want to ensure we can continue to meet everyone's needs into the future, for the best possible price. 

Before I provide you with an overview of our network tariff reform journey so far, it is important that everyone is clear on three things: 

Firstly, Ergon Energy operates as both a "poles and wires" (or network) business and as an "energy purchaser and seller" (or retail) business. Our focus today is on network tariffs that get bundled into the final bill you receive from your retailer. 

However, because the network part is a big chunk of the total bill, the way we structure our tariffs into different components (a fixed $ per day, cents per KWh etc) usually makes its way to the customer through the retail bill. We also are a large portion of this bill so often customers will see a fair amount of our charges coming through on their final bill. 

Secondly, if you receive your bill from Ergon Energy Retail, the Queensland Competition Authority determines how our network charges are bundled up and passed on to you. And sometimes there's a little bit of a mismatch between what Ergon Energy network charges are and what the QCA determines as part of the Ergon Energy Retail bill. 

We do have members from the Queensland Competition Authority on this webinar, we appreciate their support in understanding more about where Ergon Energy network prices are going and we look forward to working with both customers and Ergon Energy Retail as well as the Queensland Competition Authority working out the interaction between our network bill and the final bill for Ergon Energy Retail customers. 

Thirdly, these reforms don't increase the money we're allowed to collect for the use of the network overall. That's an important point that people often miss.

The network revenues that we receive are set in advance, independently by the Australian Energy Regulator. So this session is more about slicing the cake up rather than the size of the cake itself. 

Over two years ago, we embarked on a journey to review the way we charge customers for the use of our network.  We saw opportunity for Ergon Energy to give customers greater visibility of the impact of their use of the network has on our costs. With improved visibility comes better customer choice and flexibility in how they use electricity. 

Over time, we saw that this would deliver benefits for all customers. 

Throughout this journey, we've released a number of consultation papers and sought written responses and direct interaction from some of our very large customers.

I know many of you on this webinar have discussed your specific circumstances and concerns with our key pricing team members including Anthony Lynch, Grahame Foulger, Gordon Binks, Ken Ash and Harry Colebourn. I have some of these experts on the webinar with us and we're hoping that we can either respond to some of the queries and concerns that you have in real time or to the extent we don't get to them today, we can respond to them after this webinar.

And we have used some of the feedback from these discussions that you've been having with our experts when looking at some of the more detailed elements of this tariff. 

Recently we provided a high level overview to some of our key major customers as well as retailer forums. This is our first go at a webinar. So I'd be very interested in any feedback any of you have on this as a consultation medium and how we might use it going forward.  There'll be more on that later. 

So in early December last year, we proposed changes to our tariffs commencing 1 July 2015. This is part of a broader consultation process that began in about mid-2013.

Many of you have already responded to our consultation paper, and we do thank you for that feedback. Our team is summarising all the responses and we will be looking for how we can address some of the issues and concerns. This is helping inform our Pricing Proposal for 2015-16, which we will present to the Australian Energy Regulator (AER) in May.

It's also informing our longer-term Tariff Structure Statement, which will apply up until 2020, and the draft is due in November.

At a high level, we've had a look at the key themes coming through in our consultation from all customers, not just the large but also the small customers. 

A general key theme has been the need for better education on tariff options and what happens with individuals and the impact that these tariffs have on them. So I'm hoping that today is the start of a lot more work on explaining the impact of these tariff options and what they mean to you. 

Related to this are concerns around the ability of some customers to control costs and the need to understand the impact of this on vulnerable customers as well as other customer segments. 

I think it's fair to say that there was a recognised tension between the need to remove cross-subsidies as early as possible but also the need for more time to be able to respond to the tariffs when they come in to play. 

I'll hand back over to Sarah now quickly so she can do a quick poll and ask for any questions. 

Thank you Brendon for that overview. Before we answer some of the preliminary questions we've received, we'd like to conduct another short poll. 

We'd like to know: What are you most looking for from network tariff reforms? The four answer options are: 

  • Improved affordability for all
  • Greater fairness (user pay) in pricing
  • Stability over time
  • Better understanding of cost reflectivity in bills 

I'll just give you a moment to register your responses. (Paused for responses.) 

Just waiting for a few more people to vote. 

Looks like we've got a bit of a mixed bag there. We're seeing around 38%-40% of people saying "improved affordability for all", 45% of people saying "greater fairness", 35% of people saying "stability over time", 46% saying " better understanding of cost reflectivity".

As people are voting those numbers are changing, that's why they don't all add up to 100%. There really is quite a mixed response to those questions. 

We might actually just take a moment to check whether we have any questions so far. I'll call on Brendon's help to answer these questions.  

Doesn't look like we've got any questions at this point so what we'll do is hold over that extra time to the end and if you've got any questions there we can address those at the conclusion of the formal presentation. 

What I'd like to do know is hand you back to Brendon and he's going to be talking about the case for change. Thanks Brendon. 

Thank you Sarah. In today's session we want to concentrate on the customers on the left-hand side of this quadrant. It's fair to say that we are adopting changes to all of our tariff classes. 

We have a separate session this afternoon looking at the customers in the green boxes. 

Today I want to concentrate on the customers in the blue boxes. These are the customers in our largest segment. 

I think we recognise that the journey to more efficient prices is not as far for these customers as potentially the journey for small business and residential customers. And that's because our largest customers in these tariff classes already face signals consistent with their impact on the network. 

We are also aware that even small changes to these customers can still have a material impact on bills. So even fine tuning of these tariffs do have impacts and therefore we are cognisant of the customer impacts as the result of any change to our tariffs. 

Let's move to individually calculated customers in 2015-2016. Ergon Energy has 74 Individually Calculated Customers (or ICCs). For those who don't know typical customers serviced in this user group are large coal mining customers. There are also a number of different end users including other types of mining, transport or (rail) and pumping. 

In 2014-15, the basis of charge for these customers changed from kW to kVA. The Individually Calculated Customer tariff class moved to kVA denomination for its unit charge - consistent with standard industry approach. 

In fact, I think Ergon Energy was one of the last DNSPs or Distribution Network Service Providers to change the large customer group to a kVAr charge. 

Some of you will note that in our December consultation paper we noted that we were going to be introducing an excess kVAr charge. We also noted our intention to use kVA as a basis for allocation for charges we pass through from Powerlink. 

We plan on continuing with this, although we do need to consider a number of submissions in consultation on this issue. I will explain more about this shortly. 

In our consultation from December, feedback was that customers were concerned about the visibility of this charge, both in terms of the market bill from retailers other than Ergon Energy and also customers on a notified tariff which is set by the QCA. There also appeared to be a recurring theme about better education generally, but specifically in respect of the excess kVAr charge. 

(Technical problems mean sound is lost until 18:58).

Sorry, we just had a bit of technical malfunction. My apologies. We're up to the right slide. My apologies for that.  

This is actually a picture from our consultation paper that we put out in December last year. If you're having trouble looking at some of the detail in the webinar, the detail is in that brochure. 

The excess kVAr charge for our very, very large customers in 2015 is designed to improve cost reflectivity of the network charges we provide. 

A premise's power factor is important because distribution systems must be designed to supply the actual power required and a low power factor means actual power delivered will be unnecessarily high. 

Reactive power is measured in kilovolt-amperes reactive (kVAr). The Excess Reactive Power Charge is applied against kVAr drawn from the network that exceeds the minimum compliant power level. 

Essentially this charge reinforces the price signal introduced by the charge to the kVA tariff, which encourages customers to improve power factor and reduce their usage of the network capacity. It is calculated monthly based on the power factor recorded at the time of each customer's individual monthly kVA peak. 

A rate of $4 per excess kVAr is proposed for 2015-16. 

Moving on to our connection asset customers now. 

Ergon Energy has 177 connection asset customers or CACs as we like to affectionately know them as. 

For those who don't know, typical customers serviced in this class consume over 4GWh of energy per annum and include industrial mining, farming, sugar mills, large shopping centres, universities, correctional centres, defence force bases, and large pumping stations. 

It's important to note that no changes occurred for this group in 2014-15, but we did note in consultation at the time that we saw changes to ICCs leading to changes in the CAC class.

In effect we were going to have CAC class lag the ICC changes year on year. So the most notable of these changes was obviously using KVA as the basic unit for charging. 

So in our consultation paper last December, we proposed an approach which would allow us to reduce the number of individual tariffs we have to publish, without materially impacting customers. 

As well as moving to the kVA basis of measurement, we also floated the idea of establishing aseasonal demand tariff as an option for customers in this class. Now during our consultation processes, we didn't receive feedback on many of these issues. 

Specifically individual customers wanted help identifying opportunities or options to mitigate power factor associated with the electrical equipment currently being at the site. We have responded to many of those customers individually and look forward to any further feedback that people have or concerns or queries that individual customers may have. 

There was a general need for more education on how the tariff worked and how it operated. There were some customers feeling at risk from a bill shock from the seasonal element of the Seasonal Time of Use Demand charge. 

It is important to note at this stage that the idea of establishing a seasonal demand tariff was only ever intended as an optional tariff to be available to customers if retailers wished to provide it. 

There was particular uncertainty with what impacts these charges had on the retail bill, and how much these changes would be visible. I will talk on this further below.  

Many were seeking longer periods before the introduction of the tariff. Retailers were looking for simplicity, consistency with other NSPs and stability over time. 

We did have some customers seeking fairly large changes so that tariffs would be based on industry-specific elements rather than tariff classes.

I think it is important to note at this time, in relation to some of the consultation, that customers that are still on notified or gazetted tariffs from the QCA, such as Tariff 22 & Tariff 48, will not see these changes due to the way the QCA, the Queensland Competition Authority, has set up the tariffs. 

Nevertheless we still thought it was important to keep you informed, so you can view the direction the reforms are going and engage with the QCA when their talking about notified tariffs for these particular tariffs. 

In preparation for the move to kVA as the denomination for demand and capacity, customers should be considering the power factor associated with the electrical equipment currently being used. There may be the opportunity to make changes, and ultimately savings for these customers. 

Ergon Energy can provide advice and guidance to help customers take corrective action based on their circumstances. 

We'll move on to the next slide. Giving a more detailed understanding of how demand charges and kVA will work for the CAC customers. 

Again, in 2013, we noted the plan to stagger the introduction of these key reforms. The same structural changes to the tariffs that were introduced to ICCs in 2014-15 are proposed for CAC customers in 15-16. 

A kVA tariff is based on applying the same business rules applied to ICC tariffs where the leading power factor has been discounted with only the lagging power factor incorporated into the calculation of kVA charges. 

The structural change is implemented in the context of being revenue neutral overall to the CAC class. 

The basis on which we increase the capacity of our network (kVA) is aligned with the basis on which we sell capacity to our customers. 

Current modelling indicates on a current revenue forecast that most customers will see less than a 5% impact on Distribution Use of System charge as a result of moving to kVA based demand. 

When implementing these tariffs for ICCs we did face hurdles in the application to customers with a mixture of load and generation. 

So in other words we went through a few teething issues in 2014-15 when applying this to ICCs that had a mixture of load and generation. Now we expect that similar arrangements to overcome these teething issues will be required for customers who face similar circumstances in the CAC class. 

Therefore, like ICCs the rules for calculating the transition to kVA will also exclude energy exported into the grid by generators. We will be looking at the impact for these customers, before finalising our business rules and we're happy to discuss arrangements with customers with generation and load, individually. 

On the next slide we talk about standardisation.  

So currently, each of the 177 CACs are priced individually each year. We have been exploring the scope to reduce individual CAC pricing and remove some of the associated management complexity within Ergon Energy, its customers and particularly for retailers who are looking for more simplicity in how they pass on the charges to customers. 

So our intent with this change is to reduce the number of CAC tariffs from the current 177 to four standard HV tariffs in each pricing zone (this is effectively a total of eight standard tariffs across the East and West zones). 

Some of you who have been around for a while will note that there was a large change in 2010 in the way customers paid for their connection assets. From July 2010 any customers connecting to the network pay for their connection assets up front. Therefore these connection costs are no longer recovered through network tariffs. 

With this in mind, the pricing of CACs for these customers, shouldn't in principle, now be any different to standard asset customers. We want to extend that so that standard rates can be applied to all our customers. 

This will allow us to publish like we do with the SACs now, providing customers and retailers with easy access to their standard charges. 

The methodology and the revenue recovered from each CAC is not changing as part of this proposal. 

We're just simply changing how we charge, which will also enable us to develop additional optional network tariffs such as our seasonal Time of Use demand that better reflect a customer's usage of the network. 

Our transparent change will see the introduction of a customer-specific connection unit value and associated tariff component. This is a different mechanism to recover what is currently presented each year to the customer as a site-specific individually fixed connection charge. 

Customers currently have an individually Authorised Demand (AD) charge and in the future will also have a connection unit number as required. The information will be considered confidential, however, the rates will be standard and therefore able to be published.

It is important to note that customers that have connected to the network since 1 July 2010, will obviously have a connection unit value of zero as they've paid for their assets up front. This is really a way of trying to standardise charges for all our customers in a way that gives our rates of charge more transparency. 

Largely transparent to customers, each National Meter Identifier (or NMI) will still have its own price, but will be the same for all 22/11kV line customers in the East Zone in the future. 

Our modelling has shown an average customer impact of less than 1% as a result of doing this standardisation of DUOS rates. 

Transmission Use of System or TUOS relates to the pass-through of charges from Powerlink. So the standardisation that we have been talking about in the previous slide was related to our Distribution Use of system charges. The allocation of the transmission charge has been a little bit more problematic moving to standardisation. 

So there are differences that exist between the individually allocated TUOS and CAC pricing and the standard TUOS rates that are determined as an average of Powerlink TUOS charges. 

Some customers do have impacts when they move to a more standardised rate for TUOS. We looked at a number of solutions or transition pathways and these are currently being explored. 

Subject to further stakeholder consideration, we'd like to incorporate a change to the TUOS as part of our 15-16 Pricing Proposal. We propose to adopt the same TUOS structure for the CACs as those for SAC customers or those who consume under 4GWhs, being three transmission regions which are not Transmission Node specific, but based on larger geographic aggregation. 

We're looking at the implications of this but we believe this is a good step forward as it gives more consistency of pricing and year-on-year stability of TUOS prices while also maintaining the ability to have more transparency in the actual charge and reduce the number of tariffs we have. 

Moving on to the next slide. We also want to offer the ability for customers, should it be provided by a retailer, to have a seasonal time of use demand tariff for CAC customers. 

The structure of this tariff will be based on the structure established for the SAC large seasonal time of use demand tariff which is proposed for introduction in 2015-16. However, we expect to have it adjusted to accommodate the authorised demand component that currently exists in CAC tariffs. 

Existing CAC tariffs don't provide any signal to customers in terms of when they use energy in the season of the year, the day of the week, or time of the day as to the cost associated with placing additional demand on the network. 

So we want to introduce this as a voluntary tariff.

We're getting feedback from customers that they'd like to work out ways that they can reduce their costs if there's a corresponding reduction in the cost of the network. We see this as a way forward for some customers who can shift their demand and there are some customers in this CAC class that can do that. 

And so we'd like to offer this as a network tariff for customers that would like to move on to it. 

The seasonal time of use demand reflects the long run marginal cost when additional demand is likely to lead to network capacity expansion and lower prices at other times. 

I'd like to display an example of how a customer might apply some of these changes to the CAC class. 

Let's assume a customer has an authorised demand of 1,100kW and a monthly actual demand of 1000kW. Let's assume that a customer consumes around 4.5GWh per annum.

Because this customer connected to the network prior to 1 July 2010 and didn't pay for their connection up front, their fixed charge implicitly includes a connection charge of $130 per day to deal with these connection assets. We've calculated this customer's power factor at 0.9 which is the highest recorded Power Factor over a 12 month period. 

Now moving this customer from a kW to KVA charging sees our Authorised Demand Charge adjusted by taking 1,000kW and dividing by the power factor of 0.9 or in other words 1,111 KVA. 

Moving to a standardised tariff means that we just represent the connection charge of $130 a day in a slightly different manner. In other words we multiply our connection unit charge by the number of connection units to recover the $130. 

Remember this charge reflects the fact that this customer connected to the network prior to July 2010. Customers who connected post July 2010 and paid for their connection assets up front will have a connection unit of zero. 

Now based on the new tariff, our customer will pay $560 odd thousand dollars.  We're seeing on that basis that in comparison to their existing bill, using the existing rates they'd see a small 1% decrease. And that's based on what we assume is the network revenue we're going to collect in 15-16. 

There are some rumours about that the network revenue that we will be collecting in 15-16 may be a bit lower as a result of the AER's draft determination. So this is just reflecting what was in our Regulatory Proposal. 

Now using our example and the customer's meter data to model against the STOUD or Seasonal Time of Use Demand structure, this customer would face an increase of 3.36% if it didn't change its behaviour, if it was going to go for this optional time of use demand tariff. 

So this customer if it was unable to shift demand from peak periods, would probably not choose to take this optional tariff up. 

What this highlights in the example is that, firstly just because you have a power factor below 1, doesn't necessarily mean you're immediately going to have to pay more money as a result of this new tariff. 

Secondly, for those customers that will have difficulty shifting their demand from peak periods, they may choose not to move to this voluntary tariff. 

Finally, if you are a customer who can shift your demand, well potentially, movement to a seasonal time of use structure could be advantageous to you. 

Brendon are you finished there?   

Yes thanks Sarah. 

We might throw back to Brendon in a moment. 

We just wanted to conduct a quick poll if we could. Whether the information on tariff calculations has been beneficial? 

You'll see four question options there on your screen. 

  • Yes, I now understand how the calculations are made
  • Yes, but I'd like more detail
  • I'd like a different example to be provided
  • I'm still unsure about how calculations are made 

If you could take some time now to answer that question please. (Paused for responses.) 

So we can see that there a mix of responses. Most people are saying, yes they do understand but they would like some more detail.

There are still some people that are still unsure or they'd like some more examples provided so we'll certainly follow up on that. 

Just bear with us, we think we might be having a sound issue. Just let us know via comments if you are having any issues there.

We're getting your messages thank you and we appreciate the feedback, as we said, this is our first webinar, so we are learning ourselves. 

Brendon, we've had some questions come in. I'm not sure if you have any conclusions or any comments to make before you wrap your presentation up or whether we'll go straight to questions? 

I think we can go straight to questions, Sarah. I feel like I'm on a game show.

Some of these questions are very difficult, I'll do my best to try and answer some of them. 

The first question we have is about Tariff 20 and will Ergon still have a flat tariff for the large customer currently on a Tariff 20 transitioning to 2020? It's from Paul Lemming. 

I think I mentioned before, Paul, about some of the important interactions between what Ergon Energy network provides as a network charge and how those network charges are converted or bundled into the prices used by the Queensland Competition Authority. 

So this is a complicated question because it deals with both how Ergon Energy sets the charges for its network business but also how the QCA sets its own charges for customers on notified tariffs. 

I think what we might do, is we might take this particular question off line to discuss potentially with further interaction with the QCA. 

What I would imagine is at this stage we are moving towards kVA charging for our CAC customers. We are moving to more optionality for customers if they want to move to some kind of time of use demand structure. 

What we want to be able to do is give both market customers or customers that don't have Ergon Energy Retail as a retailer and also for customers on notified prices, as much heads up as possible as to what we're doing as part of our network charges, and that will be passed on to both our retailers such as Origin and AGL but also the QCA or the Queensland Competition Authority and how they set charges for tariffs like Tariff 20 which is on its own transitionary path. 

Another question comes from Nina Zuchowski. How granual will cost reflectivity become? Customer groupings or individual customers or geography?

Nina you raise a really, really important point. Ergon Energy is one of the largest networks in Australia, in fact, if not the world. 

So one of the issues that we do have with responding to broad based tariffs across large geographic areas, is the challenge of trying to set a broad based tariff without creating numerous numbers or a substantial number of individual tariffs, either at an individual geography level or at a customer grouping level. 

At the moment, we have three main regions. We have the East Region, the West Region, the Mt Isa region. We don't have any plans at this stage to move to a more granular level for these customers. However, that shouldn't stop us from providing the best and most efficient tariff signal for customers across this broad base. 

I'm never going to say never, we are looking at possible options as to how we might better do this. This is being reflected by policy makers who are pushing us quite hard to ensure that we provide better locational signals. So that's on the to do list for future changes Nina. 

There's a further question from Nina on the kVAr penalty rate.  Will the kVAr penalty rate apply to the authorised demand or the measured demand? 

I think I know the answer, but I might, if it's OK, allocate that one to Ken Ash, if I could. Ken, are you on the line? 

Yes Brendon, can you hear me? 

I can hear you Ken. 

G'day. The excess kVAr penalty charge will be calculated monthly. So that will be in theory applied to the monthly demand charge. 

Excellent, thank you Ken. W

e have another question Ken, while you are on the line. It's a question from Bruce Iliff and he's asked a particular question in relation to embedded generators for ICCs. I think it's getting back to this issue of load and generation. 

Ken, are you able to expand on my comments on the mixture of generation and load? 

Sure, no problems Brendon. As Brendon mentioned earlier in the presentation, we implemented a kVA demand charge for the ICCs last July 2014 and there are a number of generators, or actually two out of the mix of 70 odd ICC customers that had both generation and load, and they were individually assessed for the application of translation of authorised demand from DUOS to kVA and also the monthly demand from DUOS to kVA and, as Brendon mentioned, the TUOS charges as well. 

And so the same philosophy will apply, or is proposed to apply in 2015 for CACs where if customers have both generation and load on the same NMI, those customers will be assessed individually and I know Bruce is doing some of the larger customers in the ICC class as well as potentially some CAC customers so at least there'll be standardisation of approach there Brendon. 

Excellent Ken. Thanks for your response.

I've got another question from Andy Trigg. Can customers over 30GWh elect to move to ICC from CAC or is 40GWh a line in the sand? 

Anthony Lynch, are you on the line and would you be able to respond to that? 

Yep, I can pick that one up Brendon. 

In answer to Andy's question, at the moment our network tariff classes are defined based on a combination of demand and/or energy levels. Basically that's the simple way. Otherwise there's some more science involved in it if they, if a customer can be identified as being quite different to other customers in that class and therefore may suit being assigned to another class. 

Network tariff class for each customer is something we as a business typically define. So in answer to your question, at the moment the 40GWh annual threshold is the typical level the customer needs to be equal to or above to be defined as an individually calculated customer. 

Thank you Anthony. 

I have another query from Brad Lucke. I think he's picked up on my issue of the size of the cake versus slicing the cake. I think his question is in the case of ICC kVAr charges. As customers work to improve their power factor and decrease revenue from this source, what will happen with their charges? 

Look in summary, Brad, what I think will happen here is that, to the extent that we have costs associated with dealing with different power factors in the network, all it will mean is that there's a better allocation of the charges the customers pay to the network costs associated with providing the capacity to that particular customer. 

What we're hoping over time however, is that, to the extent that we can free up capacity in the network, the impost or the impact of these decisions will reduce the need for further investment either in aspects to deal with poor power factors or in terms of augmentational replacement and I think that's a win/win situation for everyone. 

So it's not necessarily a one-to-one. That's the design of these tariffs. That's what we're trying to get as the outcome for these tariffs. 

There's a question from Andy Trigg. We are regional, with the removal of loss factors, are we likely to see an increase in network charges with the introduction of standard tariffs? 

Anthony, I'm wondering if you could answer that one again, is that OK? I'll just make sure you're off mute. Yep you're good. 

Yeah, I'm not quite understanding that question. The loss factors are still going to remain the same. They're quite separate from the network tariff structure in the fact that they only apply to the TUOS energy. So, that application will stay the same. If I'm understanding the question correctly. It won't affect the standard network tariff rate. 

Great, thanks Anthony. 

There's a question here from Kelvin Bella. I think these webinars are very good to bring out of the cracks all these individual circumstances that we need to take into account, so thank you for your query Kelvin. 

Ken, I might see if you can answer this, although we may have to consider it and get back to Kelvin. 

With seasonal operations where factories only operate six months of the year and do maintenance for the remainder, will there be allowances to start the whole factory once or twice a month for maintenance purposes without being charged for breaking the kVA? Have we had any experience with that with the ICC customers? 

No we haven't Brendon. So, I think, I'm not sure if Kelvin is from the sugar mill scene or not but that's a very good example of some of the issues that the sugar mills are going to face, where they are producing very large loads for six months of the year and very small loads for the remainder and also they have a varying pattern of generation as well.

So, I think that goes back to what you and I mentioned earlier, is that individual circumstances will need to be taken into account for those types of customers and I think Brendon we can also make a comment there that the connection agreement for individual customers also comes into play, not just the network tariffs. 

So, there is an interaction between tariffs and the connection agreement and customers do have the ability to negotiate some of those factors through their connection agreement as well. 

Thanks Ken. 

While you're on the phone, I've got another query from Bruce Iliff. Again I know this was determined by someone that's not on the phone but do you know how the value of $4 per excess kVAr is determined? 

I have seen the calculations behind it Brendon, but I wouldn't be game to approach the theory behind it. I'll probably have to defer that one. OK, so Bruce, we'll get back to you through Harry Colebourn who couldn't make it to our discussion today. 

I have a query here from Ian Bray. Will there be any flexibility in the tariff reforms to cater for the need to downgrade site classifications or revert back to standard tariffs when a site changes tenant on material use and the existing structure makes the site commercially unviable and stops the landlord's ability to let the site? 

Ian that is probably a fairly good question which we might want to understand the circumstances a little bit better to respond to. 

Unless Anthony, you had a quick response you can add or is this one we probably need to understand with more detail? 

I can answer it broadly, in the fact that our terms of network tariff class reclassification are proposed to remain the same. There are going to be some business rules implemented around the shift because now there are more than just the base tariff, like the shift between the base tariff and a STOUD. 

Within the tariff class there's going to be some business rules there. As far as tariff class reclassifications, they are going to remain the same as our current arrangements. 

For example, should a customer be currently classed as a CAC and that site becomes vacant or changes the industry or the use of that site, then it can be reclassified to a more suitable network tariff class based on the proposed energy consumption patterns moving forward. 

So, that's probably a bit of a broad answer that hopefully covers the question. 

Thanks Anthony. 

Thank you everyone for those questions. 

There are a couple of additional questions that I haven't got to. What we will do is to the extent we didn't get to respond to all of these questions we will take those on board and try and respond to you. 

We do have your email addresses and contact details, so we will try and respond to those. 

I am getting a fairly strong wind up signal from Sarah so I might hand back to her because we only have a few minutes left on the webinar. So thanks Sarah, back to you. 

Thanks very much Brendon.

Thank you for your time. Before we conclude formally, we would just like to ask another poll. 

As we've mentioned a couple of times, this is a first time experience for us so we're keen to get a sense from you whether or not today's webinar experience was a valuable one. If you could take some time there. 

Did you find the webinar experience valuable? The possible response are: 

  • Yes, it was very valuable
  • Yes, it was of some value
  • No, the topic was too complex for a webinar
  • No, webinars are just not for me 

Give you a couple of moments there. (Paused for responses.) 

Great, thank you.

The responses are largely that the webinar was of value with about half of the people saying it was of some value and almost half saying it was very valuable with a couple of people talking about the complexity of the topic which we understand as well.

I'd like to thank Ian McLeod and also Brendon Crown for their time today as well as the other panellists that we had dial in to the teleconference.

Also to you, our attendees, for taking the time to participate and for providing us with the feedback. 

Obviously we'll be able to take some learnings from today and improve these for future webinars. 

We'll be contacting those participants whose questions we weren't able to get to as Brendon indicated. 

And also you'll note when the webinar closes you'll be asked to answer a couple of questions about the session. You'll be prompted by a box on the screen and Ergon would be grateful if you could take the time to complete this and provide your feedback. 

Thank you again for your time today and your participation. Have a great day.

Customers using less than 4GWh

This covered the network tariff reforms for customers using less than 4GWh of electricity per year. Watch the following video or alternatively review LESS than 4GWh slide presentation (PDF 1007.1 kb) and the additional Questions & Answers document (PDF 88.3 kb).

Transcript

Good afternoon everyone. Thank you for joining us today for this webinar on Network Tariff Reform for customers using LESS than four Gigawatt Hours (4GWh) a year, particularly Large Standard Asset Customers using less than four Gigawatt Hours per year, and Small Standard Asset Customers using less than 100 Megawatt Hours per year.

It's wonderful to have so many here with us today — we've got 65 participants online at the moment and that number is growing as the minutes pass.

My name is Sarah Dixon and I'll be facilitating today's webinar.

I'm joined today by Ergon Energy's Chief Executive, Ian McLeod, and Manager of Regulatory Determination and Pricing, Brendon Crown.

You'll hear from both Brendon and Ian and shortly.

Before we get started though, I would like to go through a couple of instructions to ensure that the webinar progresses smoothly.

When you joined the webinar session, a Control Panel will have appeared on the right-hand side of your screen. You can use this Control Panel to manage your session.

If your Control Panel is blocking your view of the presentation, you can simply use the small orange arrow to minimise it. You then just need to re-click the arrow to make it re-appear. 

From the Control Panel, you can also control how you listen to the webinar. If you are having issues with your audio, you can dial in via telephone at any time simply by selecting the telephone option and calling the number provided. Alternatively, you can use your computer speakers.

Another screen will also have appeared showing you the first slide of our presentation. I hope everybody is able to see that.

We've also activated our webcam functionality, so you should be able to see our speakers throughout the session.

For this webinar, your participant microphones have been muted, meaning that no one else can hear you in the room that you're in.

But, you can still ask questions of the speakers during the presentation. You simply need to type them into the Questions Pane at the bottom of your Control Panel.

These questions will be monitored throughout the session and we'll have some dedicated feedback opportunities to answer those questions.

We'll take five minutes in the middle of the session to address any preliminary questions, and then 10 or 15 minutes has been set aside towards the end of the session as dedicated Q&A time.

If we don't have enough time to answer your questions in today's session, or if we don't have the information at hand, somebody from Ergon will come back to you via email with a response by the end of the week.

A Q&A document capturing these will also be placed on the website.

We have a number of panellists online today as well to help us answer those questions, so if Ian or Brendon can't answer your questions themselves, somebody else may be able to.

I'd also like to let you know we'll  be recording today's session so it's accessible to people who were unable to participate, and it should be online in a couple of days.

Today's session is planned to go for approximately an hour. We've allowed 40 minutes for the formal presentation component and then about 15 to 20 minutes for questions.

During the session, we'll also be asking you to complete a number of quick polls.

These polls will pop up on your screen at the appropriate time and these multiple choice questions will then help us gauge perceptions and let us know where we need to focus our efforts. 

Hopefully that covers off the key things you need to know.

In terms of today's agenda, we'll start today with some opening remarks from Ergon Energy's Chief Executive, Ian McLeod.

And we'll then hear an overview of the network tariff reform journey so far from by Brendon Crown.

We'll then take about five minutes to address any preliminary questions.

The second part of the formal presentation will be about the case for change, including an overview of items still being considered and the feedback received by Ergon Energy to date.

To close this session, we'll be taking your questions.

To get things started and to set the scene for today's webinar, I'd like to invite Ian McLeod, Ergon Energy's Chief Executive, to make his opening remarks. Thanks Ian.

Thank you very much Sarah.

I just wanted to introduce today's session about network tariff reform and look, it's one of a number of reforms that are underway in Ergon Energy.

I guess over the last seven or so years we've seen a lot of changes. We've seen increased prices, we've seen increased introduction of new technologies, renewable energy demand management, all those sorts of things, which is a very positive sign for us.

Ergon is looking for an effective market at the end of the day that allows all those distributed resources to contribute effectively to economic outcomes for Queensland.

So in about late 2012, we started a process of tariff reform for the network business to move away from what were pretty flat standard type tariffs and tariff structures in a lot of cases, to a tariff structure that sends appropriate signals out there. If we get that right, and we get the utilisation of the network right, we can bring down the cost over a period of time.

We've certainly had some success to date with what we've done. We've reduced expenditure in this period by $1.7billion, which is 22%, 11% in the next five year period, and therefore we should see at least stable to reducing network prices. That's a good outcome.

So look, we're looking to deliver sustainable, affordable electricity supply to Queensland into the future.

We understand our customers want 'peace of mind' and that includes electricity pricing, that's also safe, dependable, reliable network. And our customers are looking for more choice and control. So if I want to…if I want to put renewable energy in there, I can do that. If I want to manage demand, I can do that. I have options of tariffs, those sorts of things, and greater choice and control, and our customers would be empowered. We've got to do all that for the best possible price. So the whole ecosystem needs to come together to ensure that we get that outcome.

So the way people are using the network is actually changing.

If we can go over the next slide. I'd like to say this slide is actually about seven or eight years old. We got it made quite some time ago, and on the left-hand side there we see the typical house. Looks like Rockhampton with the thermal power station in the back and the Ford at the front etc. and the customer had little choice but to take energy from Ergon.

The one on the right is pretty well much real today in becoming more commercially viable for a lot of people with solar and solar hot water, communication networks, potentially smart meter type tariff options, different potentially battery storage, those sorts of things. So the customer has significantly more choice than what they had before and the way they use the network is certainly different.

So it is a two way street. This network is about being an open access platform, and equitable platform for all distributed energy resources so we can share them effectively and efficiently across the grid.

So in terms of what it means for us, if we can get this right we can reduce investment into peak demand. In the last or the current regulatory period, there was around $1.6billion allowed for augmentation of the network. In the next period we've halved that down to about $800million.

So the actual tariff singles become quite important, and we want to work together with you on that to make sure we get it right, otherwise if we don't then we understand that's not a good economic outcome for you, and therefore not for us.

So I'm pleased with the response we've had to today's session. Don't hesitate to get involved and participate in the discussion and provide any feedback that you wish.

Thank you for that.

Thanks for your comments, and thank you Ian for your comments and for providing us with some context for Ergon Energy's network tariff reforms.

Before I handover to Brendon Crown to provide an overview of the network tariff reform journey so far, we would like to get a sense from you as to how you rate your understanding of network tariff reforms.

You'll see on your screen a quick little poll, and I'd ask you to take a moment to respond to that poll now. It should be appearing on your screen shortly.

The question we're asking is: How would you rate your understanding of network tariff reforms?

And the four options are:

  • No exposure until today;
  • Limited or some understanding;
  • Sound understanding; or
  • High level of expertise

I'll just give you a couple of moments to respond to that.

So the majority of participants are saying they have limited or some understanding, with about 37% saying they have a sound understanding, and a much smaller percentage saying they have a high level of expertise. So that's good for us to know and we'll certainly keep that in mind as we progress from here. 

I'd now like to introduce you to Brendon Crown, Ergon Energy's Manager of Regulatory Determination and Pricing.

Brendon will provide an overview of Ergon Energy's network tariff reform journey so far.

Thank you Brendon.

Thank you Sarah and thank you Ian, and thank you everyone for joining this webinar. This is a fairly new experience for us, so bear with us if we go through a few little bugs along the way.

Why are we changing our network tariffs? It's a very big question. It's a question that are consumers are asking us, it's a question that our stakeholders are asking us, and there's a number of reasons for it.

Fundamentally, we started asking this question a number of years ago. The reason why we had to answer this question was that the way that customers are using our network has changed substantially.

As Ian suggested, there's so many more options for customers in the way they use what was traditionally a fairly single directional flow of power, and there's so many more options for customers into how they use that network. Using it more or using it less, using other sources, and that's going to continually change over time.

And of course while all this is happening, we haven't really changed our tariffs in about 15 years. So we've been looking at different options, different ways to make our tariffs more responsive to the varying, changing needs of our customers.

We've worked hard to ensure that our network can meet the changing needs of our customers, but at the end of the day we need to make sure that entire aspect of Ergon Energy's business is keeping up with those changes, and that includes in the area of tariffs.

Now it's important to say here that tariff reform isn't a silver bullet. I don't want to give the impression that we're peddling snake oil here. We want to reform tariffs in a way that allows customers to continue to use the network in the way that they want to use the network, and to think about new and different ways that they can use the network.

We want to have them use that in a way that benefits all customers to the best way possible over time so that the responsibility for costs are shared in a way that's fair and equitable.

Now before I go on, I want to make sure that we're all on the same page here. I want to make sure that we're all clear on four key things:

Firstly, Ergon Energy operates as both a 'poles and wires' (or network) business and as an 'energy purchaser and seller', (or a retail) business.

So the focus today on this session is on network tariffs that get bundled into the final bill you receive from your retailer.

So we're not going to go into too much detail on the actual retail tariff, but we are going to concentrate on the network tariffs specifically.

Because network is a big chunk of the bill, the way we structure our tariffs into different components (i.e. a fixed $ per day or cents per kWh etc.) usually makes its way to the customer through the retail bill. On top of that, the network charge itself is obviously a fairly large proportion of that retail bill. So while we're not talking about the total bill here, we do recognise that the structure and the quantum of the network tariff in terms of the total customer bill is important.

Secondly, if you receive your bill from Ergon Energy retail, the Queensland Competition Authority (or QCA) determines how much of our network charges are bundled up and passed on to you. 

Thirdly, if you are residential or small business customer receiving a bill from Ergon Energy retail, your price will be based on the costs faced by a retailer in south-east Queensland, including reflective of a network cost component that may reflect Energex's network charges.

Finally, it's important to reiterate that these reforms will not increase the money we're allowed to collect for the use of the network overall.

This is set in advance, independently by the Australian Energy Regulator.

So in some ways what we're talking about today is not the size of the cake, but the way that the cake is sliced up for everyone.

Two years ago almost today, we embarked on a journey to review the way we charge customers for the use of our network.

We saw an opportunity for Ergon Energy to give customers greater visibility on the impact their use of the network has on our underlying costs.

With improved visibility for the customer comes better customer choice and flexibility in how they use the electricity. Over time, we foresaw that this would deliver benefits for all customers. 

Now throughout this journey, we have released a number of consultation papers and sought written responses, and I know some people on the call have been very proactive in providing responses to our consultation processes and for that we thank you.

We also held public forums both on our own and in conjunction with the QCA, and I know there's also people from the QCA on this teleconference. We thank them for their interest in Ergon Energy's network charges and how they will best be applied to notified tariff rates for people in regional Queensland.

Moreover, we've been engaging in focus sessions with key stakeholder groups.

And again, some of those representatives are on this webinar today. We thank them for this.

This is our first go at a webinar and I'd be interested in any feedback that any of our stakeholders have on this as a consultation medium, and whether we should be using this going forward.

Many of you will know in early December last year, we proposed a number of changes to our tariffs, and these tariffs will commence from 1 July 2015.

Many of you have already responded to our consultation paper, so I'd like to thank you for your feedback.

Our team is summarising all the responses and we'll be looking for how we can address some of those issues and concerns raised. We'll in fact reflect some of those concerns raised in this webinar itself.

Look at a high level, we're seeing that already some key themes coming through the responses from you, and these include the need for a better education on tariff options and the impact on individuals and tariff customer segments.

So I'm hoping that this is the start of a lot more work that we need to do on explaining the impact of these different tariff changes and tariff options on you.

Related to this are concerns around the ability of some customers to control demand and therefore costs, and some of need to understand the impact of this on vulnerable customers and other customer segments.

Finally, I think quite intelligently there was a recognised tension between the need to remove cross subsidies as early as possible. Contrast that with the need for more time to be able to understand and respond to the changes that we're proposing.

We'll move on to the next slide. This gives us an overview of all the proposed changes to the tariffs that are occurring. Today I want to focus, or this afternoon I want to focus on the right hand side of the quadrant. We've already spoken to the customers on the left hand side of the quadrant in an earlier session, so today's focus will be on our Standard Asset Customers – Large or SAC-Large customers and our Standard Asset Customers – Small, our SAC-Small customers.

The SAC-Large customer group incorporates commercial, industrial and rural industry customers consuming over 100 MWh per annum.

We proposed in our December paper, the ability for customers in this tariff class to choose a seasonal time of use demand charge.

The prices for this charge will be impacted by some changes that we've seen in our Long Run Marginal Cost, and we've outlined this in our paper that we published recently called "Aligning network charges to the cost of peak demand".

Our SAC-Small user group is our largest user group. This describes the majority of our customers around the small-to-medium businesses and our residential customers.

Many of you will know that our time of use energy charge, introduced in 2014-15, will also be influenced by changes in our Long Run Marginal Cost calculations.

Furthermore, in our December consultation paper, we highlighted our intention to allow residential and small business customers to choose a similar seasonal demand tariff, and that was going to occur from 1 July 2016.

I want to point out to all stakeholders about our recent consultation paper which proposed bringing forward the introduction of this tariff to July this year.

This means that 3 of our 4 tariff classes will be exposed, or have the opportunity to access a new seasonal demand tariff that will occur from 1 July this year.

At this time Sarah I might hand back to you. I think we're going to try for another poll.

Yes we are. Thank you for that Brendon.

What we would like to know from you now is: What are you most looking for from network tariff reforms?

You'll see the poll responses there with a couple of options:

  • Improved affordability for all;
  • Greater fairness (user pay) in pricing;
  • Protection for specific customer groups;
  • Incentive to reduce demand or reduce your bill; and
  • Support for new technologies

I'll just give everyone a moment to respond.

We've had about 20% of people vote so I'll give you a little bit more time.

So there's a mixed bag of responses really, the most popular one being the incentive to reduce demand or to reduce your bill being the largest, followed by support for new technologies, improved affordability for all, and then with a much smaller percentage, asking for greater fairness (user pay) in pricing and protection for specific customer groups.

Thank you for that.

At this stage we haven't received any questions, any specific questions. So what we might actually do is hold that question time that we'd set aside currently to the end of the webinar and give us a little bit more time to respond to your questions once you've heard the formal part of the presentation.   

So, I might hand back to Brendon now to talk about the case for change. Thanks Brendon.

Yes, thank you Sarah. Look, I'll just follow on from my previous slides when we talked about the notion or idea of introducing a new tariff as an option into 3 of our 4 tariff classes.

Now I'd say most small customers or residential customers and small business customers are used to having optionality in their tariffs. People who are used to the QCA determined tariffs would be aware that they have an option for tariff 12 which is the time of use energy option, and that's in contrast to the default option which is the tariff 11 which is a fixed plus energy.

In the SAC-Large there is an idea of self-selection between demand small, demand medium and demand large, so there is optionality available for customers in this particular tariff grouping. 

But what we want to do is bring forward some of the reforms so that customers in this small customer grouping to the extent of benefits to them can access a maximum demand tariff. The decision to bring forward this new tariff was not made without careful consideration of the pros and cons, particularly in the context of a fairly limited consultation period.

The reason why we made this decision early was really based on analysis that we only received around the end of last year.

We asked Energeia, a consultant that's working very closely with us and a couple of those experts are on the webinar as I speak. We asked them to simulate some network price growth scenarios over the next ten years, based on firstly, no-action tariff reform.

Now this has some simplifying assumptions, based on customers taking up solar where it's commercial to do so. It's not really necessarily reflective of what actually will happen. What you can see is that a no-action scenario has the potential to increase network price growth as less kilowatt hours are being consumed, but there's no corresponding reduction in our network costs.

Energeia also modelled network price growth if a maximum demand tariff was adopted.

You can see in the lighter blue line that a maximum demand tariff by contrast leads to more efficient pricing outcomes, because it better aligns the cost of the network with the decisions made by the customer.     

Now we see the gap between these two lines – the cost of inaction – as the reason why Ergon Energy would like to transition earlier as soon as possible, rather than later, to more efficient tariff structures.

Now it is important to re-emphasise here that these reforms will not change the money we're allowed to collect for the use of the network overall for the regulatory period. This is set in advance, independent by the Australian Energy Regulator, and we're looking forward to the Australian Energy Regulator's interim determination on our regulatory proposal, which will happen at the end of April

It's worth noting though that efficient tariff structures can have a positive effect on future investment and, to the extent that this happens, we think this represents a win-win situation overall.

Our consultation paper that we released last month tried to explain why the cost of inaction creates problems for customers overall.

In the example on the left of the webinar screen, let's assume a customer makes a decision to install a new air conditioner, and he makes this decision on the basis that he knows it's going to cost him more (about an additional $300 or $280  in additional network charges).

In other words, the customer decides this additional cost is actually a fair amount to pay for the extra comfort he will receive on a really hot day, when he's sipping his stubby watching the footy.

However, this same decision will cost the network $447 a year due to the increased demand that air conditioner may place on the system.

So in other words, the difference between what we have to invest to supply the required power for this customers comfort and what the customer pays creates a subsidy of $165. 

This is paid by other customers via an increase in network prices.

Let's look at the inverse example on the right chart.

In this case, the customer saves $910 on his network bill, or her network bill, by producing his or her own solar energy, but the costs of saving to the network are only $105.

This $805 shortfall in the revenue required must be recouped from all customers via an increase in network prices in the following year.

It's important to reiterate here that the problem is not the technology, the problem is not the appliance, the problem is not the air conditioner, and the problem is not the solar panel.

We could be referring here to a pool pump, we could be referring to a new bar fridge or basic decisions by customers to use less energy at particular times in order to save money.

It's important to Ergon Energy that customers should be free to use the network how they want to use the network.

The problem is the tariff. This impact of the customers' decision leads the customer to make decisions that benefit this customer, and these impacts are subsidised by others.

So the more that we can change the tariff structures so the impact of a decision is either aligned to the network cost or benefit, or at least is not subsidised by other users, the more efficient that tariff will be.

It's not about targeting appliance. It's about targeting the tariff to make it work for us, to align decisions with network usage and align decisions in a way that minimises the subsidies.

Sarah I might hand over to you, is that okay?

Thank you Brendon. Before Brendon continues with his presentation, we'd like to take another quick poll if we could please.

Specifically, we would like to know: How do you think Ergon Energy should respond to the case for change?

The four answer options are:

  • That action is needed immediately to remove cross subsidies;
  • That we should start now, but move gradually;
  • We should delay, even if it means cross subsidies continue; or simply
  • Existing tariffs are fine. I don't see the need to change.

I'll give you a bit of time.

While I'm waiting, I'll just remind you that you can ask questions through the Question Pane. We've had some questions come through and we'll take those questions a little bit later. But if you have any questions, by all means please ask them.

We've had about three quarters of people vote so far so I'll just give a little bit more time.

So looking at the stats, and they're still changing as I'm speaking, but we're looking at about 65% of people saying we should start now but move gradually, with about even numbers of people sitting around the 15% mark saying action is needed immediately or existing tariffs are fine. So the group is a bit divided there in terms of their views. 

Thank you for that.

I will now pass back to Brendon to continue with his presentation.

Thank you Sarah. I'm hoping everyone can hear me, we've got a bit of construction work going on outside. So if people are having trouble hearing me, please just type in a comment and I'll make sure I move a bit closer to the microphone.

I'd like to move into some more detail about the calculation of what is our new proposed seasonal time of use demand tariff.

Maximum demand tariffs charge customers based on their maximum usage within a given time period.

The peak charge component of a maximum demand tariff is expressed in kW, rather than kWh.

Now there's no need to sweat the difference between these two concepts.

I think most residential customers are used to a rate based on the total amount or volume of energy used over a long period of time (usually a quarter).

A kW measurement is really looking at that same usage but over a particular point in time (i.e. not over a long time period).

Now this charge is intended to signal the marginal cost of the extra kW of demand on the network during the peak periods usage as shown.

You can see on the screen, these are the peak periods that we've identified from our substation analysis of either zone substations that are aligned to a residential area or smaller substations assigned to a business zone. They do differ obviously, depending on the different times and peaks.

What we're seeing is residential zones usually have a peak period between 3pm and 9:30pm on a summer day. Businesses alternatively have a peak period between 10am and 8pm on a summer day.

Importantly what we're seeing is, unlike potentially other networks, we only really have a peak period in summer months (December, January and February). What that means is we actually have quite a long period in which we're not affected by peak demand, or non-summer months which occurs for quite a long period of time.

In effect, at least for the residential zone, what you're finding is at least 90% or 92% of the time is in non-peak periods.

The kW measurement is looking at usage at a particular point in time and this charge is intended to signal a marginal cost of the extra kW of demand on network during the peaks. If you use our previous example, the customer buys an air-conditioner, and he uses it during these peak periods, his bill will reflect the likelihood of Ergon Energy having to invest in the network to keep up with his increased demand on the network.

Now when he's using it outside it's not going to drive investment.

In other words, what we want to do is we want to give the customer the signal for when it's most likely to impact our future costs. What we also want to do is, when he's using it outside the peak period, to give him as much opportunity to use it at as little cost as possible.

Now we're proposing to apply this summer peak demand charge to the average demand during the peak period of the top 4 peak days, which does sound a bit  more complicated than it is – so I'll probably go through this in a little bit more detail in later slides.

Let's look at an example customer.

This example customer consumes about 9.5MWh of energy per annum and the customer is now considering whether they want to adopt this new demand-based tariff.

Now a 9.5MWh customer is a fairly large usage customer. It's a customer that would obviously have some air conditioning or pool pump or otherwise, because it is a fairly large consumption.

A customer of this size on a normal Tariff 11 would have a bill of around $600 per quarter. And this would be calculated simply by looking at the fixed daily charge and the number of kWh in the year. I'm not sure whether people out there know their quarterly bill. I think this would be fairly close to my quarterly bill if I didn't have a teenager.     

Now I'm not going to lie, this new tariff is a little bit more complicated than a fixed daily charge and an any time energy charge. It's complicated by two main factors –

Firstly, it recognises the time at which the customer uses energy matters, and we've already talked about that peak demand period.

Secondly, the maximum amount of energy a customer users at a particular time also matters.

But I don't think the tariff gets much more complicated than that.

Let's go through how the Jones family using 9.5MWh would fare under this new tariff.

You can see that this is the month of January which is one of the three summer months which we are recording a peak demand charge. You can see that during the first week of January, the maximum demands were quite low – perhaps the Joneses were on holidays, or at least the teenager of the Joneses may have been on holidays at the time.

Perhaps the Joneses had people over on the 19th of January because you can see that usage demand in that period is fairly high.

You can also see near the end of the month the demands were also quite high, which might reflect the fact that the Joneses were using some more air con on those days.

For the purposes of calculating our demand charge, we're interested in the peak periods of the four peak demand days, and they're represented by those green bars.

Now the reason for this is to minimise the abnormally high peak demand day for this customer in one month.

So for example, we could have calculated on the 19th of January, but instead what we're doing is averaging it over four periods.

It also improves the chance of having the period that we are measuring for the Joneses peak demand to coincide with the substation or system peak at that time.

We'll move on to the next slide. We can see that we go into each of the peak days and we try and measure the each half hour which the residential customers is using his energy between 3pm and 9:30. That's also represented by the green bars.

So you can see the Joneses family obviously wasn't quite home from school at 3 o'clock, or 3:30, so they were not using much demand. Obviously the teenager came home at about 6 o'clock but must have left again because we've got lower demands from then on.

What we could have done is we could have measured the demand at the peak at this time, but instead what we do is we measure the average of the demands over this period on this day.

Now the reason why we do this is it allows customers to smooth the demands on that peak day. So rather than having some measured at about say 4kW, we're measuring it at the average demand which is just below 1.5kW.

It also reflects the fact that there's not a strong correlation between the customer's half hour demand and the system half hour demand, but in fact a strong correlation that one of the top four peak days will correlate to a peak demand on the system.

We also have a demand charge in the off peak, but this is measured as the maximum demand recorded for the month.

In this case, we allocating the residual revenue recovery and not trying to align a particular charge with a system peak.

We also assume that a floor of 2kW means you pay the greater of 2kW times the kW charge and the total kW times the charge.

For the Joneses family, they will pay the equivalent of 3.8kW times the off peak charge.

The benefit of having an off peak charge with a floor is that it can proxy as a non-summer months network fixed charge, and the benefit of that is that all the customer is really being faced with from a network charge is really that peak charge in that peak time during the summer months.  The customer pays no other charges other than that for the network.

We'll move on to the next slide. Let's compare the Tariff 11 with the possible notified tariff.

Now I need to reiterate. What we've done here is we've used the existing rates that the QCA has determined for Tariff 11 with what we would consider would be a possible rate that the QCA could come up with for a demand tariff for these customers.

The QCA has not yet released its decision on whether it will allow a particular demand tariff to apply to this particular segment, so what we're doing is giving a comparison for illustrative purposes.

You can see on the left-hand side that the customer is paying about $391 in a fixed charge and about $2,100 for a volume charge.

Using a demand tariff, you can see that their fixed and volume charges do fall by around about half. A little bit over less than half for the volume charge, and a little bit more than half for the fixed charge. This is obviously a benefit for the customer, particularly when they're using energy in winter.

Where the customer does get hit is by the peak demand charge, which is a fairly high rate times the average kW during the peak period of the top four demand days.

They also incur an off peak demand charge, which is the equivalent of $13.13 times the maximum kW recorded in the month.

If we add all of those up, you can see that this particular customer, the Joneses customer, can actually have a lower overall bill compared to their Tariff 11 bill with no change in their behaviour.

If this customer, the Joneses, were a little bit more clever with how they used their energy on peak demand days, they could potentially make even greater savings with the use of this tariff.

Now this doesn't mean that every customer and every circumstance is going to be better off as a result of this tariff. Obviously it's very dependent on what the customer does. If the customer uses a lot of energy in peak periods and not a lot of energy in off peak periods, this tariff is probably not going to be very advantageous for them. Alternatively if customers want to look to reduce their overall bill, this can be a very advantageous bill for the customer.

But the thing we like about this is that the customer is responding to the signals at the same time that benefit the network, and minimise cross subsidies overall.         

If we move to the next slide, we can see that best in the comparison of the types of money, or the proportion of the bill respected by each component.

You can see with the Tariff 11, we do collect quite a large or substantial proportion of our revenue from the volume charge.

When we move to the demand charge, what we're doing is we're introducing a proportion of the bill related to the peak demand charge, and obviously the off peak demand charge.  

Now let's acknowledge that obviously this is the total bill which includes the retail component. But what we're hoping is that from a network perspective, if the customer can influence his behaviour on the dark blue and light blue lines, we can get a benefit from the network, at least from the dark blue overall. 

The next two slides will show the timing differences in the bills for each of these tariffs.

And you can see under the Tariff 11 the Joneses customers do have some variability in their price. They're looking in summer months at an average of over $200, (somewhere between $200 and $250), and in the winter months they're getting an average of just below $200.

There is some variance in the demand charge, which we'll see from the next slide.

You can see with this, the customer does pay a fairly high bill in December, obviously because their demand charge was quite high in that year, and they're getting charged as fairly high in January and February, but not inconsistent with what they were experiencing from the other Tariff 11 bill.

The differences in this bill are between summer and winter have as much to do with the fact that this customer is paying a lot lower charges in the non-summer months compared to the Tariff 11, as much as they are paying higher prices compared to the Tariff 11 in the summer months.

The other thing worth noting with this particular tariff is because it requires certain metering capability, this tariff would have to be billed on a monthly basis, rather than a quarterly basis, and that would potentially assist with any potential issues of having large customer bills over a quarter.

I might move to Sarah now to look at some further queries and maybe open it up for some questions.

Thanks Brendon.

Before we do that though, we just have another quick poll that will be appearing on your screen shortly.

The question is: Would you like further engagement or information on maximum demand tariffs?

Your four answer options are:

  • Yes, I'd would like some more info on residential calculations;
  • Yes, I'd like more info on SAC Large calculations;
  • Yes, I'd like more info on small business calculations; or
  • No, I have the information that I need.

I'll just give you a moment to vote.

We've had about three quarters of the people vote, so I'll just give a couple more moments.

So obviously it is a complex topic, and not surprisingly we've had very few people say no I have the information I need. So there's been strong responses all round on each of the other three options on residential calculations SAC-Large and small business calculations. So certainly will seek to be providing further information as we progress from here. Thank you for taking the time to answer those questions.

We now are planning to take your questions, and there have been questions coming through as we've been presenting. If we don't have time – we've obviously got about 15 minutes remaining – to answer all of your questions, we certainly will be not ignoring those. We'll be looking for ways to come back to you and give you an answer to the question that you've asked, but we'll do what we can now certainly to take your questions.

So Brendon I'll hand it back to you and we can go from there. 

Thank you Sarah, I appreciate that, and I really appreciate the questions coming through. I feel like I'm on a bit of a game show because these questions are quite complicated and difficult. I'll do my best to try and answer them.

We do have a query from David about, "How does the fact that small customers may not see the network tariff levels or structures affect Ergon Energy's network tariff considerations?"

Look David, this is a really good question. We do have to work very closely with the QCA in establishing how our network charges can best be reflected in the ultimate charges that the QCA passes on to customers.

We do have QCA representatives on and they are listening to this discussion, and I just wanted to thank QCA for some of their pro-activeness in this area, particularly in the last 12 months.

Some people will have seen that in relation to the Tariff 12 rates, for the first time the QCA has sort to strike a balance between the need to have some commonality in charges with customers in southeast Queensland and customers in rural Queensland, while also trying to be cost reflective as possible with the impact of the network from peak and off peak periods which may be different to the Energex area.

So you will see in the new rates put forward by the QCA that the times for the Tariff 12 rates are more closely aligned to the times that Ergon Energy experience as peak and off peak. Having said that, there's obviously some issues with having 97% or 95% of our customers subject to tariffs that are not available for the market.

So we are very reliant on the QCA in the way it develops its notified tariffs to be able to facilitate tariff reform. A perfect example of that is the seasonal time of use demand tariff which we are advocating.

What we would like to do, is we would like to make this tariff available as part of our pricing proposal to the AER, and what we would like to do is we would like our incumbent retailer, Ergon Energy Retail, to be able to start offering these new tariffs to customers in 2015-16.

Now, I think the reform process of this will be slow, that you can see that this tariff is a very different tariff to what customers are experiencing, so I'm not expecting the flood gates to open. But I think we saw from the earlier slide that there is a very big cost of inaction, and every year of delay results in a year of further possible cross subsidies which only get bigger and bigger over time.

So this is why Ergon Energy executive particularly is really keen to push forward with tariff reform, and we'd like those tariff reforms to make their way through to regional Queenslanders. Importantly what we need to emphasis is that this is an optional tariff.

There's no expectations that this tariff will be put forth as mandatory. We don't even really have the metering capability for this tariff to be put forward as mandatory at this stage. But what we do want to do, is we want to start that pathway and start it as soon as possible.

We have another question from Jonathan Pavetto, who's actually on our Customer Council working group. Jonathan's asked the question, "Are changes to ICC and CAC customer tariffs revenue neutral? Will there be more or less revenue collected from these groups due to changes to their network tariffs?"

And Jonathan, is a good question. What we said in our last session is that the tariff reforms we're proposing for those particular tariff classes will also be revenue neutral so that the types of charges that we're passing on won't have an effect on the revenue collected from that class. The only exception to that may be in relation to a movement to allocating revenues by kVA. We haven't finalised that piece of work yet. I'm assuming at this stage that there won't be much change at all based on that allocation via kVA.

I think we had a particular question in relation to Tariff 50, which is actually a tariff that the QCA has quite appropriately included in its list of tariffs made available for SAC-Large customers. I'm wondering, I think the question… I don't have it quite on my screen. I think the question was, "How does the off peak charge work for Tariff 50 customers?" Gordon Binks has been working on that particular tariff for SAC-Large customers. Gordon, if you're on the phone would you be able to respond to that question?

Yep, thanks Brendon. I think that question related to how the off peak charge may apply during the summer peak months and the answer to that question is that the off peak charge only applies in the 9 non-summer months, so that's from March through to November. The peak demand charge operates in December, January and February, but in the case of commercial or business customers, only between the hours of 10am and 8pm.

That means effectively for any demand outside of the peak period during the summer, there's no demand charge associated with that. With respect to the Tariff 50 retail tariff, where there's retail costs put on to our network charge, there is an energy charge associated with that usage in the off peak period, but no demand charge associated with it.

Thanks Gordon, I appreciate that. We have a question from Rose McGrath from QCOSS. Thank you Rose for your continued contribution to our working group. The question from Rose is, "Has Ergon Energy have any notion of how many households are likely to take up the new seasonal time of use demand tariff? What are the issues with smart meters and what sort of promotion will Ergon Energy be doing on new tariffs?"

This is a very good question. I would imagine, given the number of customers we have on Tariff 12 at the moment is very limited, I think it's only around 50, I'm not expecting too many customers to move across. Look, to be honest with you, if this does not become a notified tariff that Ergon Energy Retail can introduce to customers on a voluntary basis in 2015-16, I don't think there'll be any movement to the seasonal time of use for the small customers.

So, it's important for us that we do get a notified tariff. We have been having some initial discussions with Ergon Energy Retail. They see that there are some benefits. Due to a number of reasons, including the availability of smart meters and some billing functionality, I don't think this would be introduced immediately when the tariff goes out. I think this will be a very slow step. I'd imagine we'd be looking at possibly, well Ergon Energy Retail would be looking at possibly introducing this to certain targeted customers probably early in the new year, next year. What we don't want to do is really wait till August 2016 to start the whole process again. I think that's where Ergon Energy Retail are at the moment. But it is a very good question.

There was a similar question from Sarah in relation to smart meters. It is true Sarah that there are no customers really at the moment in our small customer space that have smart meter functionality or capability to enable to allow this tariff. That means that for anyone who wanted to move onto this tariff, they would have to have a smart meter installed and all of these issues would have to be incorporated when Ergon Energy Retail does want to approach customers to voluntarily accept this tariff.

Obviously if the cost of moving to this new tariff (including the cost of the smart meter) was too high, customers wouldn't move onto this tariff. So we need to make these things very clear, and I think it's part of Rose's question before, "What sort of promotion and communication would Ergon Energy be undertaking for these new tariffs?"

I think we'd have to have a very targeted campaign I think in the early stages, really looking at those particular customers that we'd think would benefit possibly most at the initial phases, or potentially just to try and get a feel for what different customer types might be benefiting from these customers. As I said, I don't think in terms of 2015-16 we'd be looking at some open flood gates in relation to this particular tariff.

I'm just going through to see if there's any other questions. There's a question from Michael. "How does Ergon Energy give customers real time price signals, rather than one on a bill at the end of the billing period?"

This is a good question Michael. I think there's technologies that are improving over time with this. But I think at the moment, the types of tariffs that we have on offer, particularly for customers in the small area, mean that if you're billed on a quarterly basis based on the aggregate usage of kW over that quarter, there's no real benefit in getting real time price signals.

I think with the introduction of more cost reflective or efficient tariffs like the seasonal time of use demand, I know that Ergon Energy Retail is looking at new products and technologies that allow customers to have a better understanding of their energy usage, and particularly the demand usage in a way that minimises their overall bill.

I have a question from Sarah Harlan in relation to peak demand, whether peak demand is measured at 30 minutes. I think that's right Sarah, I'm not too 'au fait' on the actual measurement in the meter, but my understanding is a kWh is really the amount of kW used in an hour but the kW that we refer to is the average kW used over a 30 minute period, that's how the meter records them.

There are a lot of questions coming through in relation to particular QCA based rates and the interaction with our network rates. Hopefully I've answered that in the best way possible. We might need to provide some follow-up on that.

There's a question here by Umesh I think on how many new time of use demand tariffs there are. Very quickly Umesh, we are wanting to introduce time of use demand tariffs for the residential customers in our SAC-Small space. We want to introduce it to small and medium enterprises, commercial customers and businesses in our SAC-Small space. We want to introduce it to our SAC-Large customers and we want to introduce it to our CAC customers.

We think the QCA has made the right decision to allow for a voluntary tariff for our SAC-Large customers consuming more than 100MWh, so they will actually be able to access this tariff if they want to from 1 July this year. What we'd like to do is expand that to some of the other customer groups as well.

I am getting a little bit of a wind up here and we're getting lots and lots of questions. So we do appreciate the amount of response.

I'll try and stream through the questions fairly quickly.

There was a question about how a high single monthly bill will be managed for bill shock, from Michael. Michael it's a very good question, something we do need to think strongly about. The bill shock I think is as much accentuated by the fact that we've significantly reduced a customer's bill in the non-summer months.

So it does create this fairly big distortion between summer and non-summer months. I can't speak for Ergon Energy Retail, but something we would like to possibly trial with the introduction of this tariff would possibly be the interaction of this tariff with a bill smoothing option. But they're things that we obviously need to work into play once the notified tariff is in place.

I've got one more question. "We didn't hear much about T20L and T20S. What's in store in the future for businesses? Will there be a possibility for T20 customers to move down to T20S if they can reduce consumption and/or demand?" I'm really bad with my numbers on the different tariffs. Gordon Binks – are you aware of the T20 large and T20 small tariffs from the QCA?

No, no I'm not Brendon. I'm assuming that that's maybe the split between the 100MWh. But no.

Sure. Brendon I'm sorry we can't respond to that query. Because we're in the network side of the business, sometimes these tariffs that come up from the QCA are more fit into our retailer side of things. To the extent that we can't respond to you after this session appropriately, I will make sure that Daniel Sanders from our retail side can give you a bit of a heads up about how those things happen and occur. 

I've got so many more questions than I have time to answer. What I will try and do is make sure that we get our team to have a look at each of these questions and we do have your contact details, we will make sure we try and respond to those in the quickest and easiest way possible.

Thank you for your interest, thank you for your questions. As I said, they were quite difficult questions and this does help us better understand the things that we need to include when we're looking at putting these tariffs out into the wider community. So thank you for your time.

I will hand over to Sarah now who's desperately telling me we're running out of time. So thank you Sarah.                                                          

Thanks Brendon. Unfortunately, our time is coming to an end.

But before we wrap the webinar up, we have a final poll for you if you wouldn't mind. The question is: Did you find this webinar experience of value?

  • Yes, it was very valuable;
  • Yes, it was of some value;
  • No, the topic was too complex for a webinar; or
  • No, webinars are just not for me.

I'll just give you a moment to vote there please.

We've just hit the three quarter mark of people voting, so just a couple more moments.

As the numbers are still coming in, I'm happy to report that most people have said that yes it was of value. So we're sitting at about half the people saying it was very valuable, and the other half saying it was of some value. So only just one or two people suggesting that the topic was too complex for a webinar.

As Brendon mentioned, this is only the second time we've done a webinar. The first was a couple of hours ago, so we're still working through some of the logistics and we appreciate your feedback on whether or not today was worthwhile for you.

In wrapping up, I would like to say thank you Ian McLeod and also to Brendon Crown for their time today.

And also to you, our attendees, for taking the time to be active participants and to ask the questions that you've asked.

A reminder that a recording of today's webinar will be available online at Ergon Energy's website in the coming days and we'll be contacting those people with questions who we weren't able to get to today.

Just when the webinar closes and we log you out, you'll be prompted by a little box that comes up to answer a couple of questions about this session and we would be grateful if you could take the time to respond to those questions.

Thank you again for your time and your participation. Have a great day.

Business customers using less than 100MWh

This was a supplementary webinar on the calculation of the demand-based time of use tariffs for business customers using less than 100MWh a year. Watch the following video recording or alternatively review the supplementary slide presentation (PDF 847.7 kb).

Transcript

Thank you for joining us today for this supplementary briefing.

In March we hosted two webinars to go through the network tariff reforms we are currently progressing.  These webinars are now available as recordings on our web page.

And in these briefings there was a lot of interest on how we plan to calculate our proposed seasonal Time of Use demand tariff for our different business customer groups.

This additional webinar is intended to provide the further information requested on these calculations, specifically for our business customers who use less than 100MWh a year. 

Now, while we are focusing in this webinar recording on the calculations for our business customers in the Standard Asset Customers class – Small user group, on the green square, you can also find out more about the proposed calculations for the other classes in other recordings.

In the "Customers using LESS than 4GWh" webinar recording, you can find out about how the calculation for the demand tariffs is currently intended to work for our residential customers.

In a second supplementary briefing, for our business customers who use MORE than 100MWh, you can find out more about the calculations for the voluntary demand tariff for the Standard Asset Customers – Large user group and the Connection Asset Customers user group.

Before we go to the calculations, however, I would just like to recap on why we're changing the way we charge to use the electricity network. 

In short, it's because the way our customers are using the network is changing. And the way we charge has not kept up – in fact, this has contributed to electricity prices rising.

We're reforming our network tariffs, which account for about half of the average bill, to ensure we can continue to meet everyone's needs into the future for the best possible price.

We embarked on our reform journey for over two years ago now, very much aware of the need to deliver fairer and more equitable pricing signals.

We want to be able to say 'we get you' and give our customers the opportunity to save. By looking at what drives our costs and aligning our pricing signals, we're planning to offer real savings for 90% of the time, when the network is not being used to its full capacity.  We'll really only need to charge extra when the level of demand across the network is likely to drive costly capital investment. 

Ergon Energy builds new infrastructure largely to keep up with demand during our 'summer months' of December, January and February – during the day for business customers and from mid-afternoon into the evening for residential customers.

We understand the need to gradually move on these reforms, but we also know we need to act now.

Recent independent modelling has shown that without our tariff reform customers in regional Queensland could be paying up to a billion dollars more than they need to in the coming decade. 

This cost of in action, in fact, could be even greater as our current pricing structures also don't incentivise other smarter choices that customers could make, which would maximise the use of the network and help us reduce costs overall.

So this is why we have been talking to customers and other stakeholders, and working hard behind the scenes, to find the best tariff structures for regional Queensland into the future.

Most bills at present look at how much energy is used over the billing period. Moving forward we believe bills need to have a bigger focus on the amount of energy used at specific times of the day, a customer's 'maximum demand'.  This becomes most important during the summer season when demand is at its highest. 

To introduce the reforms we'll be working through the education programs, the web-based tools and the consumer protections required to ensure that they can deliver the price relief we are confident they can. 

Lastly, before we move on to the way the charges for a demand tariff could be calculated for small to medium businesses, it is important to note that these changes will not increase the money we're allowed to collect for the use of the network overall. This is set independently by the Australian Energy Regulator.

Ok, to start… lets first look at the components of the new optional or voluntary seasonal time of use demand tariff.

It is a new voluntary tariff that we are planning to introduce with slight variations for each customer user group.

It has demand charges that are based on a customer's maximum usage within a given time period, with rates and methods of calculations dependent on the time of the year.

These measurements are expressed in kW, rather than kWh.  As I said in our earlier webinar, there is no need to sweat the difference between these two concepts. Most small to medium businesses are more than familiar with rates based on the total amount or volume of energy used over a period of time. A kW measurement is looking at the usage at a particular point in time rather than over a period.

The summer demand charge is intended to signal the marginal cost of the extra kW of demand on the network during the peak usage periods shown.

We are proposing to apply the summer demand charge to the average demand during the peak period of the top 4 peak days, which sounds more complicated than it is. I will explain this in more detail in later slides.

We will also apply a non-summer demand charge… a monthly Maximum demand charge. The off peak charge includes a floor at the moment of 2kW or a minimum chargeable demand in each of the 9 non summer months (from March to November).

We will also apply a lower flat cents per kWh any time energy charge.

It is probably best to explain this tariff by way of an example.

In first webinar we used residential example, using 9.5MWh per year to show how large peaks in a home's usage would be dealt with in the calculation.

Here we will show some of the same workings, but this time for a real business example.  This customer is a medium sized business using 33.5MWh per year.

Let's look at the recorded daily peaks in demand for this medium business, medium sized business in January.

You can see that across the month this business has a fairly consistent level of maximum demand on at least one day of a normal working week.  Their demand, however, drops dramatically on weekends and perhaps also on public holidays.

For the purpose of calculating our charge, for the demand tariff we are proposing, regardless of the customer's actual profile, we more interested in the peak periods of the four peak demand days, and these are represented here by the green bars.

The reason for this is to minimise the impact of any abnormally high peak demand day for this customer.

And for us, it also improves the chance of having the period you are measuring coincide with the substation or system peak.

For each of the top four peak demand days, we plan to measure each half hour which, for business customers, is between 10am and 8pm.  This time is the only difference between how we calculate the demand charge for small to medium business customers from how we charge for residential customers using this tariff.

The average of those demands is used to calculate the peak charge for each of the four peak demand days.

Again, this benefits the customer by smoothing the signal in this case to around the 6kW level, rather than the peak half hour interval of around 15kW.

It also reflects the fact that there is a strong correlation that one of the top four peak days will correlate to a system… to a peak on the system.

So, any decision by a customer to reduce demand in half hours in this period is beneficial for the network, reducing our need to make costly capital investment – and that is what this tariff is aiming to reward.

This method of calculation has the potential to offer customers significant control of their electricity costs, as a customer would only need to really consider their energy use for about 120 hours in total for the whole year, when in peak… when they peak, in order to make significant savings.

We also have a demand charge in off peak. It is measured as the maximum demand recorded for the month.

In this case, we are allocating the residual revenue recovery and not trying to align to system peak.

As I mentioned, we also assume a floor of 2kW, meaning the customer pays the greater of 2kW times the kW charge or the total kW times the charge. For this business, they will pay the equivalent of 17kW or thereabouts, times the off peak charge.

The benefit of having an off peak charge with a floor is that it can proxy as a non-summer months network fixed charge. And, the good news is that this means that this tariff doesn't have a daily fixed charge for the network costs in summer months.

The rate we apply to this charge, is what will allow us to offer real savings for customers 90% of the time, when the network is not being used to its full capacity.

You can see from the elements here, that this customer's bill can be influenced by the ability to manage their demand on the network.

The aim of this tariff is obviously to incentivise businesses to look to reduce maximum demand in the periods where the overall level of demand across the network is likely to drive costly capital investment.  And push up everyone's costs.

Together this package also offers good incentives for customers to actually use electricity outside peak summer times… making better use of the network during off peak periods will on the flip side reduce other pressures that increase electricity costs.

Using a notified price we hope the Queensland Competition Authority will implement, we are developing a calculator that will help our customers see if this tariff could be right for them.

A striking thing to note in the example modelled here, is the fixed charge and the volume charge are about 50% lower than the Tariff 20 offering. Offsetting or the halving of the daily fixed and significantly lower the volume charge is the demand charge that has both  peak and off peak charging components.  This is how we can create the incentive to reduce demand in peak periods.

For this particular business, their current usage profile gives them an overall reduction in their bill even without changing their usage behaviour or investing in demand management technology. 

This of course varies from customer to customer.

To the extent that they do respond to the signal provided by the tariff and make changes, any additional reduction in their bill would be based on their usage behaviour helping to defer the need to augment the network into the future.

Finishing up on the small to medium business demand tariff, I need to remind you that this tariff is not yet available to customers.  We are currently consulting on it with the retailers, the Queensland Competition Authority, and the Australian Energy Regulator, as well as with other customers.

Please don't hesitate to get in touch with us if you would like to be kept informed of any updates.

Thank you.

Webinar briefing for Retailers

Retailers were briefed on the proposed network tariff reforms on 8 April 2015. Watch the webinar video or alternatively review the Retailer Network Tariff Briefing slide presentation (PDF 1.1 mb).

Transcript

Good morning everyone. Thank you for joining us today for this webinar, which is intended to provide Retailers with a high-level briefing on Ergon Energy's Network Tariff Reforms.

It's wonderful to have the representation of Retailers we have online today; we appreciated your time.

My name is Sarah Dixon; and I'll be facilitating today's webinar.

I am joined today by Ergon Energy's Manager of Regulatory Determination and Pricing, Brendon Crown.

You'll hear from Brendon shortly.

Before we get started though, I'd like to go through a few instructions to ensure this webinar progresses smoothly.

When you joined the webinar session, a Control Panel will have appeared on the right-hand side of your screen.

You can use your Control Panel to manage your session.

If your Control Panel is blocking your view of the presentation, you can simply use the small orange arrow to minimise it. You then just need to re-click the arrow to make it re-appear. 

From the Control Panel, you can control how you listen to this webinar. If you are having issues with your audio, you can dial in via telephone at any time by selecting the telephone option and calling the number provided.

Alternatively, you can use your computer speakers.

Another screen will have also appeared showing you the first slide of our presentation.

We've also activated our webcam functionality, so you should be able to see myself and Brendon, and we'll appear and re-appear throughout the presentation.

For this webinar, your participant microphones have been muted, and that means that nobody else can hear you. If you need to contact us at any time you can simply use the Chat Function on the Control Panel to the right.

You can ask questions at any time by typing them into the Questions Panel at the bottom of your Control Panel.

These questions will be monitored throughout the session.

We have a number of panellists with us online, so if Brendon is unable to answer your question, somebody  else should be able to.

We will take five minutes a couple of times throughout the session to address any preliminary questions that you may have, and then 10 to 15 minutes dedicated question and answer time at the end of the session.

If we don't have enough time to answer your question in today's session, or if we don't have the information on hand, someone from Ergon will come back to you via email. We plan to do that within the week.

If you have a question that you would like to ask but don't actually want discussed out loud, whether it's confidential or for other reasons, please simply type  the word confidential at the beginning of the question and we'll  answer that separately with you directly.

I'd also like to let you know we will be recording today's session so it is accessible to people who were unable to attend.

It will be available on the network tariff section of Ergon Energy's web page.

Today's session will go for approximately one hour. We've allowed 40 minutes for the formal presentation and then 15 to 20 minutes for questions throughout and at the end.

We'll start by looking at the changes proposed for the Individually Calculated Customers, we'll then take five minutes to address preliminary questions.

We'll then look at the specific changes for the Connection Asset Customers, and follow that with another 5 minutes of questions.

Then in the last part of the formal presentation, we'll look at the new seasonal time of use demand tariff planned for the Standard Asset Customers Large user group.

Then to close this session, we'll have some further time for your questions on all the topics discussed.

Before I hand you to Brendon though, I'd like to ask you to complete a quick poll.

This poll will pop up on your screen shortly.

It's a multiple choice question, and it will just help us focus today's session. 

We would like to know: What is your role in the organisation?

Your answer options are:

  • Network tariffs and pricing
  • Business relations or product development
  • Network billing or metering/meter data
  • Service order requests or market transfers, or
  • Other

I'll just give you a couple of moments now to respond to that.

Great, the majority I think are network tariffs and pricing. Thank you for that.

We'll keep that in mind as we progress through the webinar.

But I would now like to introduce you to Brendon Crown, Ergon Energy's Manager of Regulatory Determination and Pricing.

Brendon will start with the changes taking place for Ergon Energy's largest customers.

Overview of the changes

Many of you will know, over the last two years we've been embarking on a journey to review the way we charge customers for the use of our network.

We saw real opportunities for Ergon Energy to give customers greater visibility of the impact their use has on the network and our costs. Now with improved visibility comes better customer choice and flexibility in how they use electricity. Over time, we saw that this would deliver benefits for all of our customers. 

Now, throughout this journey, we've released a number of consultation papers and sought written responses. Moreover, we've been engaging in focus sessions with key stakeholder groups, including with retailers and retailer groups.

Now our first major change to network tariffs in 15 years happened last year, commenced on 1 July 2014. These included large changes across three of our four tariff classes.

In early December last year, we released a consultation paper announcing proposed changes to tariffs commencing 1 July 2015. I know several representatives we've engaged with on these changes are participating on this webinar and I thank you for your ongoing input and consultation to date.

I am aware that many of you have already been part of our webinar sessions held a fortnight ago. We have also discussed many of the issues I am talking about today through meetings with the ERAA and through separate one on one discussions with some of our retailers.

In relation to the webinars, we did receive some fairly positive response from stakeholders, generally on our webinars held about a fortnight ago. We'd be interested in your feedback on the webinar discussion, that's identified specific for retailers.

In today's session, we're going to concentrate on the reforms we are planning for the larger business customers. These are the classes with customers most likely active in the competitive market and of most interest to you, and they're represented in the three blue boxes on the quadrant on your screen.

I will assume that most of you on the webinar today are aware of the regulatory arrangements that currently exist in Queensland, so I'm not intending to  go into these or any other Government policy on possible changes to these arrangements today.

Now the tariff class in the green square represents the SAC-Small user group, or customers consuming less than 100MWh per annum. This describes the majority of our customers – including small-to-medium business and residential customers. Many of you will know that the time of use energy charge was introduced in 2014-15 for this customer group. So far we have no market customers move to this tariff.

In our December consultation paper, and in addition to the default tariff and time of use energy option paper, we noted our intention to allow residential and small business customers in this class to choose a seasonal demand tariff. We intended to introduce this in 1 July 2016. 

Now our most recent consultation paper earlier this year proposed bringing forward the introduction of this tariff to 1 July 2015. This means now that 3 of the 4 tariff classes will introduce a new seasonal demand tariff or demand saver tariff from 1 July this year if approved by the AER.

There will be conditions on retailers and customers being able to access this tariff for customers in the green square. The most important condition is that the tariff will only be available with a comms enabled meter capable of recording half hour interval data. Access to the tariff is also conditional upon billing capability consistent with this metering capability.

Now we're confident on introducing this tariff as a notified or regulated tariff through the QCA but expect that this tariff will be more likely a pilot and will be introduced on a limited basis in 2015-16.

If you are interested in more on this particular tariff or any particular issues with the customers consuming less than 100 megawatt-hours, our website includes links to a recent webinar for customers in this tariff class. It includes more detail of the demand tariff we propose to introduce for customers in that green quadrant.

For the rest of the presentation today, I'm intending to concentrate on the other tariff classes represented by the blue boxes.

Let's first move to the Independently Calculated Customers or ICC tariff class. 

Ergon Energy has 77 Individually Calculated Customers (or ICCs) who generally consume over 40Gwh per annum. Typical customers served in this user group are large coal mining customers as well as other types of mining, transport and pumping.

In 2014-15, the basis of charge for these customers changed from kW to kVA denomination – consistent with the standard industry approach. In fact, I think Ergon Energy was one of the last Distribution Network Service Providers to adopt this change for such a large customer group.

Our December 2014 consultation paper noted that we will also be introducing in 2015 an excess reactive power charge. This is a less common charge.  We are planning to introduce an excess reactive power charge, or excess kVAr charge, for the Individually Calculated Customers from 1 July 2015 in order to improve cost reflectivity for all our customers.

A premise's power factor is important because distribution systems must be designed to supply the actual power required. A low power factor means actual power delivered will be unnecessarily high. Reactive power is measured in kVAr, or kilovolt-amperes reactive.

The Excess Reactive Power Charge is applied against the kVAr drawn from the network that exceeds the minimum compliant power factor level.

Essentially this charge reinforces the price signal introduced by the change to the kVA tariff. It encourages customers to improve their power factor and in turn reducing their usage of network capacity.

This charge is calculated monthly based on the power factor recorded at the time of each customer's individual monthly kVA peak. A rate of $4 per excess kVAr is proposed for 2015-16.

The slide on your screen attempts to explain the calculation in a little bit more detail with some nice pretty pictures.  This may be hard to read on your screen depending on your resolution. If you want to know more information, there is a brochure on our website that you can go to. If you just go to the Future Network Tariffs link on our webpage, you should be able to see a brochure with this in more detail.

We also noted our intention in our consultation paper to use kVA as a basis for allocation of charges we pass through from Powerlink. We plan on continuing with this, although we do need to consider a number of submissions in consultation on this issue.

The following slide attempts to show how the excess reactive power charge will be displayed on a customer's bill.

It's  important to note that this charging component would apply only where an ICC customers' power factor doesn't  meet the value specified by the Rules standard, and would only apply to the magnitude of kVArLag consumed in excess of that permitted by the Rules for the specific ICC connection point.

ICC customers that have an existing arrangement with Ergon Energy, documented in a Connection Agreement, that allows for a variation from the Rules standard, such as kVArLead for Ergon Energy network voltage support purposes, or kVArLag in excess of the rules as being gradually improved under an agreed investment plan. These will probably be exempted from such changes on a case by case basis.

This slide represents how an ICC Excess Reactive Power Charge will appear.

For these tariffs, you'll expect an additional line item in the bill statement of charge file. The bottom line indicates the dummy Excess kVAr charge item.

In the example on the screen, you can see that the excess reactive power charge calculations has revealed the customer is to be charged an excess of 200kVAr at $4.00 per unit giving a total of $800.00.

We recognise that the addition line could have some implications for your billing systems, and those Retailers on the line that don't  have their billing representatives with us, you may wish to advise them of this change and get them to replay the video at a later point in time.

I think we're going to move to any questions at the moment, so if anyone has any questions. Sarah are you aware of any questions that have come through at the moment?

I think there's a question related to power factor dependent excess reactive demand charges formula and calculation methodology details.

We do have some information on our website which will provide some more details of the calculation. I think hopefully that, combined with the attached example, will be able to assist.

We also have a webinar on the website for customers consuming more than 4Gwh per annum, and we went through an example of that on that webinar. So that may be another point which you can look at it. 

I'm having a few problems actually seeing the questions, so while we're sorting that out, I might onto the next slides.

Bear in mind, if you do have a question, we don't actually answer it on the webinar. Our intention is that we will respond either directly or through a general presentation on the webpage. We'll keep you up to date with that.

I'd like to talk to you about the three main changes to Connection Asset Customers from 1 July 2015. This is at the beginning of slide 9.

In 2013, we noted that we planned to stagger the introduction of key reforms to ICC and CAC customers by one year. The same structural changes to the tariffs that were introduced to ICCs in 2014-15 are proposed for CACs in 2015-16.

This involves the move to using kVA as the unit of measure tariff that's  based on applying the same business rules applied to ICC tariffs where leading power factor has been discounted with only the lagging power factor incorporated into the calculation of kVA charges.

The second major change involves reducing complexity for Ergon Energy and for retailers, customers and other market participants. Our intent is to reduce the number of CAC tariffs from the current 177 to four standard HV tariffs in each pricing zone (effectively a total of eight standard tariffs across the East and West zones).

The idea of standard rates gives us a lot more flexibility. It allows us to publish like we do with customers consuming less that 4GWh per annum. This gives customers and retailers with easy access to the particular rates.

This transparent change requires the introduction of a customer-specific 'connection unit' value and associated tariff component for some of these customers. This is a different mechanism to recover what was currently presented each year to the customer as a site-specific individual fixed connection charge.

Customers currently have an individual 'Authorised Demand' and in future will also have a connection unit number as required. 

This information will be considered confidential, however, all the rates will be standard and therefore able to be published. 

The four newly formed standard default tariffs recognise the different points of connection to the network for these customers. These are:

  • 11/22 kV lines
  • 11/22/kV bus
  • 33kV connections and
  • 66kV connections.

We are currently considering whether we should continue with the 33and 66kV, or merge them into a higher voltage standard default tariff. This would allow us to go from four to three standard default tariffs.

The last change we are proposing with this particular class is the introduction of an alternative and optional network demand tariff. A seasonal Time of Use demand or, for our smaller customers what we're calling a demand saver, better reflects a customer's usage on the network, and I'll talk about this in later slides.

We'll move onto slide 10. As I mentioned, all of the CACs will move to kVA based demand charge. This will appear on our Schedule of Network Tariffs, like we've identified on the screen.

The power factor used to convert each CAC's Authorised Demand is the highest power factor at monthly peak demand from the most recent 12 months meter data. 

This structural change is implemented in the context of being revenue neutral to the overall tariff class for CACs. Don't expect to recover any more or less from what has already been allocated through our normal allocation process.

When implementing these tariffs for ICCs we did face some hurdles in the application to customers with a mixture of load and generation particularly. We expect similar arrangements will be required for customers in the CAC class in similar circumstances. Therefore, like ICC's the rules for calculating the transition to kVA also exclude energy exported to the grid by generators. We'll be looking at the impact for these customers, before finalising our business rules and we are happy to discuss arrangements if you have customers with generation, individually.

On slide 11 – just want to go through the statement of charge. It's explaining how it might look when we change the kW to kVA.

For these tariffs, a change in the existing component codes would be displayed.  

Note last line of the Statement of Charge file is for the connection asset charge; 3 units multiplied by 28 days in the billing period.

You will also note that the TUOS is represented as 3 elements, being fixed, capacity and volume, and the original General and Service Charge has been incorporated into the volume charge.

For TUOS the AD or Authorised Demand component will continue be calculated on the Authorised Demand or Minimum Monthly Demand whichever is the higher.

It's also worth noting that the TUOS, or the Powerlink charges allocated to a customer, will no longer be based on the charges relevant to the nearest connection point. Instead we have adopted an approach consistent with the way we apply TUOS for customers consuming less than 4GWh, and allocating a TUOS charge based on a predefined region.

Within these changes, you will have to note, that because of changes that we're currently making to our billing system, there will be lag for the first few months in how these charges may be seen in your Statement of Charge. What we are showing you is what we think will be billed from September 2015. Until then the Statement of Charge will be similar to what you currently receive. The cost outcome in both circumstances will be the same. This is just representing the charge in a different way which allows us to publish standard rates.

Let's take an example in Ergon Energy's network now to illustrate the changes and the additional network tariff covered.

Let's assume we have a customer with an Authorised Demand of 3,672kW and a monthly actual demand of about 1000kW. The customer consumes around 6.9GWh per annum, an average of 0.57GWh per month. Now because this customer connected to the network prior to 1 July 2010, they didn't pay for their connection assets up front in their charges, therefore their ongoing fixed charge implicitly includes a connection charge of about $514 per day. Now we've calculated this customer's power factor at 0.9, representing the highest recorded Power Factor at peak demand over a 12 month period.

Moving this customer from a kW to kVA charging sees our Authorised Demand adjusted by taking 3,672kW and dividing that by the power factor of 0.9 which comes up with 4,080kVA.

Moving to a standardised tariff means that we just represent the connection charge of $514 per day in a slightly different way. Firstly, the Fixed Demand Charge from the applicable standard network tariff applies. All CAC customers will be billed the standard rates. This customer then receives a number of connection units to multiply against the Connection Charge which recovers the same amount of $514 per day. Remember that this charge reflects the fact that this customer connected to the network prior to 1 July 2010.  Customers connecting post 1 July 2010 paid for their connection assets up front, and therefore will have a connection unit of zero, representing their connection charge of $0. They will still pay the normal fixed charge like all customers.

Existing CAC tariffs do not provide any signal to customers in terms of season of the year, or day of the week, or time of the day, and therefore isn't necessarily cost reflective of the times that we're more likely to invest. Now we're proposing to introduce a voluntary tariff to addresses this gap.

This is a new voluntary which I was mentioning before for our SAC-Small customers similarly, with slight variations to the Connection Asset Customers and the Standard Asset Customers Large which we'll explain later. We think this is a good opportunity for you as Retailers and for customers generally, to take up a tariff that's going to be more cost reflective with all our network charges.

We're on slide 13.

The structure of this tariff will be based on the structure established for the SAC-Large seasonal Time of Use demand tariff, which is proposed for introduction in 2015-16. However, it will be adjusted to accommodate the Authorised Demand component that currently exists in CAC tariffs.

In each summer month the Peak Demand Calculation uses the greater of the maximum kVA demand in any single half hour at any time during the Peak Demand Period and the customer's Authorised Demand. Remembering the Peak Demand Period is between 10am and 8pm on a weekday.

The Off Peak Demand Calculation uses the higher of the maximum kVA demand in the any single half hour at any time during each non summer month and the minimum chargeable demand.

Different minimum chargeable demands do apply to the CAC class. This is in order to provide a more equitable allocation of cost to the different connection points. These apply to the time of use demand tariffs available. Again, these are based on the connection voltage.

On slide 14 we have an example of a CAC STOUD on a customer's bill. You'll note that the new or changed components from the standard CAC tariffs are highlighted in yellow.

In this monthly example you will also note the "Peak" charges are zero, as this example of a monthly bill is an "Off-Peak" month. 

Moving to slide 15 – just want to see how we intend to display the CAC SToUD in the Statement of Charges.

You'll note in this particular sample that the statement shows shoulder periods. These, however, will be updated to reflect our current position which is to only have a peak charge against specific times during the summer months, and an off-peak demand charge applying to the summer months. At this stage, we don't intend to introduce a shoulder period. Energy will either be anytime throughout the year or alternatively, we may apply an energy charge just through the summer months. This is subject to further analysis and consultation.

All demands will be in kVA.

New Tariff Codes and Component Codes will be displayed on the bill Statement of Charge file.  

Authorised Demand will be applied for the capacity charge.

TUoS Energy has same breakup as DUoS Energy but charged at the same rates for each period.

Slide 16 has an example of the SToUD with the connection Asset Charge.

Connection Asset charge is shown as separate line item. The quantity to be billed is the number of days in billing period multiplied by the number of connection units at the NMI; in this case we have a full month of 31 days multiplied by quantity of 3 connection units. 

On slide 17 we are moving on to a new tariff class. This is the customers consuming between 100MWh per annum and 4GWh per annum.

We proposed in our December paper the ability for customers in this tariff class to also choose a seasonal time of use demand charge.

You'll see on this diagram various components of the demand charge.  It includes:

  • A peak demand charge for the summer months. This charge is intended to signal a marginal cost of the extra unit of demand on the network during the peak weekday usage periods shown. For this tariff class, the maximum recorded demand in the peak period is reduced by 15kW represented by the threshold demand. Obviously the maximum recorded demand below 15kW would result in a zero peak demand charge for that month.
  • Outside the summer months there will be a lower off-peak demand charge, a monthly demand charge, in this case a 40kW threshold applies. The maximum recorded demand in that off-peak month, or that non-summer month, is reduced by 40kW, representing the threshold demand for the off-peak. Obviously the maximum recorded demand below 40kW would result in a zero off-peak demand charge for that month.
  • Currently sitting under these two charges is an anytime energy charge and a fixed charge, which are applicable through the year.
  • However, since proposing this in our previous consultation, we have reviewed our peak charges which have now increased due to our revised LRMC and are now looking at options to only apply a cents per kWh rate through the non-summer months. If we proceed with this change, there would be no DUOS cents per KWh rate applying for network charges in the summer months.

On slide 18, we've demonstrated the calculation of these charges in a summer month.

This is how the calculation would work with a large business customer consuming 630MWh per year.

You can look at the highest recorded peak demand for this customer in January. We looked at the maximum demand recorded in peak times of the summer for which these customers is between 10am and 8pm on a summer weekday.

You can see for this customer they have three distinct days where demand is quite high in the peak times during January and the maximum demand for the month recorded is on the 24th.

The threshold applies to the maximum demand charge, so the charge is applied against the amount of demand above 15kW on the maximum demand recorded. If the maximum demand for the month is below 15kW, no demand charge is payable.

This is for weekdays only. Peak is peak demand in peak demand window on weekdays between 10am to 8pm.

On the next slide we show how the off-peak charge is represented. It is the maximum demand recorded in the month.

For this customer the maximum demand recorded is on the 1st. Again a threshold applies to the maximum demand charge, so the charge is applied against the amount of demand above 40kW on the maximum demand recorded.

If the maximum demand for the month is below 40kW, no demand charge is payable.

We've done a quick calculation on slide 20.

You can see that the bill for this customer consuming 630MWh per year is influenced by the ability for the customer to change demand during the peak period. The off set of this is a lower volume charge to what we might normally apply.

 The aim of this tariff is obviously to incentivise businesses to look to reduce demand in the periods that have the highest risk of future investment.

This is how the Seasonal Time of Use Demand will be displayed in the Statement of Charges.

Again you'll note that this particular sample segment shows shoulder periods on the Statement of Charge. These will again be updated to reflect our current position once the tariffs are introduced. 

The new Tariff Codes and Component Codes will be displayed on the Statement.  

It's worth noting that the TUoS Energy will be applied at an anytime rate. 

I think that's where we'll end up at the moment unless we have any additional questions. Those questions that did come through were fairly specific and I probably will leave them for a separate response. I'll just quickly have a look to see if there's any questions that are worthwhile sharing with the group.

There is a question here from Umesh Dutt. He's asked the question "will the details of the threshold be provided as a PDF similar to last year's tariff changes?" I believe that we will be providing additional information at the time that the AR approves the pricing proposal, and that will be closer to the beginning of June I believe. I think we'll probably be providing additional information at that time Umesh.

There is a quick question here. "Is the charge code for the ICC 'EICCKA66'?" Adrian Salkeld is our resident guru on tariff codes. Are you able to answer that question Adrian? You might be on mute Adrian. No, we'll leave that for another…

Can you hear me now?

I can hear your now Adrian, thank you

Great, thank you. Sorry about that. The tariff code that was picked up (the EICC66) is the individual tariff code applicable to that NMI. So the ICC's will retain individual tariff codes which will then reflect the NMI specific elements, including the Authorised Demand side.

I understand.

The concept of the inclusion of the kVA is just an indication that that customer is now on a kVA tariff as appose to the kilowatt tariff previously.

Sure. Thank you Adrian.

Well I don't have any other questions at the moment. I do, sorry. Umesh has asked another question. "What would be the charge code for the excess reactive demand charges?" So Adrian, based on that previous response, I think what you're suggesting is that each of the individual calculated customer's tariff codes will stay the same, they'll still be individually priced. So for each ICC customer that a Retailer has, they will have the charges relevant to the kVA appear for that tariff code. Is that right?

There will be a new tariff component code created for the excess kVAr charge, and that will be published in the network billing spec in the very near future. The slide that we had the example Statement of Charge file suggested a component code, but that hasn't been finalised at the moment. Does that answer the question?

Thank you Adrian, yes.

Well thank you all for your questions. I think we're just about to wrap up and close. I apologise for some of the audio changes, it was certainly outside our control at one stage, but I do appreciate everyone staying on the line. We didn't have any one drop out so I really do appreciate everyone's patience while we fixed up those sound issues. Sarah can I hand it back to you?   

Certainly. Thank you everybody for you time. Before we wrap things up, we' just wanted to ask another poll question. That poll will be appearing on your screen shortly. The question is: Did you find the webinar experience valuable?

Possible responses include:

  • Yes, it was very valuable;
  • Yes, it was of some value;
  • No, the topic was too complex for a webinar; or
  • No, webinars are just not for me.

I'll give you a little bit of time to respond to that poll.

We have about 44% of the vote counted, so I'll just give you a couple of moments to mark your answer.

We've got about 90% of the vote counted. A mix of responses. We've got about 65% of people saying yes, it was of some value. About a quarter of people saying the topic was too complex and about 15% saying yes, it was very valuable. So thank you for that. That helps us in ensuring we can tailor our content in the future.

I would like to thank Brendon Crown, specifically for his time today.

I'd also like to thank you, our attendees, for participating in today's webinar.

Just a reminder that a recording of the webinar will be placed online in the coming days on the Ergon Energy website, and we'll  also be contacting any participants who had questions that were marked confidential and we'll be getting back in touch with you directly.

When this webinar closes, we would be grateful if you could take a moment to answer a few questions that will be asked of you. If you could just take the time to compete that we would be very grateful..

Thank you again for your time and also for your patience as we worked through some of the technical challenges. We appreciate your time. Have a great day.

March/April 2015 - Submissions received

The following submissions were received on our supplementary consultation papers (see below) on our approach to Long Run Marginal Cost and the proposed introduction of a voluntary demand-based tariff in July 2015.

Documents Published
Australian PV Institute Submission (PDF File, 2.0 MB) 14 Apr 2015
Canegrowers Submission (PDF File, 431.9 KB) 14 Apr 2015
Canegrowers Isis Submission 1 (PDF File, 890.6 KB) 14 Apr 2015
Canegrowers Isis Submission 2 (PDF File, 408.9 KB) 14 Apr 2015
Cotton Australia Submission (PDF File, 88.8 KB) 14 Apr 2015
Far North Queensland Electricity Users Network Submission (PDF File, 650.6 KB) 14 Apr 2015
Queensland Farmers' Federation Submission (PDF File, 116.1 KB) 14 Apr 2015
Queensland Resources Council Submission (PDF File, 59.7 KB) 14 Apr 2015

March 2015 - Supplementary consultation papers

These were the supplementary consultation papers on our approach for 2015-16 and beyond.

February 2015 - Submissions received

The following are the submissions received on our Consultation Paper for Future Network Tariffs 2015-16, published in December 2014.

December 2014/January 2015 - Proposed changes for 2015-16

Below are the documents released as part of our engagement on the proposed network tariff reforms for 2015-16 and beyond.

Apr 2014 - Tariff structures revised, presented to the AER

These documents concluded the consultation on 2014-15 network tariffs.  The revised network tariff structures were submitted to the AER for approval in April 2014

Nov 2013 - Second round of public consultation

These were the submissions received for the second round of consultation detailed below.

Nov 2013 - Proposed reform pathway with indicative 2014-15 prices released

In November 2013 we incorporated feedback into our proposals and published the following documents for further consideration.

Aug 2013 - Submissions reviewed and tariff options developed

These were the submissions received on the original consultation paper (see below).

Documents Published
Network Tariff Strategy Review Consultation Report (PDF File, 732.9 KB) 7 Nov 2013
AgForce Submission - Jul 2013 (PDF File, 143.9 KB) 7 Nov 2013
AIMS Submission - Aug 2013 (PDF File, 72.3 KB) 7 Nov 2013
AIR Noosa Submission - Oct 2013 (PDF File, 114.0 KB) 7 Nov 2013
AngloAmercian Submission - Jul 2013 (PDF File, 1.2 MB) 7 Nov 2013
Anonymous Submission - Aug 2013 (PDF File, 916.6 KB) 7 Nov 2013
Atherton Submission - Jul 2013 (PDF File, 603.6 KB) 7 Nov 2013
Bundaberg Regional Irrigators Group Submission - Aug 2013 (PDF File, 713.2 KB) 7 Nov 2013
Cairns and District Branch of Australians in Retirement Submission - Aug 2013 (PDF File, 125.9 KB) 7 Nov 2013
Canegrowers Isis Submission - Aug 2013 (PDF File, 1.8 MB) 25 Jul 2014
Canegrowers Submission - Aug 2013 (PDF File, 1.1 MB) 7 Nov 2013
Clean Energy Council Submission - Aug 2013 (PDF File, 206.3 KB) 7 Nov 2013
COTA Submission - Jul 2013 (PDF File, 51.2 KB) 7 Nov 2013
Cotton Australia Submission - Aug 2013 (PDF File, 248.2 KB) 7 Nov 2013
Energy Australia Submission - Aug 2013 (PDF File, 106.7 KB) 7 Nov 2013
Ensby Submission - Jul 2013 (PDF File, 23.6 KB) 7 Nov 2013
Ergon Energy Queensland Pty Ltd Submission - Aug 2013 (PDF File, 292.4 KB) 7 Nov 2013
EUAA Submission - Aug 2013 (PDF File, 85.0 KB) 7 Nov 2013
Franklin Submission - Jul 2013 (PDF File, 32.2 KB) 7 Nov 2013
Gladstone Area Water Board Submission - Aug 2013 (PDF File, 45.1 KB) 7 Nov 2013
John Box Submission - Jul 2013 (PDF File, 94.1 KB) 7 Nov 2013
Lawton Submission - Jul 2013 (PDF File, 31.2 KB) 7 Nov 2013
LGAQ Submission - Aug 2013 (PDF File, 518.3 KB) 25 Jul 2014
MEA Submission - Aug 2013 (PDF File, 145.6 KB) 7 Nov 2013
O'Brien Submission - Jul 2013 (PDF File, 34.5 KB) 7 Nov 2013
Origin Submission - Aug 2013 (PDF File, 47.0 KB) 7 Nov 2013
Pioneer Valley Water Submission - Aug 2013 (PDF File, 367.2 KB) 7 Nov 2013
Ports North Submission - Aug 2013 (PDF File, 446.6 KB) 25 Jul 2014
QCOSS Submission - Aug 2013 (PDF File, 240.4 KB) 7 Nov 2013
QFF Submission - Aug 2013 (PDF File, 90.2 KB) 7 Nov 2013
QLD Consumer Assoc Submission - Aug 2013 (PDF File, 52.3 KB) 7 Nov 2013
QLD Resource Council Submission - Aug 2013 (PDF File, 80.4 KB) 7 Nov 2013
Schneider Submission - Jul 2013 (PDF File, 33.3 KB) 7 Nov 2013
Seafarm Submission - Aug 2013 (PDF File, 68.1 KB) 7 Nov 2013
Stanwell Submission - Aug 2013 (PDF File, 1.0 MB) 7 Nov 2013
Taylor Submission - Aug 2013 (PDF File, 30.4 KB) 7 Nov 2013
Toowoomba Regional Council Submission - Jul 2013 (PDF File, 1.4 MB) 7 Nov 2013
Wilmar Submission - Aug 2013 (PDF File, 1.2 MB) 7 Nov 2013

Jun 2013 - Launched initial public consultation

Our network tariff reform public consultation commenced in June 2013 with the release of this original consultation paper.

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