Queensland businesses face new price gouge

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Retailers have decided it’s their turn to extract more blood from the stone, pushing up business consumption charges by 20-40%.

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While some Queensland business continue to reel at massive cost increases brought about by new metering methodology, requiring big capital outlays for power factor correction, retailers have decided it’s their turn to extract more blood from the stone.

As of July this year Energex customers who are on demand based charging went from kilowatt peak (KW) billing to kilovolt ampere metering (KVa). The headline charge per unit for this demand charge dropped by about two dollars per unit, however the new measuring system meant some industrial customers saw their number of these new units increase by up to 40%, causing a massive spike in electricity demand charges. Any customer who had a power factor (a measure of electrical efficiency) below 0.92, copped a non- linear increase in the amount of units charged. Very few companies saw a decrease in demand charges as few exceed this 0.92 power factor number. This has created a mad rush for the sourcing and installation of power factor correction systems designed to repair power factor and push businesses electrical efficiency more towards the high 0.9’s or even an ideal figure of one or ‘unity’.

This has meant a capital cost of thousands to tens of thousands to businesses to rectify their power efficiency. So the apparent drop in the demand charge was, for most customers, a substantial rise in demand and possibly consumption charges as well, which is also likely to adopt the new measure.

While the businesses still struggle with these on-going or capital costs, many who now seek to lock new retailer supply contracts for the next twelve to twenty four months, are seeing rates across the board rise by two to three cents per kilowatt hour, from a current price of four to six cents regardless of retailer. Are we seeing a petrol like cycle emerging where the big gentailers are in cahoots with electricity supply? Or is the high reliance on gas in Queensland suddenly forcing prices up?


Yesterday’s AEMO figures put the average spot price of electricity at about $60 per megawatt hour or 0.06 cents per kilowatt hour. This was a hot and humid day in South East Queensland and no doubt the price was suppressed by the contribution of roof top solar, notwithstanding it is an expensive time to buy electricity. The curious thing about yesterday is that the three eastern states had nearly identical price profiles for the day, this can only indicate that either it was a complete coincidence or the HV interconnectors between these three states were working their butts off. This does however raise the question, if kilowatt hour prices from say from Energy Australia, who produces cheap brown coal electricity, are higher for Queensland customers that their Victorian customers, and the network charges that are paid are supposed to pay for the “transport” of this power, what is the point of the national electricity market if state based constraints and premiums are in place anyway?. What is the point of being able to purchase electricity from a competitor who loads a state based premium on that very supply regardless?

What this does mean is that solar for industry has just been given a huge boost, even where solar has little of no impact on demand charges, the thirty to fourty percent increase on returns by only replacing consumption makes the installation of solar even more attractive. It’s also good for the retailers who are now basing contracts on high price periods, only to reap sweet margins when supply drops in the cooler months.

 

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8 Comments
  1. Warwick 4 years ago

    This change brings Queensland into line with many other jurisdictions, charging kVA rather than kW, making tariffs more cost reflective, so some will be better off and some will be worse off… Poor power factor means unnecessary network capacity and a higher price. This is not some conspiracy.

    Wholesale prices in Queensland are higher than they used to be mainly due to the growth in demand due to the new LNG facilities being developed. These higher prices by all retailers reflect underlying contract prices as can be seen here (https://asxenergy.com.au/)

    It is apparent you don’t understand how the wholesale market works…even though Energy Australia has “cheap” brown coal in Victoria, it will reply upon hedging contracts from government owned generators in Queensland for hedging as it will not take the basis risk from Victoria to NSW to QLD. The “point” of the market is that it provides locational pricing signals, encouraging generators to invest in regions with the highest prices..i.e. Queensland as an example.

    • Phil Shield 4 years ago

      Fully agree, kVA billing in Queensland is decades overdue. If businesses have poor power factor, this gives them incentive to install appropriate correction equipment.

    • Rob Campbell 4 years ago

      After stating the obvious, why don’t you actually address the underlying purpose of the article, that is that retail competition has not benifited the consumer one bit. It has only provided a mix of administration and other candle wicks that can be pushed up to generate revenues for those who buy in. Your constant critical analysis would be better utilised in your own post or one that is relevant to the context of the post. Just because it exists doesn’t make it efficient, fair or anything else, unless of course your the consultant that makes money out of inventing the whole crappy idea.
      I just think your response isn’t relevant.

  2. Ray Miller 4 years ago

    Thanks Rob for your article, I support the KVA chargers to business customers and also regulation on appliances which require either PFC power supplies and/or PF correction on appliances to 0.95 or better. It may be sudden but overdue.

    Interestingly the requirement for solar inverters >3kVA to have what amounts to an PF offset counteracting the motors with poor PF, so the inverter owners loose 10% income of exported energy to support poor grid PF! This could also be seen as double dipping? Should not the supporting inverters be credited with extra income for the support services?

    Another issue on the grid which is not reported is high voltage, I’ve been part of a university research project in which monitoring equipment which reads RMS grid voltage as well as energy has revealed what I would call widespread significant grid over voltage (outside of solar PV hours). While the sample size is very small the extent of the over voltage is disturbing. When the grid voltage in Australia should have moved to 230V +/- the 240V is very notional, I would use a typical average figure of 250V.

    While the I squared losses may be lower a number of other standing losses are larger 24/7 also the limits it places on solar inverters being blamed for over voltage when the route cause is poor management by the utilities.

    • Rob Campbell 4 years ago

      Thanks for that,it seems that the emphasis I placed on power factor out did me on the key point of large increases in kilowatt hour pricing. I do agree that we had to bring ourselves into line with the other states in terms of KVa pricing and Energex and Ergon did give a bit of a breather to those 0.92 and above. But I do feel for the engineering businesses who now face this extra burden from the gentailer’s, who as all businesses do try to extract as much money as they can
      from their customers, and unfortunately, whether it be petrol, concrete , and any other supply chain with only a few players, each will follow one another in putting prices up rather than stealing customers. Its like opening a new restaurant or bar, just because you open it doesn’t mean more people go out, you just take business away from others. So only one of two things can happen, the business goes broke or puts up their prices.

      • Ray Miller 4 years ago

        I take the point of ‘extra burden’ on businesses of sudden changes, but I’ve formed a strong opinion that Australian business need to grow up and take responsibility and be good citizens. This includes knowing we urgently need to decarbonize, become very efficient and operate within the bounds of the planetary systems. We have know this for some 50 years now so why should any special consideration be given to those if they had become efficient would be immune to any PF or energy cost changes? When the very small price was added then removed from carbon many resumed their old ways. Yes the workers now sufferer but nothing like what is ahead if lasting and significant changes aren’t made.

    • john 4 years ago

      I have seen first hand the effect of over voltage where the HV when from 11000 Volts to it seems 11500 with the increase in LV from 242-4 to 252-4.
      The cost to enable a PV system to work with such close to maximum voltage from the grid entailed some considerable upgraded wiring, both the aerial house supply and the supply cables to the switchbox.

  3. Ray Miller 4 years ago

    Rob I would further add that while I do agree that the NEM is major failure it is the system which needs dramatic overhaul. The relationship of the stake holders seems to be upside down. The most import stakeholders are the users and the NEM is totally subservient and for the benefit of them. The users and NEM are also a partnership which is totally ignored, added to this are the extremely narrow minded and uneducated engineers and accountants who are not fit for purpose in this current century running the NEM and energy system. It is time to put them to pasture without any bonuses and get some fresh thinking intelligent management.

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