Australians have been experiencing a surge on electricity bills for the past decade. Consumers are aware that the amount reflecting on energy bills are based on total energy consumption.
Also, the market’s energy prices significantly affect energy costs too. But, do we know the factors influencing energy prices?
Wholesale costs of energy
National Electricity Market (NEM) is selling electricity in the wholesale market on states like NSW, QLD, VIC, SA, and ACT. Wholesale costs of energy are set by NEM, and constantly changing depending on supply and demand. The wholesale cost of energy is the largest factor that influences energy market prices.
- Supply – Renewable (wind, solar, biomass) and non-renewable (coal, natural gas, fossil fuel) electricity generators react quickly in response to consumer demand. This results in the fluctuation of energy prices.
- Demand – Consumers demand heating, cooling, lighting and other services related to electricity.
Read about: Wholesale markets
Network cost is important to avoid or minimize blackouts, brownouts or power outage. The network (poles and wires) needs to be built and maintained to meet Australian standards and demands. All energy retailers pay network costs to network companies (distributor) for using their networks to transport gas and electricity.
Part of the consumer’s electricity bill is network costs. These costs around $20 to $25 a month of energy prices.
Environmental and social obligation costs
Some part of energy prices are government charges and covers 7% to 8% of the total bill. Charges include:
- Energy retailer’s obligation
Energy retailer’s obligation is a program that promotes energy efficiency. It is a legal obligation of the energy retailers to deliver energy efficiency measures and guidelines to their customers. Energy retailer’s obligation helps both consumers and the environment. It helps to lower bills by improving energy efficiency and the environment to reduce greenhouse gas emissions.
- Renewable obligation
This is the financial support of retailers for renewable energy sources. Consumers can also support renewable sources by switching to some “green retailers” and pay some amount. Check this list of green retailers in the country in the greenelectricityguide website.
- Feed-in Tariff
All consumers and business owners, with solar panels, are paid for the total electricity exported to the grid. The equivalent amount per kWh may change too.
Supplier operating costs
These are expenditures of the retailers which are related to the operation of their business. It includes costs of sales, advertisements, billing, and metering. It is around 14% to 15% of energy prices.
Goods and Services Tax (GST) is a value-added tax on most goods and services. It is a broad-based tax of 10% for all home and business owners. Further information about GST? Click here. Avoid “bill shock” by knowing these factors affecting energy prices. However, help from experts keeps energy costs as low as possible.
With Econnex, you can check the most competitive energy plans in your area on your most convenient time.