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Comparing electricity plans takes a lot of expert knowledge and understanding. In this guide, we’re going to make you the experts by explaining how the cost of electricity is calculated, which costs you can influence, and of course, most importantly, how you can find a cheaper deal for your home.
Electricity takes a long journey to reach your home, from a power station or renewable source, via a complex network of wires and poles, all the way to your power points. The three key players in this journey are the electricity generator, the distribution networks and the energy retailers. Each of these industries incurs a cost, which contributes to the amount you pay. The role of each of these industries, and how they affect your electricity bills, is explained below.
NSW is powered primarily by coal, with its five coal-fired power stations accounting for approximately 76% of the state’s electricity. The lifespan of a power station is around 50 years, and all five NSW stations are reaching the end of their technical life. Closure dates have been scheduled for each plant between 2023 and 2043, starting in April 2023 with Liddell Power Station, then Vales Point B in 2029, Eraring in 2031, Bayswater in 2035 and Mount Piper in 2043.
This coincides with Australia’s Renewable Energy Target (RET) commitments, which aim to transition the country’s power to renewable sources. AGL’s Liddel site will be converted to a low-carbon industrial energy hub, supporting the RET, increasing energy reliability and stimulating regional economic development.
About 20% of NSW’s electricity is generated through renewable sources, including hydro, solar and wind farms. The state is committed to playing its part in the RET with a $24 billion investment proposed for renewables. This includes 81 solar farms, 15 wind farms and the Snowy 2.0 Stage 2 Main Works.
Once electricity is generated, it is the role of the Australian Energy Market Operator (AEMO) to control the amount of electricity that is dispatched into the National Electricity Market (NEM) and when. Fluctuations in demand and the cost of the primary source affect the cost of the wholesale electricity that is supplied to the NEM, which is, in turn, passed on to customers.
Now the electricity is available from the generators, a complex network of transmission and distribution lines transport it to your home or business. NSW is part of the National Electricity Market (NEM), which is the wholesale market for generators and retailers to trade. The NEM is made up of about 40,000km of transmission lines and cables to transport electricity around the country.
In NSW, the transmission system is owned and operated by TransGrid. Alongside TransGrid, three electricity distributors take the power from the high voltage transmission lines through a low voltage distribution network into your home. Each distributor services a different area.
The cost of running the distribution network is passed on to electricity retailers, who cover the cost with a ‘distribution’ charge on your quarterly electricity bill. The price of your distribution charge will depend on the network area you live in. Consumers who live further away from the generator will incur higher costs to account for the extra difficulty involved in transporting electricity to that area.
The role of the electricity retailer is to manage the customer accounts and payments in order to supply electricity from the distribution network to homes and businesses. Retailers will set the cost of electricity high enough to cover the expenses involved in generating and distributing electricity in your area, plus their own retail costs.
There are over 30 electricity retailers in NSW, each with a range of rates and plans to suit different energy needs in different areas. You can read more about New South Wales’s energy retailers here.
As you’ve just found out, the price you pay on your energy bill is made up of the costs of generating, distributing and selling electricity. Several other factors also affect the cost of electricity, which are discussed below.
The wholesale cost of generating electricity makes up about 26 per cent of an average electricity bill. When the cost of wholesale electricity rises, the price is passed onto consumers so that energy retailers can remain profitable.
There are many reasons that can cause wholesale electricity prices to rise in New South Wales:
Unfortunately, coal prices are volatile. Recent impacts on the market include global distribution issues caused by COVID-19, local distribution issues caused by bushfires and flooding, and a supply shortage caused by sanctions placed on Russian coal following the war in Ukraine.
An example is the closure of Victoria’s Hazelwood Power Station in 2017, which saw wholesale prices rise 85% compared to 2016. In NSW, Origin’s Eraring Power Station, the biggest coal-fired power station in the country, will close in 2025, seven years ahead of schedule, with the remaining four stations also scheduled to close by 2043. These closures pose a risk to the capacity of the network to supply adequate power if enough renewable sources haven’t been established. These shortages could lead to skyrocketing electricity prices.
This congestion leads to increased expenses to maintain and expand the network, which causes a rise in the cost of wholesale electricity.
These changes have caused local network challenges while the system transitions, which in turn leads to increased expenses that are passed on to customers.
Network costs account for up to 46% of your bill and vary depending on the transmission network costs. Customers living in rural areas pay more for distribution than metro customers, due to the increased cost of transporting electricity and maintaining the infrastructure including poles and wires.
In New South Wales, there are three distribution network areas. Customers in each different area pay a different rate for their electricity.
The cheapest distribution network is Ausgrid, powering the Sydney metropolitan area. Customers in the Ausgrid area pay up to $500 less than customers in the most expensive Essential Energy distribution zones of regional and country NSW.
Unfortunately, your distributor costs are determined by the area you live in, so NSW customers cannot shop around for distributors in the same way you can for retailers.
During times of peak electricity consumption, consumers pay more for their electricity usage. In NSW, peak demand periods are between 2 pm and 8 pm on weekdays in summer and 5 pm to 9 pm in winter. In recent years peak demand has grown due to population growth and an increase in technological use.
The amount you pay for your on-peak and off-peak electricity usage depends on the rate agreed in your plan. There are three types of Time of Use (ToU) tariffs:
The DMO is part of the Federal Government’s national energy legislation and rules that regulate the electricity industry. It was introduced in 2018, after a report by the ACCC found that the electricity market was disadvantageous to customers, with plans that were too complicated and too difficult to compare.
The same report found that loyal customers were being exploited with non-discounted standing offers that were significantly more expensive than other plans, leaving them hundreds of dollars out of pocket each year.
The DMO is an electricity reference price that is set by the Australian Energy Regulator (AER), rather than by retailers. It addresses both of the issues in order to protect residential and small business customers from price gouging and unaffordable energy prices. Retailers are now required to show all of their discounted plans as a percentage of the DMO price, to allow customers to clearly and fairly compare all the plans on the market. The DMO is also the maximum price that retailers can charge for customers on their standing offer.
The DMO price is reviewed every year, and an increase in the DMO will lead to an increase in your electricity bill.
You can read all about the DMO here.
As you can see, there are a lot of variables that go into the price you pay for your energy bill. A typical bill from your retailer will be 46% network charges, 26% wholesale generation, 18% retail, 7% ‘other costs’ such as renewable energy surcharges and 3% metering.
For transparency, you will see four different charges on your bill. Each of these charges is explained below.
Now that you know all the aspects of your electricity bill that you can’t control, including the cost of generating and distributing power to your home, we can move on to the parts that you can.
Electricity retailers in NSW offer a variety of discounted rates and special offers that can lead to hundreds of dollars back in your pocket each year. Read on to find out how you can save on your bills.
In NSW, if you aren’t actively engaged in the electricity market, then you are probably paying the price set by the DMO. There are many ways to access cheaper rates and discounts from your retailer and save hundreds of dollars in the process.
Although each retailer in NSW is capped by the DMO, they have free reign to offer discounted rates below the DMO to attract customers to their service. This means there are significant savings to be found if you shop around.
As well as discounted rates, the market offers often include additional benefits such as guaranteed discounts, off-peak rates or high solar feed-in tariffs. Some plans include bonuses for special-use items, such as electric vehicles or Virtual Power Plants (VPPs).
Your unique needs and circumstances will determine which market offer is the best value for your home or business. But stay alert! Many offers are for a limited time or have certain conditions attached, so make sure you find one offering true value in the long term.
More savings can be accessed by finding a plan that rewards you for things like paying on time, using paperless bills and direct debit or bundling other services. These rewards are often in the form of a one-off credit of up or could be a discount on each quarterly bill.
Comparing market offers, discounts and credits can quickly become a bit overwhelming. To protect consumers from being misled by the chaos, retailers in NSW are now required to show their discounted plans as a percentage of the DMO to make it easier to compare.
Once you’ve found a plan that suits your needs, make sure you understand the terms and conditions of your offer. Most offers will expire after 12 months, at which point you will automatically be transferred to the DMO unless you sign up for a new market offer. Comparing your bill every 12 months is the only way to make sure you continue to get the best deal on the market.
With so much competition in the market, retailers are going all out to win your business. Some of the common incentives and rewards you will find include sign-up credits and offers from partner companies included in your plan. For example, Alinta Energy has a plan specifically for sports lovers, with a free 12-month Kayo subscription included, or for foodies, 1st Energy offers a plan that includes Menulog vouchers.
You will also find a range of rewards shops available with companies, including Origin, Alinta and AGL. These work by giving you points every time you pay your bill, which can be exchanged in the rewards shops for goods and services from their partners including movie vouchers, theme park tickets, and travel and dining experiences.
In NSW there are government concessions and rebates available for families, seniors and low-income households to assist with the cost of electricity and gas. These rebates are in addition to any discounts or offers you receive from your retailer. To find out if you are eligible or for more information about your entitlements, visit Service NSW.
Below is a summary of a couple of our preferred electricity retailers for New South Wales. You can read our full list of retailers here so you can compare and save.
EnergyAustralia services more than 1.7 million customers, making them one of Australia’s ‘Big Three’ energy retailers. They offer electricity, gas and NBN to customers in New South Wale and nationwide.
EnergyAustralia has won first prize in the Global Review Awards Digital Customer Experience category for six years running, recognising their exceptional customer service and innovative customer experience.
You can tailor an EnergyAustralia plan to meet your needs, with options including no lock-in contracts and fixed-rate plans for peace of mind.
Our favourite EnergyAustralia plan for NSW residents is the Total Plan. This electricity and gas bundle gives you a 20% discount on the DMO price for electricity and 16% for gas, guaranteed for 12 months. Plus there are no exit fees and the plan is 100% carbon neutral. There is an additional $50 credit available for signing up online, and if you also bundle your NBN plan, you can save another $10 per month.
To switch your plan to EnergyAustralia call CheapBills on 1300 786 045 or enter your details here.
Alinta Energy is an Australian power generator and retailer, servicing over 1 million customers. With their head office in Sydney and customer experience hub in the Latrobe Valley, they are a great option for customers looking for a local touch.
Alinta Energy’s forward-thinking mission is to keep energy affordable and sustainable. As well as good rates, you can reap rewards by converting your bills into Qantas points or using their Rewards Shop for a wide range of discounts on movies, theme parks, shopping and electronics.
Alinta Energy’s HomeDeal Energy plan is our favourite pick for NSW customers. Available to new customers, this plan offers no lock-in contracts or exit fees, flexible payment options, no credit card fees and access to the rewards shop. This bundle deal gives you a huge 25% discount on the DMO, one of the cheapest rates on the market. To switch your plan to Alinta Energy visit www.alintaenergy.com.au/nsw/
To browse more retailers available in NSW, and find the best one for you, see our full list here.
There are a few important steps to take when switching electricity providers. Firstly, you need to assess your current financial situation so that you are aware of your budget. Consider everything you are financially committed to such as home loans, credit cards, life insurance, health insurance and any other financial products.
You also need to review and understand your energy usage habits to find a deal that is suited to your needs. This includes what time of day you use the most power, the size of your household and if you have special energy needs such as an electric vehicle or swimming pool.
Our comparison service can take you through these steps and help you compare electricity plans to find the best deal for your unique requirements.
The easiest way to make the switch is to use a comparison tool like CheapBills. With one easy phone call, we can help you understand all the variables involved in finding the best plan. Our team of experts will take the time to understand your energy needs and find you the cheapest deal from our panel of providers, saving you hours of phone calls and internet research.
Once we have matched you with a plan you are happy with, we will also take care of the switch for you, so all you have to do is sit back and start saving!
Call CheapBills on 1300 786 045 or enter your details here.