Customers who want to minimise their power bills often find it hard to do so without sacrificing convenience or comfort. This is because the only way to reduce power bills under the flat, consumption-based pricing familiar to most Tasmanians is to use less electricity.
As the electricity network provider in Tasmania, households and businesses rely on us to provide a safe, reliable supply of power. But instead of billing households and businesses directly for using our network we charge energy retailers, who then pass our network charges on to their customers through their power bills.
The charges relating to your property that we send to your energy retailer will vary according to how much electricity you use. Modernising pricing will also see you being charged for when you use electricity.
The need for change
Currently, most customers pay a flat rate for their electricity and their use of the network. Power bills reflect the amount of electricity used between billing periods. The challenge with this is the cost of providing the electricity network isn’t driven so much by the amount of power customers use over time, but by the network capacity needed to meet the generally short peaks in usage that typically occur on cold weekday mornings and evenings.
Charging the same rate for the use of the electricity network 24/7 means customers who use power outside of periods of high demand aren’t rewarded for doing so. And it means some customers who use less power from the network (because they have solar panels, for example) pay less towards the cost of the network. This is despite placing the same demands on the network during the morning and afternoon peaks as customers who don’t have solar panels. It also means (for most customers) the only way to save money on power bills is to use less power. Unfortunately for some customers, that means doing things like not turning on a heater and going cold.
We all deserve the security and reliability the electricity network provides, regardless of how much power we use. But there needs to be a better, fairer way of charging households and small businesses for their use of the network.
For the time being, customers probably won’t see any change. The network charges we send to energy retailers will continue as they are and power bills will reflect the same retail prices currently offered. For most customers, that means continuing to pay a flat rate for the electricity they use. However, some customers will – through their energy retailer – choose to switch to a price (called a tariff in the energy industry) that not only reflects how much electricity they use, but when they use it. This is known as time-of-use pricing.
Over time, we plan to progressively transition more customers from flat network tariffs to fairer, more cost-reflective network tariffs. One of the triggers for reassigning customers to a modern, time-of-use network tariff will be the installation of a smart meter that has the ability to record the information needed to bill customers on a time-of-use basis.
We’re also adjusting the prices of a number of our long-standing network tariffs, which don’t appropriately reflect the costs associated with the demands customers on those tariffs are making on the network. For example, we’ve already realigned the network tariffs for most small businesses with the network prices applied to residential properties, because their connections and consumption are similar. And we’re gradually lifting the cost of our uncontrolled low voltage heating price (TAS41) so it will be similar to the residential low voltage general price (TAS31). But this is a gradual process and we’re not going to abolish such a widely used tariff and force customers onto another.
Over the next 10 years or so, we expect time-of-use network charges to become the norm (as will time-of-use prices from your energy retailer). Once that’s happened, we’ll reassign the remaining customers still on flat network tariffs to a time-of-use network tariff and start billing their energy retailer on that basis. It’ll then be up to energy retailers whether they pass the time-of-use network prices on to those customers or not.
What are the benefits of time-of-use pricing?
Time-of-use prices for the use of the electricity network will help customers recognise and pay for the value the network provides to them. Time-of-use prices will also help customers better understand the costs and benefits of solar panels, battery storage, electric vehicles and energy efficiency measures when making investment and energy use decisions.
Many customers with solar panels are already switching from the combination of a separate tariff for general power and lighting plus another for home heating and/or hot water, and opting for a single time-of-use tariff. They’re doing this because it enables them to use the power they generate for any purpose – including heating and hot water – not just general power and lighting.
For customers looking to minimise their electricity costs, time-of-use network prices offer the chance to reduce their power bills by shifting some of their consumption into cheaper off-peak periods – potentially without any loss of comfort or convenience – rather than just using less electricity.
Over the longer term, time-of-use pricing may reduce network prices for all customers by reducing the cost of the network. Lower network prices at off-peak times will reward people for using less electricity at peak times and encourage greater use in periods where there’s spare network capacity. By using existing capacity better, we can deliver more electricity without spending money to add more network capacity to cope with growing peaks in demand. In this way, time of use network pricing can provide better outcomes for customers in the both the short and longer term.
The changes to our network prices are intended to make network pricing fairer and more closely linked to our customers’ use of the electricity network, and the value the network provides to each customer.
Our pricing reform and pricing strategies have also been developed in consultation with key community stakeholders through our Pricing Reform Working Group. The purpose of the group is to provide a forum where members can share their views and provide feedback in relation to network pricing. The group includes electricity retailers, customer advocates, representatives of the business community and energy advisors.
Our Tariff Structure Statement and the accompanying Tariff Structure Explanatory Statement set out the network charges that will be offered between 1 July 2019 to 30 June 2024 and explain how we designed the network tariffs available to customers and how we price them: