5 Reasons Why Supply Charges On Electricity Bills Must Go!

pylons

Supply charges have no place in a 21st Century electricity network.

Do you know what I hate? What I truly despise? What causes black bile to bubble up from the deepest, darkest depths of my soul? Supply charges on electricity bills.

What Are Supply Charges?

On my electricity bill AGL calls them supply charges. On yours they may be called something else, such as  “service to property charge”.  Which is perhaps more appropriate, as whenever I look at my bill I feel as though I have been thoroughly serviced.

supply charges

This is what the supply charges look like on my bill.

But whatever name they go by, they are the fixed, daily charges we have to pay for our grid connection, whether we use any grid electricity or not.

You can turn your power off at the mains and go on a holiday, or if you are in a contemplative mood just sit in the dark. But you will still have to pay your daily supply charge.

Here in South Australia I pay 63.8 cents a day, or $233 a year. While that is a fairly typical amount, there are still a lot of people who have to pay considerably more. For example, in Queensland my parents pay $1.17 a day or $429 a year, and apparently there are some households in Australia that pay over $550 a year in supply charges. But no matter how high or even how low they are, supply charges need to go, and I will give you five reasons why.

Reason #1: Supply Charges Are All About Profit Maximization

There is one reason and one reason only why we have supply charges on our electricity bills, and that is profit maximization. In other words it is to increase the revenue and profits of the electricity companies.

fat cat

Supply charges increase electricity companies’ profits

The way it works is this. Adding a supply charge as a large proportion of the bill enables the cost per kilowatt-hour to be decreased. Because this cost is lower, people have less incentive to conserve electricity, less incentive to invest in energy efficiency measures such as insulation or energy-saving appliances, and less incentive to install rooftop solar. In fact, the increase in Queensland’s supply charge last year appears specifically aimed at discouraging the uptake of rooftop solar in that state.

So supply charges maximize profits by causing people to use more electricity than they would without them, which allows your electricity company to sell more electricity, and make more money.

Reason #2: Supply Charges Kill People

smokestacks

Supply charges disincentivise energy efficiency and increase pollution.

Now if electricity generation was harmless and only involved the occasional handful of pixie dust and rendering down the odd leprechaun (the greenest of all fuels), then profit maximization by the grid would not be a giant, bloodstained, horrific, murderous problem. But that’s not the case because supply charges kill people.

In Australia 87% of electricity is still generated from burning coal and that kills. It kills directly from the effects of particulates, carcinogens, and heavy metals released into the atmosphere, and the ground level ozone it creates.  And it kills people indirectly through global warming.

And our emissions are higher than they would be if there were no supply charges.

Reason #3: Supply Charges Transfer Money From The Poor To The Rich

Let’s say you are rich. You have a big house in Queensland with multiple air conditioners, a spa, a swimming pool, and you never, ever take down your Christmas lights. If you use 50 kilowatt-hours a day and are on the most common Queensland residential tariff, then including the supply charge, that electricity is going to cost you 24.4 cents a kilowatt-hour. That’s not exactly cheap, but what do you care? You’re rich!

Now let’s instead say you are a Queensland couple living in poverty. Because you are so poor you are very careful with your electricity use. You don’t use air conditioning or electric heating, you microwave to avoid using the electric oven, and you switch off your hot water system in summer. As a result of all this scrimping and saving you only use 3 kilowatt-hours a day. If you are on the same tariff as that lucky bastard in the mansion across the road with the Christmas lights, then including the supply charge, your electricity will cost you 57.8 cents a kilowatt-hour. That’s more than twice as much as the energy wasting millionaire.

So low income households end up paying much more for electricity than high income households because of supply charges. If there were no supply charges the millionaire would pay slightly more and the couple in poverty would pay a lot less.

2016-05-06_16-42-35

Supply charges penalise the frugal (and the poor).

Reason #4: Supply Charges Make Electricity Bills Confusing

I don’t understand my electricity bill.  I really don’t.  And if I can’t understand it, then a large portion of the population is in big trouble.

Now while I’m no mathematical genius, all my ex-wives did treat me as a kind of human calculator on account of my ability to do arithmetic in my head.  They all agreed it was the only thing I was good for.  Apart from in the bedroom of course.  I can sleep like a champion.

The calculation of my bill includes:

  • cost per kilowatt-hour,
  • supply charges,
  • various discounts,
  • seasonal variations in tariffs

But unsurprisingly neglects to tell me whether or not I am out of contract.

The only way I can work out how much my electricity costs is to look at the total and divide it by the number of kilowatt-hours I’ve used.  On my latest electricity bill it came to 43 cents a kilowatt-hour.  Ouch!

Our electricity bills are quite intentionally confusing.  It not only makes is really hard to tell which retailer will give us the best deal, but we can’t cant tell which of a retailer’s multiple plans is best for us.

Competition in the electricity market is supposed to bring down the cost of their services.  But clearly competition can’t work if most people can’t tell who has the best plan.

However if we eliminate supply charges and put all discounts up front, then people will be able to pick the best plan for them.  It will be simple, because you simply look for the cheapest cost per kilowatt-hour.

In the meantime you can use SolarQuotes’ electricity price comparison tool to try to find a better deal. It lets you put in your previous bill’s details and predicts how much other retailers would have charged for the same usage. (It includes exported solar too.)

2016-05-06_17-43-52

Use our comparison tool to find a retailer with lower supply charges.

Reason #5: Supply Charges Encourage People To Quit The Grid With Batteries

battery

Supply charges encourage people to ditch the grid.

Currently it does not make economic sense for people to go off-grid. It is not possible to save money or even break even at the moment. But with declining costs of solar battery storage, the day it will pay for itself is coming and once that day does arrive then Australians could start leaving the grid in droves, causing it to become a tattered, threadbare, shadow of its former self, and the electricity industry as we know it will be utterly destroyed.

This horrifying scenario could certainly come to pass, unless of course we make one small change. And that change is the elimination of supply charges. If there are no supply charges then people have no economic incentive to leave the grid. It doesn’t matter if they have a battery system, with no supply charges they lose nothing by staying connected. They have no reason not to remain and continue to send any surplus solar electricity they generate into the grid and use grid electricity if they need to. That grid power might not be cheap, but it will be cheaper than using a generator.

Without supply charges the grid can gradually adapt to home and business energy storage. With supply charges we may see a disastrous stampede away from the grid.

Supply Charges Are Evil And They Need To Go

Supply charges only exist to maximize the profits of a natural monopoly, they act to transfer wealth from the poor to the rich, they make make our electricity bills confusing, they leave the grid vulnerable to disruption from low cost home and business energy storage, and they kill people. They truly are evil and need to go. Your bill should be proportional to the amount of electricity you consume from the grid.

Supply charges have done well to hide the harm they cause from general awareness so far, but I intend to see them flushed out into the light and struck down for the good of the planet.

About Ronald Brakels

Many years ago now, Ronald Brakels was born in Toowoomba. He first rose to international prominence when his township took up a collection to send him to Japan, which was the furthest they could manage with the money they raised. He became passionately interested in environmental matters upon his return to Australia when the local Mayor met him at the airport and explained it was far too dangerous for him to return to Toowoomba on account of climate change and mutant attack goats. Ronald then moved to a property in the Adelaide Hills where he now lives with his horse, Tonto 23.

Comments

  1. Quentin Clark says

    An excellent post that helps to better see the costs and their apportionment within the population. However I don’t see government energy suppliers changing soon as they use it to compete with the private sector and maintain their poles and wires. The private sector suppliers don’t have much control as the poles and wires are often owned by different companies who have their own agendas with regard profitability.

    • Ronald Brakels says

      Thanks! And yes, I don’t expect to see any change in the short term, but if a significant number of people start dropping off grid using battery storage in the future, that is likely to shake things up.

      • Jeremy Lawrence says

        Wouldn’t this mean that batteries are good & green (i.e. opposite to what you have written on other blog posts about batteries) because they will help accelerate pricing reform (dropping fixed daily charges)?

        • Ronald Brakels says

          Jeremy, there certainly could be positive externalities resulting from the uptake of home battery storage such as accelerating reform that eliminates supply charges. But there could also be negative externalities as well. For example, it could result in grid demand being higher in the middle of the day than it would otherwise be as people store solar energy instead of sending it into the grid. And this could enable coal power stations to remain economically viable longer than they otherwise would. So if we are going to consider externalities we would have to weigh up the good and bad and try to work out which comes out ahead. And that is difficult to do because it’s hard to know what will actually happen.

          For example, it’s possible that in a year we will have a government that seriously cares about the fact that climate change kills people and they will eliminate supply charges regardless of how much home storage there is. Or possibly gentailers (eg. Origin, AGL) will start eliminating supply charges now in an attempt to head off home energy storage.

          But regardless of what positive effects may result from installing energy storage now, it seems clear to me that if you have money to spend and your goal is to help the environment, you are much better off putting a solar system on grandma’s roof than installing batteries at this point in time. For one thing, to really get the electricity sector’s attention you’d have to go off-grid and that is bloody expensive. And also, you only have the possibility that positive effects will outweigh the carbon footprint of installing batteries and the loss of clean energy to charge/discharge inefficiencies.

          But if you put solar on grandma’s roof it will definitely cut fossil fuel use. It will hurt coal more than other forms of generation and coal is the most polluting and greenhouse gas intensive form of generation we have. Your grandmother will save money, she will have a higher standard of living as a result, and her cat will receive a larger inheritance.

    • Lee McCurtayne says

      The government is guilty of “Cartel behaviour”
      Usage over the last 3 yrs has gone down by 10%, so much for suppy and demand .
      The price has been artificially kept high for “stealth G.ST.” much in the same vein as petrol prices.
      Two power stations have gone offline with no plans for replacement, their costs are dropping but not being reflected in the servive charges.

  2. I am not sure that by simply disconnecting from the grid you can avoid the supply charges. I thought it was the same as water you pay a minimum charge whether you are connected or not [Supply, Storm Water, Grey or Sewerage].

    As for solar I believe that are two numbers that determine the viability of solar and storage. They are the payback in years and return on investment [ROI].

    Even with supply charges my ROI with a Enphase 5.75 kW system [Cairns] averages about 16% p.a. depending on the seasonality which of course is Tax Free.

    So if the tax free ROI on Enphase batteries over the next 10 years is a percentage greater than that set by the RBA then in my view it would be a pretty good investment.

    So my kWH cost is 0.25c so if I was to save 2 kWH per day then that would be 0.50c annualised 182.50 or Tax Free on $2,000 investment [1.2 kWH Enphase System] 9.125%. Now the question is where can I get a no risk and tax free ‘Cash Investment’ of 9.125% on $2,000.

    • “…the same as water you pay a minimum charge whether you are connected or not …”

      Bought our rural property 25 years ago. No water was supplied. A decade later water went in past our driveway. $6K to connect said the WC. “Nope!” we responded. We’d put in five rainwater tanks… and were completely self-sufficient.

      Hasn’t stopped the b*stards charging us water rates annually!

      * Large Australian flightless birds… .

      • Ozbloke38 says

        That should be bloody illegal, I really hate this country, people don’t even stand up and do anything about it either, they rather just take it up the arse and pay for it.

    • Ronald Brakels says

      Anthony, I’ve never had to do this myself, but my understanding is if you call up your electricity retailer and tell them you have to disconnect because you can’t pay the bill, you don’t get any charges for the period you don’t have electricity connected. Sure, maybe they’d like to be able to charge you, but they probably recognize that you can’t get blood from a stone. Or at least don’t want the bad PR that would come from crushing stones to get the last few drops of blood out of them.

      Of course, nowadays there are people who might drop off-grid not because they can’t afford to pay but because they have installed a battery storage system, and no doubt there are people hard at work figuring how to charge them for the power lines that run past their houses. And those people may not care if a few poor old rocks who can’t afford to pay get crushed in the process.

    • Jack Wallace says

      Anthony:- “. Now the question is where can I get a no risk and tax free ‘Cash Investment’ of 9.125% on $2,000.”

      Lotsa places! I do rather better than that on the stock-market and ~ if I feel energetic enough to bother ~ at the race-track.

      ….oh: and the best way to avoid the taxman is not to tell him your business..

      But I agree that there’re probably plans in the works to charge people for power-lines going past. The best way to prevent politically-inspired impositions is the STOP electing bloody politicians!!
      ………and the best way to avoid politicians imposing themselves unto you is to STOP paying taxes.

      People sometimes remind me of the sadist and the masochist who got married….

      • Colin Spencer says

        The politicians are not your enemy. They will just about crawl over broken glass to keep you voting for them. Remember: Politicians do not represent the administrative government. They represent you, the voter. You are their constituent, and their first loyalty is to you. Otherwise they are goners next time around. Without Pollies, you would be at the mercy of administrative dictators. Think about it. Go to your local MPs office for a cup of coffee or tea one day and get to know him, or her.

      • In my comment I forgot to include an exclusion for gamblers. Gosh thinks are not looking good in NSW for Dog Owners but a lot brighter for Rabbits.

  3. I think we see them as network charges here in Victoria. The electricity retailer only sells the electricity and is not responsible for the network. SP Ausnet owns the network and delivery assets, so it appears that they are being rewarded for their capital investment. Probably double-dipping as well, I would assume, because the network owners or operators would be paid for kilowatts delivered and sold by the retailers. Or, are they are being paid by the retailer, and the retailer is then collecting the network charges from the consumer? My next move will be to an unserviced block a bit further out in the bush, and I will put solar and storage into a new building, and will not be bringing poles and wires in from the network.

    • Colin Spencer says

      More than 50% of the final price of any given product will normally be attributed to distribution, marketing and administration costs. If Solar was really competitive with good old brown coal power, you could eliminate distribution costs and your solar would have to have an all up cost of around 12 cents per kw/hr

  4. David Griffiths says

    Not a very logical argument I’m afraid. Supply charges are perfectly reasonable. It costs the electricity companies money to provide and maintain the network infrastructure and the connection to your house and metering equipment whether you use a little electricity or a lot. So it makes senses to have a ‘user pays’ arrangement where you pay to have the connection and then pay for your usage.
    I believe that electricity is not like water and you only pay if you are actually connected (here in NSW anyway).

    • Colin Spencer says

      The logic of the matter is that more than one company is involved with supply of electricity to your premises. One that retails the energy, and another that supplies the infrastructure. Charges from the network owner are apparently passed on as a separate item on your invoice. If you were to complain about the size of your electricity bill at any time, the first thing you would ask for is details of what comprises the charges. This way, you already know. If either the energy cost or the network usage cost seem excessive, you have instant access to the component that causes the most doubt. We got used to the old SEC charging an all inclusive price back in the “good old days” but there is a whole new system in place now. You don’t have complete privatisation of the network in NSW just yet, do you? They keep talking about it.

    • Actually I disagree on your assumptions.
      Supply chargers are like tipping.
      When you go on an American cruise ship you get a price for your trip and then are politely told that you owe another few hundred in tips which will be distributed to the poor workers on the ship.
      In the case of electricity providers the cost of connection to new building sites is built into the cost of the land that you buy.the developer pays all those one offs and then you pay it as it is included in the price of your land so is the sewer and water connection and the curb and guttering you don’t get this stuff for free.
      As for poles and wires user pays no? why not ? the more you use the more you should pay for maintainance not the other way round.
      The cost of KW hours should reflect the cost of the power to the supplier which is last time I checked 5 cents per KW from the power station.
      Now how can that be ?
      The supplier chargers 25 cents for main power and 8 cents a KWH for water heating.
      Oh yes that means at 8 cents the profit margin is substantial so at 25 cents it is enormous and I for one will be against tipping on my bill but as we live on an American cruise ship I guess it is compulsory..

      • David Griffiths says

        Your over simplification of the costs is amazing and equating it to tipping is a long shot. The wholesale cost of the power generation is only part of the cost of supplying electricity. What about the cost of the transmission network, the cost of the reticulation network including poles, wires and sub stations. All of these have to be installed, monitored and then maintained. When a storm rolls through (a not irregular event in my parts), who pays for all the linesmen that mobilise to fix the damage (at no direct cost to the users)? Then there are the retail costs, marketing, sales, billing, bad debts. And of course the suppliers would also like to make a profit – call it ROI. As for the cheap rates for Off Peak, this is exactly what many businesses do, offer a discount to use available capacity during quiet times.

        • Jack Wallace says

          All very good reasons for getting off the grid altogether.
          ….and then FIGHT any attempt to charge a price for ‘service availability’.

          Take an example from the toll-road fiasco in Melbourne about (?) years ago.
          All such bullshit CAN be stopped if only people are willing to make a fight of it.

          And it’s never about the ‘price’, but about the freedom of the individual to opt out.

    • Jeremy Lawrence says

      David, the argument appears logical to me. Yes, the grid has to be paid for. The question is how best to pay for it. What is wrong with a combination of volumetric charges (c/kWh) and capacity charges (c/kW)? If capacity charges were introduced and fixed daily charges were eliminated, this would both (1) pay for the grid, and (2) incentivise solar + storage.

  5. MAlmeida says

    I’m portuguese and living in Portugal, but always read your great posts.
    Here our “supply charges” depend on the instant power you can draw from the grid. The more you want to draw the more you pay for your supply charges (there are various levels) and you’ll have a maximum demand meter installed. This, kind of makes rich people paying more.
    Also, poor people have special tariffs (with the controversy of defining who is poor).
    The national electricity authority has an online comparison tool with all electricity sellers, where you input the supply charge level you want, single or time of use tariff, average month consumption and how you want to be billed (post or e-mail; period – monthly or every two months; way of payment – if you pay with money or if the power company can directly debit your bank account; if you are willing to pay additional services – sometimes you pay less but have to contract something like an insurance policy with them), because companies have discounts accordingly.

    • Ronald Brakels says

      Obrigado pelo seu contributo.

    • Jeremy Lawrence says

      Thanks for the information – can you post a link to a scan of a bill, showing your supply charges? Or, a link to a website that shows how you can select between various levels of power?

  6. john nielsen says

    I am not a lawyer, but I believe the government owned grid costs passing your property could be charged to you whether you are connected or not, but don’t believe that a private owned company could charge you, that is why I would like the grid sold off. I sometimes drive past the pizza shop on the way home, I don’t see why I should pay the pizza shop (a privately owned operation) to drive past their door.
    john nielsen, Silkwood

    • We have a government run (contracted out) postal service which passes our gate each weekday but only actual deliveries are paid for (in this case by the sender – I guess someone has to). Please don’t start suggesting that any government service passing my property deserves a charge on the property. A long long time ago not even the Post-master Generals Department had the gall to charge a licence fee for those without a radio despite the fact that the ABC broadcast coverage was completely indiscriminate.

      As for the pizza shop I would have thought that it more a case of them trying to charge you for passing your door every Friday night when they make there regular run to your neighbour’s place.

      • Jack Wallace says

        Confucius (or somebody) say:- If you want to be sure of winning a football match turn up at the ground with a cricket bat.

    • Jack Wallace says

      ….Particularly when they deliver the pizza for free, hey John?

  7. Dylanpete says

    Hi Ronald,
    On top of those unfair supply charges here in QLD we also get a)the PV meter reading charges and b) upfront meteri installation charges in case of installation of a new meter, particularly necessary in case of installing a PV system >5 kW!
    http://us5.campaign-archive2.com/?u=69932807d57ffb9c816b93a84&id=07ea27bd28&e=fdcd3ae7fc

    Early 2015 Energex installed new polyphase meters at no costs and now if installing a PV system of >5kW intending to also enable export part of your energy produced you will need a 3 phase meter and you’ll pay $564.57 for three phase plus GST. Overmore they’ll charge you PV meter reading charges…

    On its website Energex has the guts to claims that meter installation costs were previously included in their tariffs…but now they already cream you off with extra “supply charges”. How could they possibly supply anyone without a meter?

    • Ronald Brakels says

      I don’t know if they physically read new meters where you are, Dylanpete, but if they don’t then you are being charged about $70 a year for a few lines of code to work out your electricity bill. The only justification for I can think of for that is if it is getting really expensive to find replacement thermionic valves for their vacuum tube computer.

      • ramjetski says

        I complained about this meter reading charge too and all I got was tripe about competition policy and how it costs whoever to pay for a meter that I didn’t want as I liked watching the older one go into reverse. Over 7 cents a day to press a button on a meter four times a year is just plain robbery.

  8. john nielsen says

    Hi Ronald,
    Thanks for the article.
    RF, you are absolutely correct. You put it much better than I could dream off doing.
    The telecommunication act introduced a decade ago allows any telecommunication company to hang cables, or dig a trench across your property without an easement.
    I believe that the power companies will be allowed to charge for wires past my property,,, just a piece of legislation. I was wrong in thinking that a private power company could not charge for wires past my property, then I remembered the changed telecommunication legislation.
    We need schools, road, hospitals etc., but I don’t know if we need submarines and US air fighter planes. The Indonesians bought Russian planes capable of flying rings around those we are buying and half the cost.
    Our government is borrowing the money to pay for the interest on the loans we have. that is why we are selling everything possible. We used to sell what was in the hole in the ground, now we are selling also the hole. I feel like Ronald expressed: thoroughly serviced.
    John Nielsen, Silkwood

  9. ramjetski says

    For what it is worth, here is what I have received from Origin Energy in regard to their proposal to charge customers $1.75 for a paper bill.

    ——-

    Hello Rodney
    Thank you for your reply.

    I have acknowledged your concerns regarding the paper bill fee and I have discussed this with my manager and I am happy confirm that Origin will not be charging you the fee for future accounts.

    Kind regards,
    Chantal
    Customer Liaison

    —–Original Message—–
    From: rhondarodney
    Sent: Friday, 22 April 2016 7:45 PM
    To: Enquiry – Origin Energy
    Subject: Re: General enquiries 475 – Make a complaint – Electricity, Natural Gas – Rodney

    The cost of printing and posting paper bills to customers is a tax deduction for Origin. There is no way known that Origin can justify a
    $1.75 charge for sending out paper bills. It is purely profit driven and nothing else. You have not answered any of my questions as to what would happen if an electronic bill was missed for what ever reason. You have not addressed the issue that I have raised as to what would happen if I could not get friends to check my mailbox and pay any bills if I was away from home for whatever reason. I am giving serious consideration to dumping Origin as my electricity supplier at the end of my contract. Not only does Origin rob me by only paying 6 cents per kilowatt hour feed in tariff and then on selling it for about 23 cents, but Origin charges me to read a solar power meter that I didn’t want and now Origin wants to charge me for receiving a paper bill that is a normal cost of business and is a tax deduction for the company. If I have to do all this, then it may not be with Origin. I reckon that I might be able to get a better deal elsewhere. Bring this to the attention of Rebekah O’Flaherty, general manager of Origin’s retail division. I’m not happy and I am now prepared to do something about if. Rod Reeves

    ——–

    On 22-Apr-16 11:25 AM, Enquiry – Origin Energy wrote:
    Dear Rodney,
    I can see from your email that you have some concerns regarding the new paper bill fee and I thank you for taking the time to discuss it with us.

    My name is Chantal and I will be assisting with your enquiry.

    Rodney, the paper bill fee has been introduced to help cover the increasing cost of printing and postage of paper bills. There are some customers that will be exempt from this charge however none of the exemptions currently apply to you.

    I can see that you currently have an email address Rodney and if you are happy to have your email address added to your account and are willing to receive your bills via email then this fee will obviously not be charged to you.

    If you are happy to do this then please email me confirmation and I will update your account accordingly. Alternatively, you can contact our call centre on 13 24 61 and speak to one of our friendly staff and they will be able to make the changes for you.

    I hope that this information has been helpful

    Kind regards
    Chantal
    Customer Liaison

    ——

    Below are the contents of a form submission from https://products.originenergy.com.au/475/General-enquiries:

    I am less than impressed by Origin Energy’s cost shifting onto its customers. First you did the gas side of the business and now you are doing the electricity side as far as billing is concerned. Costs of billing is a normal business cost and should be part of the business structure. Charging customers for receiving a paper bill is just another form of scumbaggery that I have come to expect from Origin Energy. You not only charge me to read a solar meter (takes 10 seconds to press 2 buttons) but now you want me to help improve the profit margin by lowering your costs! Corporate robbery is all that I can say about this. I would like to know what would happen in the future if I didn’t have a computer, was absent from home for an extended period of time or my ISP malfunctioned and I never received an electronic billing notice? I would no longer be able to ask friends or family to check my letter box and pay my bills, as there would be a bill to pay. This move by Origin should be seen for what it is and not by the bullshit excuses given to customers in the facile letter that accompanied the last bill. I will not do anything about switching until I get some sort of answer to my questions. Thanks. Rod Reeves. p.s I am sure that Australia Post is really happy about this too.

    • Dylanpete says

      Rodney, thanks for publicly exposing this scumbaggery and fighting back to achieve a fair treatment!

    • From my experience paper based billing is not limited to but involves the cost of the internal administration [wages and on costs], producing the billing cycle production tape, courier costs, the cost of printing, sorting by postcode and envelope insertion, the cost of the envelope the cost of the postage the administration of bills returned unanswered due to incorrect addressing etc.

      I think you might find that the cost of processing a paper based bill is probably set to an amount to encourage subscribers to move to a more cost effective method for the supplier [as an email attachment].

      I think you need to consider all the costs involved in processing paper based accounts because there is no such thing as a free lunch.

      • Jack Wallace says

        ?????there is no such thing as a free lunch????

        Note that comment was coined by a politician ~ sans any qualifications in economics.
        …….Or anything else other than getting free lunches! lol

      • hang on ,theres now the ‘non direct debit fee’

  10. I had a laugh at your figures. I am just outside metro Perth. My last bill was $82.95, whilst my net usage was only 89Kw (I have a badly shaded 3Kw solar w mini inverters). Not quite $1 per KwH, but knocking at the door.

    In WA we get 7c per KwH we export, 26c for imports. If they cannot make a profit on that, they are mentally deficient.

    The supply charge of nearly $1 per day is also a complete ripoff.

    Incidentally, the cost of wires etc is called a sunk cost in economics (just like roads, etc) – there is no way the supply charge should be used to cover that…

    Roll on an affordable battery pack and an extra 1.5Kw of panels.

  11. Jack Wallace says

    Just re-reading the headers, young Finn. Dunno what you’ve been smoking, but suggest you do it more: it suits you!
    ……..though I still disagree with you about the financial viability/benefit of going off-grid ~ last week….or ever since battery-technology/price got down to present levels. (eg $2 per ah for batteries that can last over about 4 years.)
    Service charges in Gippsland, Vic. are CURRENTLY pushing $600 per year = $3000 in 5 years (and rising) = 1500ah (@12-volts) of self-storage = (roughly) 12 kw per day @ 60% DOD.

    I get by comfortably enough on 2.5 kwperday, and friends of mine (2 adults2smallkids) manage on a little over 7 kwperday.
    (plus a minimal number of $ for a small back-up generator)

  12. john nielsen says

    Hi Ronald,
    I believe many PV owners could go off grid using lead gel batteries. My cost to have a stand alone system: $5,500 for 36 kWh battery bank, $1,000 inverter (4000Watt continuous), $230 relay driver, relays, contactors plus a few bits to make the system fully automatic: about $100. We have a household of 6 people and don’t need the grid at all, except air con time of the year, when we have our air cons plugged into the grid supply. I cannot run 4 air cons at night from my battery bank, but usually two air cons during the day from my PV. My annual bill is about $500 which is down from about $2,500. I must admit that I get a pension discount which pays part of the service fee to the grid. So for most people with a smaller household, i.e. not 4 washing loads a day, and not living in tropical North Queensland, I cannot see why they cannot go off grid completely, provided they forget about any of these fancy pie in the sky lithium type battery systems.
    John Nielsen, Silkwood

  13. I understand that there is more to supplying electricity than just the generation costs, I accept they charge for infrastructure and so forth, why to retailers, ie Origin, AGL etc. charge the fixed daily supply charge.

    I contacted Origin and got this response: I can confrim that all the Origin Energy energy plans, have usage only discounts that apply. I guess this is mainly due to the fact, that the general supply charges are set by the energy distributor and are the same for each NSW customer.

    So I contacted Essential Energy and I got this : Essential Energy set their tariffs to recover the cost of providing supply of electricity to customers. The majority of these costs are fixed and so we recover these residual costs from a fixed charge. The variable charges are set to recover the long run marginal cost of providing supply.

    Please note that retailers also charge a portion of fixed costs and the Essential Energy supply charge for your tariff for 2016/17 is $0.8618 per day or $315 per year including metering fees.

  14. It s the financial system locking in MINDLESS MAXIMUM SPENDING.At our expense and planet.
    The government,regardless of party in power, is there to protect it.So you cannot go off grid with battery alternatives OR whatever else.Soon to come will be supply charges in the hundreds to deter other s from NOT PAYING more MONEY to the RICH.I feel sorry for those who believe if only this government were in power ,or that party…..makes no different.The government ,under a financial system ,here in the WEST we live under,serve first and foremost the dollar.By DEFAULT your Fuked!

  15. Got a bill for $150. Service fee $133. What a joke.

  16. yes the supply charge should be banned it’s a straight rip off by capitalists supported by a capitalist government .
    My last bill i side stepped the supply charge, my pension rebate took care of that .
    My total bill was $10.00 , the lowest I have ever had. I usually average between $200 to $300 a quarter and just checked my AGL bill and it currently sits on $500.00 with 9 days to go, so lets say $600.00 which means that with discount, pension rebate and buy back it should be close to $300.00 and on that figure it means I would save around $1,000 per annum with batteries but batteries , let’s say 8KW would be need by me would cost me too much at present costs .
    $2,500 seems reasonable for 8 to 10 KW and this would be the size needed , minimum, to get off the grid at least while the day time light is available.

  17. Further to my earlier comment about the supply charge rip off in the West, our “beloved” supplier has now doubled their supply charge (effective July 2017) with further increases in (near)sight.

    The limited power we receive from the grid was already costing me a real $1 per Kwh and that has risen to over $1.80 on the last bill. Adding the factor of persistent power outages of (say) 4 a month – during which my current system cannot send me my own power from my own roof – the combination of inept provision of supply and economics has made the switch to batteries a no brainer. My only issue now is whether to install a couple of small batteries (i.e. Enphase 1Kwh) and expand them when the price drops further or simply bite the bullet and go off grid altogether.

    Oh, and Ronald I have never agreed with your comment that it is better for the environment to stay grid-connected and subsidise the electricity companies while watching them close coal power stations. All we in the West are doing is supporting yet another worthless bureaucracy which will not be changing until there are enough grid defections to force their hand. A century of their business model reinforces my belief in their resistance to move in any direction except to gouge more from their customers.

    While I think of it, name me one business that can get away with a 300% markup differential from changing the direction of the power flow (7.9c to them, 29c from them). Most businesses would be happy with a 10% differential.

  18. tim miltin says

    I think all or most of the power companies in Australia are run by private enterprise. In private enterprise you add up the total of your costs, add your profit margin & accordingly determine how much your product will sell for! Why are power companies any different? It is unfair & unjust that they be permitted to retain a separate supply charge which permits these rogues inter alia, to manipulate consumers & future outcomes.
    In the past, it may have been legal for governments to act similarly…but governments can bend ethics according to the extent in which they control Parliaments. Private enterprise should be urgently deprived of this questionable capacity because they are not the government & they should be bound to the same rules as everyone else. It would interesting if someone challenged the legality of the supply charge in a state District Court on the basis that it is unfair [compelling different levels of society to pay differing prices per unit of energy consumed] & it enables manipulation of prices in order to increase profits unreasonably.
    Politicians should be made to work for the people, not the power companies [which I believe] are largely foreign owned such as AGL which is Singapore owned…& they dictate to us this outlandish demand??????????!

  19. ramjetski says

    My wife has returned to her home town in rural New South Wales to die with what remains of her immediate family about her. She is now moving into a community based aged care accommodation complex. She has had to put the electricity on for her unit and I will be paying the bills. I noticed when I received the initial contract etc, that she will be paying 4 cents more per kilowatt hour than what I am, and her daily supply charge is 30 cents more per day that what it is where our home is located. No doubt Origin Energy has some rationale for this. The remoteness of the town perhaps, about 90 minutes from Moree, but I still think that it sucks that rural residents, who are often lower on the socioeconomic ladder are paying more than larger city residents. I suppose it explains in part why her son put solar panels on his house roof. What a rip off.

  20. Scott Manning says

    A similar comparison would surely be the NBN….
    If we have NBN we pay a single price for the type of service we get.
    We may be paying for the lines, and or infrastructure, but this is built into the end price.
    The retailers should be doing the same thing. I really don’t care, nor should I, how much the retailer is paying the wholesaler.
    And when it comes to Electricity, why does there even have to be multiple retailers, surely a way to bring down costs would be to have one supplier for all of Australia?
    Electricity is Electricity, Is electricity.
    it’s not like if I change supplier I get a better (or even different) product…..

  21. I think people are having a severe case of knee-jerk reaction to the daily supply charge situation. I don’t think they realise the costs involved.

    Let me break it down:-
    Take Endeavour Energy (Sydney North/South West region).
    Daily supply charge about $0.97/day
    Endeavour has about 1,000,000 customers
    Total annual charge = 365 * $0/97 * 1,000,000 = $354,000,000 (may be less depends on much the retailer keep of this from the bill).

    From this, outgoings are:-
    1) Wages = approx 2200 employees @ say $80,000 average = $176,000,000
    2) 9.5% super = $15,840,000
    That leaves $162,160,000 (assuming that nothing was taken from retailer component) to maintain the wires (thousands of kms) and poles (thousands) , substations (pole/ground = thousands of and hundreds of zone substations) across a fairly large geographic area – Illawarra, Sydney West Metro, Blue Mts and Colo/Portland region.

    Then there’s overtime to be paid in events of emergencies and outages.

    Maintenance costs of the infrastructure – wear and tear. The transformers need their oil changed and cleaned (just like car engines). Switchgear need replacing as they wear out. Wires need replacing due to exposure to elements.

    Insurance premiums for workers compensation and public liability.

    Operational costs such as vehicles and trucks.

    Safety programs such as vegetation trimmings.

    Maintenance of street lighting (bulbs don’t last forever).

    And the list goes on right down to the nitty gritty of office works running billing systems, ICT infrastructure, system operators, control room operators and so on.

    To have all this in place to what I would consider a pretty good system in place (I live in the Hawkesbury) and probably had 1 short blackout caused by high winds over the last 12 months.

    The distributors then have to pay the tranmission grid operators to connect to the high voltage grid system (e.g., generally anything over 33kV, 66kV, 132kV and higher systems ). The distributors mostly deal with the 240v/415V/11kV/22kV/33kV systems.

    By the time one factors the costs of just running the system, it does ask the question what is the full costs of the distributor operations. Endeavour Energy would not make money from the energy itself since it is a distributor (not a generator or retailer).

    Country areas (Essential Energy) have higher daily supply charge due to an even larger geographic area and a smaller customer base compared to the metro area (Ausgrid and Endeavour Energy).

    It does not matter whether you draw 1 watt or 5000 watts, you need a wire to the property. Without a wire, no electrons flow in either direction (consumption or export). This is a fixed cost regardless how much you use. It’s like a car, you need tires to get the car rolling. No tires, car does not move. No wires, no power. The wires do not wear out because you draw more power (the wires wear out due to other elements). The tires do not wear out faster because you drive faster, tires wear out as a function of driving conditions, distance and road condition. If you don’t drive your car to save on fuel, the tires sit there doing nothing, costing you money because it’s not used. You can even drive with bald tires (but due to legal and safety reason, tires must have a minimum tread) but you still need tires to move a car (one could potentially drive 5x the distance on bald tires) but the car would have probably got close to being sold off before the tires got replaced if one was able to drive the tire bald.

    The point is, the daily supply charge is not a function of how much energy you use. It is a function of getting the electrons from the generators (from a distance) to your property. And that involves a complex infrastructure involving a lot of equipment with a lot of safety mechanisms.

    The cost of undergrounding wires is about 3x more than overhead wires, so that cost is also factored in the daily supply charge as well. Because repairing underground cabling is more complex, time consuming and harder than overhead wires.

    I have a solar system but for 9 months of the year, I hardly draw from the grid but I still pay for the daily supply charge for the grid connection. But this is a small price to pay for security of power (when my solar is low on production). I looked at costing a generator to supplement solar, it’s just not worth it.

    To save $357/pa on daily supply charge would only buy me about 260 litres of petrol for a petrol generator. Which would give me about 420kWh of electricity based on $1.35/litre. Simply just not enough to make up the shortfall from my solar, especially in winter. Then the cost of a decent 3kW generator is about $3000 (like the Honda super quite generator – being in an urban area, I’m sure that after 10pm there are noise control laws to be complied with).

    Going off grid in an urban area simply doesn’t cut it without a decent investment in a very large solar/battery backup/generator setup. I rather pay for $357/year in grid connection charges for the simple fact that for 99% of the time, I would be guaranteed up to 19kW (240v x 80A) of energy available instantly online without having to deal with generators, petrol and maintaining it. Sorry, any arguments against this logic would be simply be crazy.

    Simply put, you simply can not base the fixed daily supply charge on how much electricity you use. You need a wire to get electricity moving somehow. How you use does not determine the fixed charge because of the fact you have to have a wire to the street poles somehow.

    Same with water, no pipes, no water. You need a pipe to get water flowing. That is a fixed cost just to get the pipe in so that you can get water flowing to the house. (no [email protected] comments about rainwater tanks etc, this a rhetorical comment). Whether you use 1 litre or 10,000 litres, you need a pipe. Again, the pipe does not wear out from water flow. Pipe replacement is due to other elements and factors. Again, a fixed cost, not a function of how much was used.

    The only exception I would allow is connecting to grid in the first place was if it was simply too expensive (say if you are on a rural property). I have heard stories of friends who would have to fork out $100,000 just to get wires to the house from the nearest street pole. It was cheaper to go full solar, battery backup and generator (emergency backup) along with solar hot water heating than to connect to the grid.

    Disclaimer: I have a electrical engineering background (and worked in the high voltage underground mains section for a county council back in the 80s). I do not work for any energy companies. County councils for those who do not know, were non-profit electricity utilities until the late 20th century before they were split into retail (now sold off in NSW ) and distribution (now partially privatised or leased for 99 years in NSW).

    • A couple of points and a quibble.

      1) Once installed, the poles and wires are a sunk cost in economics terms. Just like a road – once built, only ongoing maintenance costs are relevant.

      2) Underground power has way lower maintenance costs than above ground (roughly 1/3 of the cost if I remember the data correctly).

      A quibble: Tyres – they wear out a lot quicker if you go faster. A quick trip from Perth to Sydney and back (around 13,000kms with the scenic detours) on my motorcycle needs a new set of tyres at Sydney for the return trip. Pottering around Perth I get 22,000kms a set… I suggest if you use an analogy it is a good one.

  22. ramjetski says

    All of your points are quite valid, but if the stupid idea of ‘competition policy’ had never emerged, then the problems we have with what was a publicly owned utility would not have occurred. Same goes for water. As soon as a profit motive is introduced, then costs rise. When will we learn to stop listening to academic economic bullshit?

    • @ramjetksi July 22, 2018 6:10pm. Agree, the old county councils (not tax-payer funded) and publicly owned utilities worked very well. The privatistation and competition arguments simply falls flat on its face big time. I never understood why public utilities had to privately operated.

      Shareholders want profits, this should be banned from public utilities such as water and electricity, these are essential services. Gas and telcos are not essential services so they can be operated any which way they like.

      • ramjetski says

        I don’t know about that. I have natural gas at my place for hot water and cooking. I think that they are essential services. I still have a telephone landline too with NBN fttp and I consider it to be an ‘essential service’. But by having two sources of energy, I am paying two lots of access charges.
        Also, access charges for electricity are not uniform. While I live in a large city in S.E Queensland, my wife who is in N.W New South Wales at the moment is paying 40 cents per day more for electricity access and 4 cents more per KwH. I’d say that country people are being ripped off even more.

  23. john nielsen says

    In June 2014 until I cancelled the connection in July 2015 I had the power connected to my orchard block. In that period I used 19 kWh and for this I paid $4.78 BUT in that period I paid $341.38 in Service Fee. I had the power disconnected because, I as can be seen, I used very little power, as I have a solar panel system which copes with much of my pumping, but occasionally I have to use power from the grid. So on these occasions I run a cable from my neighbor. I recently wrote to the power company that I would like to have the power on again ( which means to push a switch in the meter box), but I will not pay for the SERVICE FEE. The power company’s friendly gentleman rang me to tell me that it couldn’t be waived. Okay, so I stick with my friendly neighbor.
    Wouldn’t you think it would have been better to have earned a little instead of nothing? All the wires and meter is still there on my power pole.
    So Good luck in getting rid of the Service Fee or whatever your power company calls it.

  24. john nielsen says

    Hi friends,
    Could it not be a pro rata? Why do I as an 81 year old pensioner using very little power have to pay say $90 per quarter, when someone using 10000 kWh per quarter is paying the same $90. Fair crack of the whip,,, power companies.

    • By removing the daily surcharge and tacking it onto the kWh price it becomes a pro rata cost.
      As it stands, low energy users (which many low income households are) are subsidising high energy users.
      It sucks big ones and the only way to avoid it is going off grid and I’m positive more and more people will do just that.

  25. Bradley McGregor says

    My supply charge is always $163 each 3 month’s. That is over my total electricity usage cost for the 3 month’s. How do they get away with it?

  26. Not that they would do it, however why don’t they remove the supply charge for all customers that send more than (say) 3Kwh per billing cycle power into the grid? The supply charge is so much more than any other part of my bill I am really tempted to just buy some secondhand lead acid batteries (or lash out the extra for Lithium ion which is getting more affordable by the day) and tell them to get knotted.

    Ronald’s argument about “better to buy more panels” just does not stack up here in the West.

    Briefly a service agreement to become a small scale wholesaler and provide power appeared in the news about 4 years ago – to be followed by deafening silence.

  27. john nielsen says

    If X power company needs say Y income from supply charge then make it pro rata to receive the same Y income, i.e. the bottom line for the company will be the same, but a fair charge for us poor people..It is sometimes referred to as “Users pays”.
    john nielsen

  28. Brian Leonard says

    Here in NSW, my origin ‘Supply Charge’ is $1.41 @ day. As the same supply line also feeds energy from my solar panels into origin’s grid, why isn’t this rebated on the ‘Supply Charge’ amount. After all, it’s a two way street…

  29. I came across this current blog while looking at different worldwide electricity rates per kwh. I was wondering if the comparisons shown on eg. Wikipedia take into account the “supply charge”. I presume that there could be great disparity worldwide with the supply charge. My current rate on my latest account (13-Dec-2018) is 25.72 cents per kwh. Adding the supply charge of 92.3 cents per day, the actual price per kwh is 45 cents (AUD). This is extremely high by world standards if like-comparisons have no “supply charge”, or if the supply charge is not included in the calculations and there is great disparity in the supply charges. According to Wikipedia, it appears that Australia is the only country with the supply charge. It appears possible or even likely that the comparisons by country are virtually meaningless. One comparison that would have meaning would be one that showed the average cost by country that includes a “supply charge”. Based on my consumption as a simple example, the cost per kwh including the supply charge is 45 cents (AUD). Even showing comparisons in USD does not give a true indication of a comparative cost, because all of the input costs are not in USD – wages are in AUD, coal is in AUD, etc. According to Wikipedia, China pays 4.5 cents US per kwh. I pay about 31.5 cents US (7 times as much as China).

  30. Our “service fee” is about $90 per billing cycle and the “meter services” charge is about $14 . If you add in the GST (no escaping that sigh) its nearly $500 a year . If every house in my suburb pays roughly the same well that’s gonna equate to Hellavalota cash going to our only choice in energy provider , Considering all the poles and wires have been in the ground as long as i can remember and i even paid for the wires from the road to my house ….. brain wanders off …. yep its rotten , and sneaky . Just cant wait till an electric car crashes near me so i can salvage the batteries then i can tell em to stick their supply charges up their ……

  31. Mark Tregear says

    hi from mark is its better to get 16.cent of solar less discounts of usage or what is the better more of solar /usage so confusing me no good at maths

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