In effect
Understanding your electricity bill
There are three main stages in supplying electricity to homes and businesses:
- generating electricity in power stations for sale to retailers
- delivering electricity through ‘poles and wires’ to customers
- selling electricity by retailers to customers.
Components of the energy supply chain
The electricity supply chain links generators with consumers.
Generation
Electricity is produced by the competitive generation sector from coal, natural gas and renewable sources.
Generators in Queensland compete in the National Electricity Market (covering eastern and southern Australia) to sell electricity to retailers and large consumers.
Transmission and distribution networks
Transmission networks transport electricity from generators to distribution networks in metropolitan and regional areas. They operate at high voltages for efficient transport over long distances.
Powerlink Qld, a Government owned corporation, owns, develops, operates and maintains Queensland’s high-voltage electricity transmission network from the Gold Coast to Cairns.
Distribution networks transport electricity from the transmission lines to customers. Electricity must be stepped down to lower voltages in a distribution network for safe use by customers.
A distribution network includes the poles, underground channels and wires that carry electricity, as well as substations, transformers, switching equipment, and monitoring and signalling equipment.
There are three distribution networks in Queensland. The two largest are run by two Government owned corporation, Energex (south east Queensland) and Ergon Energy (rural and regional Queensland).
Essential Energy, a NSW Government owned corporation, operate in the Goondiwindi region near the Queensland/ New South Wales border.
The Australian Energy Regulator (AER) regulates electricity networks in the National Electricity Market and gas pipelines in jurisdictions other than Western Australia and Tasmania, aiming to ensure service providers operate these assets reliably and cost effectively.
Prices are usually set every five years. The five-year regulatory cycle was established to help encourage a stable investment environment.
The rules set down by the AER provide the framework within which the regulator sets the maximum prices that electricity network businesses can charge for the services they provide or the maximum revenue they can earn.
Regulation helps to manage the potential risks of monopoly pricing so that consumers do not pay any more than necessary for the reliable supply of electricity and gas.
Retail
Electricity retailers purchase electricity from the wholesale market (the Network Electricity Market), pay for transportation services and sell the combined product to homes and businesses.
The retail sector of the supply chain is generally competitive – allowing consumers to choose to purchase their electricity from a range of energy retailers.
There are a growing number of energy retailers in south east Queensland competing for customers’ business. They offer a range of discounts and benefits to suit the needs of different customers.
Consumers in regional Queensland are generally supplied by only one retailer, Ergon Energy. This is because the Queensland Government pays Ergon Energy a subsidy so that regional customers pay the same regulated prices as consumers in south east Queensland.
Competition in regional areas is therefore limited, as other retailers cannot compete with Ergon Energy’s subsidised prices.
Customers’ bills reflect all costs involved in supplying these services.
Customers also pay for the costs of ‘green schemes’ including the renewable energy target and the solar bonus scheme.
We have a number of responsibilities in the retail market: