UNDERSTANDING ENERGY BILLS & TARRIFS

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1 UNDERSTANDING ENERGY BILLS & TARRIFS as part of the Energy Efficiency Information Grants Program

2 Reading and understanding your energy and gas bills is a good first step to help you to identify where you can save energy. The old adage holds true you can t manage what you don t measure. This guide will help you understand your energy bills and what you re being charged. More importantly, that information will lay the foundation for you to reduce you energy costs now and into the future. WHERE ENERGY IS USED IN YOUR BUSINESS An Introduction to Energy Efficiency includes a breakdown of total energy use in addition to electricity and gas used in a typical hotel. Using this allocation and the total cost of your energy from your bills will give you an idea of the magnitude of your energy costs across the different parts of your business. KEY ELEMENTS OF YOUR ENERGY BILL You should be able to see the elements outlined in this section on your bill these elements are also represented on a typical electricity bill on the following page. National Meter Identifier A National Meter Identifier (NMI) for electricity or Meter Installation Reference Number (MIRN) for gas. This unique number identifies the metering at your address. Billing Period The billing or supply period is important as you will need to know this to determine how much energy you use on average each day, week or month. Supply Charges The charges over the period may include: electricity / gas charges, charges for emissions and renewable energy, meter supply and market participation charges, and distribution charges (or network charges). Energy Charges Energy (electricity or gas) charges are the cost of the energy used by your business. Distribution charges are the costs associated with transporting the energy to your business from the point of creation (i.e. from the power station), based on your usage. Each charge is determined from a quantity of energy used through the meter (kwh or MJ) multiplied by the tariff or rate which is the cost of the energy being supplied per unit of energy ($/kwh or $/MJ). Some retail tariffs have a peak rate; some may also have off-peak and shoulder rates. Some tariffs are also stepped, meaning there is a different rate for the first consumption bracket compared to next brackets. Understanding your tariffs means you will know when your energy is costing more. Your bill will also include renewable energy and emissions charges. These will vary from state to state, depending on the schemes in place as well as the pass through cost for the Clean Energy Future carbon price. Charges are based on your total energy usage. As a commercial customer you may be charged for Peak Demand on your electricity bill in addition to usage. Peak Demand is your greatest demand for electricity over a billing period; that is, it is the largest electrical load you placed on the grid at any given point-in-time. You are essentially paying for the energy company to have that much electricity available to you should you need it. Peak Demand charges are usually stepped with a number of different tariffs. If you want to know more, the Australian Energy Regulator has produced a fact sheet explaining what is behind the cost of electricity and natural gas refer to the More Information section for a link. Key things to know from your bill: The cost of the energy you are using: energy has a different cost per unit at different times of the day; as reflected in your tariffs. Your retailer will be able to tell you when the tariffs start and end. When you use energy: knowing when you use energy will also put you in a better position to negotiate with your retailer.

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4 HOW TO REDUCE YOUR ENERGY BILLS Use Less Key to reducing energy bills is reducing usage: Reduce your energy usage The cheapest energy is the energy you don t use. Minimise the use of expensive energy Understand which operations and what equipment uses energy during the periods when you are charged a higher tariff. Explore the opportunity to undertake these activities at a different time. Reduce your Peak Demand By reducing the largest load you require you will reduce your bill. This can be as simple as not starting or running all your equipment at the same time if it is not necessary to do so. CASE STUDY Peak Demand Consider a customer who has a Peak Demand occurrence that occurs once a month at 265kVA. For the remainder of the month the average of their peak demand was around 200kVA. This monthly event represents a 65kVA peak above the month average and as a result the customer being billed by their retailer under Peak Demand Step 3 at $9.82 per kva/month. If the customer could avoid the peak and maintain their peak at around 200kVA their bill would be around $630 less per month. In the event is a consistent monthly experience and could be avoided the customer would save over $7,500 a year. Get the Best Deal You can save money when you buy energy: Negotiate with your retailer Ensuring you re taking advantage of competitive rates is the first step to cost savings. Shop around The retail energy marketplace is competitive and the retailers have the latitude to negotiate on both supply and distribution rates. Consider going on a contract Retailers offer significant financial incentives to encourage you to enter a contract. The length of the contract will also influence the cost. Improve Your Power Factor You should check the Power Factor of the electrical supply on your site. Power Factor is the ratio between the power that is supplied to your site (kva) and the power that is actually used (kw). It is a measure of how efficiently an installation uses electrical energy. A Power Factor of 0.9 or less should be corrected as it means 10% of the electricity delivered to the site is wasted before use - it makes good sense to get the most from the energy you pay for. A Power Factor of 0.98 (meaning a 2% loss) is best practice and commonly achieved. CASE STUDY - Power Factor Correction New Food Coatings has been operating in Wetherill Park for over 20 years with a focus on developing and delivering the latest trends in food coatings and seasonings. New Food Coatings installed three Power Factor Correction units. The forecast outcomes for the 37.5kVAr unit are: PFC unit installed: 37.5kVAr Power Factor: 0.83 to 0.98 improvement Peak Power Savings: 14kVA Captial cost: $5,670 Annual Savings: $1,170 Simple payback: 4.8 years Source: A project under the SME power factor correction program supported by the NSW Government s Climate Change Fund. Data courtesy of Demand Manager. Create Your Own Energy Consider ways to generate your own energy and reduce your reliance on grid electricity and mains gas with: Solar hot water systems to replace gas or electric hot water heaters or preheat boiler water. Grid connected solar system or small wind turbine to offset grid-electricity. Cogeneration system to generate both heat and electricity (usually from natural gas). A decision to create your own energy should be based your business mode of operation, energy cost structure, future business needs and investment payback. When considering implementing such a system, ensure the appropriate level of financial due diligence is undertaken on the cost of connecting any system to the grid. Grid connection can be very expensive and form a significant proportion of the overall value of a system. The cheapest energy is the energy you don t use! The AHA has developed a range of guides that show you how to save money through energy efficiency in specific areas of your business e.g. HVAC, lighting, etc.

5 ENERGY METERING AND MONITORING Monitoring energy use can be undertaken in a number of ways, each giving a greater level of resolution and therefore increased ability to make informed decisions about energy use and cost. 1. Accounting (monthly) Use your accounting systems to track energy cost across your different energy invoices. 2. Energy Bills (monthly) Use your energy bills to determine your energy consumption in kwh (electricity) and MJ (gas) for the whole business or for each individual meter that is detailed on your bills. 3. Meter Reading (hourly, daily, weekly) Record your meter reading at frequent intervals to gain an accurate understanding of the profile of your energy use across the day, week or month. 4. Smart Meters (hourly) Smart meters record your energy use and send it to the energy retailer. Some retailers have detailed web-portals that can show you up-to-the-minute data, trends and allow you to compare with other periods. 5. Sub-metering (zone, area, equipment) Use power and flow meters to measure energy consumed by an area of your building, a zone (e.g. kitchen) or a piece of equipment (e.g. HVAC). Frequency is productioncycle dependent so comparisons are useful (e.g. daily or weekly). Calculate energy cost over the period using energy bill data. 6. Building/Energy Management Systems (zone, equipment) A system that can track the energy consumption of areas, zones and equipment. A system that records data by the minute if useful, especially if the information is converted into a report with trend data. Generally, the more frequent the data collected, the greater the opportunity to better understand your usage profile and, therefore, identify ways to reduce your energy cost. More information can be found on in the Commonwealth Government s Energy Savings Measurement Guide refer to the More Information section for a link. BENCHMARKING ENERGY USE Understanding energy use as a function of business output and other performance metrics provides greater transparency and accountability for improved energy efficiency. Metrics are used by businesses, big or small, to measure and trend efficiency in the delivery of the businesses outputs. These metrics create the opportunity to benchmark energy performance and focus energy efficiency improvements where they will generate the greatest business benefit. An example of metrics for energy performance using key business indicators include: Energy cost ($) per accommodation room Energy use (kwh) per m2 of function space Energy use (kwh) per meal These types of indicators enable you to trend energy consumption inline with other key business metrics. Then when implementing energy efficiency projects you can monitor the impact and better understand the business benefits of the project. MORE INFORMATION 1. Electricity and natural gas bills explained the costs of your electricity and natural gas, Australian Energy Regulator, files/electricity and natural gas bills explained_0.pdf 2. How to Estimate, Measure, Evaluate and Track Energy Efficiency Opportunities, Australian Government 2008, savings_measurement_guide.pdf ABOUT THE PROGRAM In response to rising energy costs the AHA has developed a range of targeted resources to assist small and medium businesses to improve energy efficiency and reduce energy costs. These resources were developed with support in the form of an Energy Efficiency Information Grant from the Australian Government. This program has been designed to assist small to medium businesses to understand where and how energy is used, carbon emissions that result from the use of energy, and to understand and communicate the opportunities for reduction and resource efficiencies. The resources, tools and information available under the program identify energy efficiency improvements that can be incorporated into day-to-day operations and factored into future capital expenditure budget. For more information please visit The views expressed herein are not necessarily the views of the Commonwealth of Australia, and the Commonwealth does not accept responsibility for any information or advice contained herein