The Australian energy market might seem complicated, but Selectra is here to help. How do you choose the best energy provider in Australia? What tariff is right for you? And what exactly is the NEM? Let’s keep reading below to find out more about the current, and future, status of electricity and gas in Australia.
Understanding Energy Providers in Australia
With over 30 energy providers in Australia, there are plenty of options to choose from. Choosing the best energy provider really depends on what you’re looking for. Are you looking for smaller, greener power suppliers or are you looking for big-name power suppliers? Regardless of the one you choose, in Australia, you are sure to have options available.
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These three energy providers are the largest and most historic in the country, controlling around 65% of the energy market share combined. However, these power suppliers are also the ones that receive the most complaints and tend to have low customer ratings.
While the majority of Australian households in the National Electricity Market are signed up to one of the Big Three, as more and more energy providers enter the market with cheaper rates and greener energy tariffs, the market share of the Big Three is waning.
What Are Tier 1 Energy Providers?
Along with The Big Three, a few more energy providers make the cut as Tier 1 power suppliers.
A Tier 1 energy company is any power supplier that holds 10% or more of the market share in any energy network region.
The National Electricity Market, or the NEM, is the government-controlled network of energy companies whose supply make up the majority of the Australian energy market. This includes energy generation, energy distribution, and energy consumption.
While the National Electricity Market doesn’t cover the entirety of Australia it does include:
Inside the National Electricity Market, there is full retail contestability.
Full contestability in the energy market means customers are free to compare and switch energy providers at will. This is true across Austria except in regional Queensland where the energy is provided by the government-owned power supplier Ergon Energy).
It’s important to note that not every energy provider offers energy in every part of the NEM. More developed states, like New South Wales, have more choice of energy providers than places like Tasmania or the ACT.
If you live outside of the NEM, you don’t have the same freedom of choice as those who do live within its borders.
While parts of the National Electricity Market have been adopted by the Northern Territory, the limited market share means that there are few energy providers who operate in the NT.
In Western Australia, only natural gas is fully contestable, meaning residents can choose their natural gas provider but not their electricity provider.
What is the Default Market Offer?
When comparing energy plans and switching providers, you’ll often notice the “Default Market Offer”, “DMO”, or “Reference Price” mentioned.
Within the National Electricity Market, the government sets the reference price for each distribution network.
In Victoria, the DMO is called the Victorian Default Offer or VDO.
The Default Market Offer has two main functions within the National Electricity Network:
To protect customers
To inform customers
Those who don’t want to engage with the energy market are protected by a cap on how much energy providers can charge you. In other words, the DMO isn’t the cheapest option available on the market, but it acts as a price ceiling for consumers who don’t want to compare, switch, and change energy providers to find the cheapest plans. You can rest assured that you won't be taken advantage of by skyrocketing prices.
The Default market offer also helps inform those who want to compare and switch energy providers to find the cheapest deals.
In this case, the DMO is used as a reference (often shown as X% off the reference price), so customers can have a standardized benchmark to compare their potential savings when they switch to a new provider.
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There are different energy tariffs available through each energy provider, which are used to calculate how much your energy bill will be every billing cycle.
All energy tariffs are measured with a daily supply charge in cents/day, and usage rates in cents/kWh.
Therefore, the price you pay is a combined price of the daily charge for having energy supplied to your property (even if you arent using energy) and the price per unit or amount of energy used.
Variable tariffs are tariffs in which the usage rate fluctuates.
As the price of wholesale energy goes up, the cost of each unit of electricity you use also goes up. With a variable tariff, the rates can go up or down.
The most common energy tariff is the flat-rate tariff. When comparing electricity plans, the estimated cost and rates will be shown for a single-rate tariff.
With a flat-rate tariff (also known as single-rate tariff or a fixed rate tariff), energy customers are charged a daily supply charge, and one flat usage rate, no matter the time of day or appliance used.
This can often be mistaken for meaning that you pay the same amount each month. This is not the case. The flat-rate tariff means that instead of having a variable price for each unit of energy used that can change throughout the year, you will have the same fixed, or flat, rate for each unit.
The best example of a flat rate tariff is to use the analogy of going to the store to purchase apples where apples represent your energy.
You can eat as many as you like a $1 each, but depending on your consumption you will be charged accordingly (more if you eat more, less if you eat less). However, imagine going to the store and finding that yesterday the apples cost $1, and today they cost $2.
A flat rate agreement can be made so that whenever you visit the store, the apples will always cost you $1. This is the way a single rate energy tariif works. Despite the price of each apple staying fixed, you will still be charged more or less depending on the quantity you consume.
Time-of-use Tariffs have different usage rates throughout the day, depending on when demand on the energy grid is usually high (usually during the evening hours), and low (overnight and weekends).
Most time-of-use tariffs are divided into three usage rates:
eak ours are when demand on the grid is high and therefore means your energy rates will be higher. Peak hours are usually during the evenings from Monday to Friday when most people are home from work and cooking, doing laundry, using the television, and other energy-intensive home activities.
Off-peak oursare when demand on the energy grid is low, so rates will be lower. For energy in Australia, off-peak times are usually overnight, on the weekends, or times people are often out of the house, sleeping, and not using much electricity.
Shoulder hours are in between peak and off-peak, such as mornings, afternoons before peak hours, and sometimes on the weekends. Power companies set rates during shoulder hours somewhere between peak hour rates and off-peak rates.
Time-of-use tariff can be a good choice for customers who are more likely to use electricity in their home during off-peak hours. If you work overnights, are more likely to do the laundry overnight or run a dishwasher, or are often out during the evenings, time-of-use might be a good tariff for you. Customers who opt for a time-of-use tariff will need a smart meter to track their energy usage.
Controlled Load Tariffs
A controlled load tariff is used for appliances that run on a separate circuit within your home.
Appliances such as water boilers, electric heaters and pool heaters are charged separately from the rest of your household’s energy usage. They often run overnight or during off-peak hours which allows the individual usage rate for these appliances to be lower.
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In fact, customers can compare electricity and gas plans online, and switch directly through their chosen provider's website, bu calling them, or using a comparison service like Selectra to make the switch for you.
You will most need to provide a valid form of ID and consent to a credit check in order to get the best energy rates available. Once you sign up with your new energy provider, they will take charge of contacting your old provider and letting them know you’ve switched.
Your old provider will take a final meter reading, and send you a final energy bill. After that, you will have been switched to your chosen new energy provider.
When you switch energy providers, you don’t need to worry about losing access to electricity and gas in your house during the switch. As your distributor is the one actually providing energy to your house, your energy service will not be cut out while you transfer to a new provider.
You also don’t need to worry about paying to switch providers. Unless you are fully disconnecting/reconnecting due to moving house or developing a new property, in which case there will probably be an additional fee involved, there is no cost to switching energy providers.