New Maximum Pricing to apply in Victorian Embedded Networks7 September 2020
From 1 September 2020, the Victorian Default Offer (VDO) will apply for most Victorian Embedded Network customers.
On 30 May 2019, the Victorian Government released its final decision to introduce a Victorian Default Offer (VDO), taking effect on 1 July 2019. The VDO represents a mechanism to safeguard electricity customers by putting in place methods to limit the maximum a customer can be charged. At the time, the Victorian Government decided the VDO would not apply as the new maximum rule to exempt sellers, or persons selling electricity in Embedded Networks. That meant that the maximum prices Embedded Networks can charge in each distribution zone would not change from the Standing Offers published on 27 May 2019, or immediately prior. Standing Offers from the designated Retailer of Last Resort (ROLR) are traditionally the maximum rate an exempt seller can charge, as allowed by the Essential Services Commission (ESC) in Victoria. However, from 1 September 2020 the VDO pricing will be the new maximum price for all households and small businesses (consuming less than 40-megawatt hours of electricity per year) in Embedded Networks.
What is an Embedded Network?
Embedded Networks are private electricity networks generally in multi-tenant environments and may include caravan parks, retirement communities, shopping centres, apartment buildings, and rooming houses. For more information about Embedded Networks, please click here.
What does it mean for the general Embedded Network customers?
Residential Embedded Network customers could save between $180.00 to $360.00, and small businesses between $900.00 to $2,200.00 annually based on the estimated impact of the current VDO. The exact result will vary depending on the distribution zone and the nature of existing contractual arrangements.
What does it mean for the Energy On Embedded Network customers?
Since the introduction of the VDO in July 2019, we are proud to be over-complying by ensuring our prices are matched to or below the VDO reference price as well as the ROLR Standing Offer. This means most Energy On customers will not see a price change come September 2020 because their prices are already competitive enough to comply with the VDO. A minority of customers on flat tariffs will see some shift in the usage and daily charge rates. While annual estimated costs are below reference prices from the VDO, the usage rate or daily charge rate, are being reduced, and so are changing to below the VDO. Energy On annually reviews electricity pricing for customers in Victoria based on the movement of underlying prices. Typically, Energy On rates were discounted against the standing offers from the ROLR and comparable to current market rates. A significant point of difference for Energy On is our flexible and competitive approach to on-selling electricity pricing. The foundation of Energy On’s Value Proposition is a careful balance between the rate that energy is on-sold to customers and the offers available from other market participants.
Victorian Default Offer for Embedded Networks
Implementing the VDO for electrical Embedded Networks means:
- A flat rate tariff for both residential and small business customers - including a daily supply charge and a flat anytime usage charge.
- A flat rate tariff with a controlled load for residential customers only - including a daily supply charge and a flat anytime usage charge, as well as a separately metered controlled load tariff.
A flat tariff structure, calculated per kilowatt-hour, forms the basis of a compliant maximum annual bill mechanism. This provides maximum prices for non-flat and cost-reflective tariff structures. Non-flat tariffs can include the time of use and flexible tariffs, or tariffs including demand charges, for example.
For consistency, the ESC has adopted the same annual reference consumption amount used to calculate the VDO compliant maximum annual bill amounts. The yearly reference consumption is 4,000kWh per year for a residential customer; and 20,000kWh per year for a small business customer.
The current VDO expires at the end of 2020, and the ESC is implementing new maximum pricing from 1 January 2021.
For more information on the VDO, you can visit the Essential Services Commissions website.
To view the VDO figures and maximum pricing visit ESC - Maximum prices for Embedded Networks and other exempt sellers_ Final Decision 22 July 2020
Additional published articles relating to VDO for Embedded Networks are listed below: https://www.canstarblue.com.au/electricity/victorian-default-offer-explained/