Did You Know?

  1. Western Australia’s south west electricity system has since 2006 been administered by an Independent Market Operator (IMO) that operates the Wholesale Electricity Market.

  2. The Wholesale Electricity Market is extensively regulated and applies to all electricity market Participants, including the network operator (Western Power) and all the retailers and generators.

  3. The Wholesale Electricity Market un-bundles the individual components of electricity supply and establish markets or mechanisms for minimizing their respective prices.

  4. The cost-of-supply components of a specific load vary according to the load's consumption profile; indicative proportions are: ¼ network, ¼ energy & carbon, ¼ Generating Capacity, 5% Environmental, 2% Ancillary Services and less than 1% Market Fees. Precise details are available here.

  5. Two hours ahead of real-time, the IMO requires generators to bid into a compulsory auction for energy and determines a "Merit Order" for the dispatch of generators so as to minimise the price of generated energy.

  6. The IMO publishes a "Balancing Price" for every 30-minute Trading Interval, including a forecast of prices for several hour ahead of real-time.

  7. All Generators are required to bid all of their capacity into the auction. Generators possessing ‘Market Power’ are required to bid at their Short Run Marginal Cost, being what it costs them to produce energy without a profit margin.

  8. The Balancing Prices range between, typically in recent times, -4c/kWh to 32c/kWh depending on climate, the accuracy of demand forecasts and power plant availability. More information is provided in the IMO's Weekly Market Reports.

  9. Energy prices (being only one component of the cost structure) are occasionally negative overnight, meaning the consumer gets paid to consume energy.

  10. The lowest energy price recorded to date was -19.86c/kWh (-198.6$/MWh) (pdf, 80KB) for the period 02:00 to 02:30 on 31 March 2013. This price occurred for only 30 minutes because the System Manager had to unexpectedly reduce the amount of generation on the system. This can happen, for example, when the wind generation suddenly changes.

  11. The IMO administers a Generating Capacity Market with an indicative value of around $1Billion per year. This comprises around 6,000MW of ‘certified capacity’ (pdf, 200KB) which is capacity that is expected to be available at a local temperature of 41oC. Much more capacity is available at average temperatures.

  12. During the period April 2011 to March 2012, the top 10% of the system load occurred for only 32 30-minute intervals (16 hours), and the top 20% occurred for only 84 hours. IMO Statement of Opportunities 2012 page 22 (pdf, 1.7MB)

  13. Generating Capacity Charges typically comprise around ¼ of the annual Gazetted Tariff charge and are based on customers’ consumption during the power system’s top 6 hours of demand.

  14. Generating Capacity Charges equate to around $30/kWh during the 6 peak hours. Yes, that's THIRTY Dollars per kWh just for Generating Capacity.

  15. The Market Objectives expressly encourage the management of how much electricity is used and when it is used; by carefully managing your electricity demand, you can reduce, or even avoid, the Generating Capacity Charge.

  16. Only very large and sophisticated customers have a direct contract with Western Power for the use of their own supply connection. Nearly all supply connections are the responsibility of the supplying retailer, and the retailer is liable to Western Power and the IMO for everything that happens at the connection, including financial liability for all electricity consumed and liability for damage caused to the network. This means that retailers bear considerable default risk and are exposed to the consequences of arbitrary consumption during times of power system stress and the associated high energy prices.

  17. In order to protect Western Power and the IMO from default risk, electricity retailers generally have to post Security Deposits or Bank Guarantees for each customer to the value of around 15% of the customers’ annual regulated (Gazetted) Tariff charge. (Clause 9 of Western Power's ETAC (pdf, 700KB) and Market Rule 2.37.4 (pdf, 290KB).)

  18. The Economic Regulation Authority recommended that Synergy be allowed to charge 3.5% of the cost of delivering electricity as a fair profit margin. (pdf, 1.3MB)

  19. Dividing the Retail Profit Margin by the Prudential Support gives an annual rate of return of over 20% cash-on-cash.

  20. The actual Prudential Support is very sensitive to the Capacity Charge and is much less (and the rate of return correspondingly much more) for customers with larger Headroom.

  21. In principle, a customer can lodge its own financial guarantee and keep for itself the attendant risk and rate of return.

  22. There are several licenced retailers competing to supply electricity to contestable customers.

  23. The State-owned Synergy supplies around 60% of the energy consumed on the south west system.

Community Electricity perceives that the relatively low customer take-up of electricity supply by a private retailer is due in part to simple customer inertia, but mainly due to a lack of knowledge and education about it. In order to give consumers confidence in the concept, we support our statements by a sworn 'Affidavit Attesting the Fitness-for-Purpose of Electricity Supplied'. Please note that this also applies to electricity supplied by any licensed retailer - not just Community.

So, now you do know, what are you going to do about it?