ActewAGL customers to pay for electricity network demand

The Australian Energy Regulator on Tuesday found the company's proposed changes would encourage energy use at times of lower demand, and better reflect usage costs during congested periods than flat tariffs.

By reducing pressure on the network during peak times, the new tariffs would lower spending on maintaining reliable supply, and reduce prices for energy users in the long term, the AER said.

ActewAGL general manager Energy Networks Stephen Devlin said it expected customers with relatively low-peak demand during congested periods would be better off than under existing tariffs, while those with high-peak demand would be worse off.

"Customers could actively reduce demand during the peak window in two ways – operating high-demand appliances consecutively, rather than concurrently, or shifting the use of high-demand appliances to outside the peak window," he said.

ActewAGL's phase-in of new demand-based charges comes as the AER identified it as leading the country in reforming its tariff structure to reflect the costs of using energy during peak periods.

AER board member Jim Cox said the new tariffs gave energy users more control over their bills by taking advantage of peak and off-peak network pricing.

From December small businesses and residential customers with new homes, or new smart meters, will pay demand-based tariffs unless they opt out.

A customer's demand charges will be calculated from their highest energy use recorded in a 30-minute period within a peak charging "window" set between 5pm and 8pm.

Existing residential and small business customers who don't replace their meter will remain on their current network tariffs.

Mr Devlin said ActewAGL had worked on introducing cost-reflective network tariffs over the past 10 years.

"The next phase of this journey focuses on implementing a more cost-reflective tariff structure and changing tariff levels over time."

The AER in a draft decision released in August last year rejected proposals for a new ActewAGL electricity tariff structure.

It said that Actew AGL's proposal, prepared in response to legislative changes initiated by the Australian Energy Market Commission's 2012 Power of Choice review, were unnecessarily complex and unlikely to move consumers to off-peak consumption.

AER recommended scrapping a morning "window" ActewAGL proposed using to calculate the demand costs on an energy user's bill.

"We considered the proposed windows were not reflective of costs imposed by customers on the network and would therefore send inefficient signals to customers regarding peak demand," the AER said.

It also rejected a plan to calculate small to medium businesses' demand charges using a 24-hour "window".

In response, ActewAGL said it would apply only a single evening peak "window" for residential customers, and one between 7am-5pm on weekdays for small to medium businesses.

The 2012 Power of Choice review found if consumers had a clear idea of the true cost of power, particularly in peak periods, and were charged accordingly, they would move as much consumption to off peak periods as possible. It recommended cost reflective tariffs as the best way to do this.

The electricity industry in recent years has reformed network tariffs, moving away from flat rate consumption-based charges.

This was driven by the impact on the electricity grid of rising maximum demand, which required increased investment in some networks when consumption was flat or falling.

About 55 per cent of the total energy demand in the ACT is subject to time of use or controlled load charges.