Lines increases hit many businesses in pocket needlessly.

PRESS RELEASE
12 April 2013
Jeff Weir, Senior Tariff Analyst, HeavyDutyDecisions.co.nz

LINES INCREASES HIT MANY BUSINESSES IN POCKET NEEDLESSLY.

Increases in lines charges come into effect on this month will add thousands to power bills for some businesses. But Jeff Weir of tariff analysis company HeavyDutyDecisions.co.nz says that many businesses could save thousands by ensuring they are on the right lines plan in the first place.

“Electricity distribution companies change their prices on the 1st of April each year, and retailers pass through any increases to end consumers. But what businesses don’t realise is that there are usually a number of different delivery plans – called load groups within the industry – that apply to non-residential connections. Sometimes tariffs differ radically from one load group to the next in terms of end cost. Yet the suitability of the load group you’re currently assigned to probably hasn’t been checked in years, if ever.”

Mr Weir estimates that many thousands of businesses might be able to switch to a different load group for economic benefit, with savings of up to tens of thousands of dollars per year on offer.

“The particular load group your business is on is usually tied to either the size of your master fuse for your site; the type of metering you have installed; or the amount of electricity you use in a year. Sometimes it depends on a combination of these. While you can’t easily change how much electricity you’re using, changes to your fused capacity or your metering configuration could be the key to unlocking significant savings.”

Mr Weir cites an example of a motel on Wellington Electricity’s network that had a fused capacity more suitable to a large industrial site than a motel.

“They installed a lower-capacity fuse, which allowed them to change from an Industrial load group (GV99) to a lower-capacity commercial one (GV30). They saved over $8,000 per year. And that was 4 years ago…meaning they’ve now avoided over $32,000 in lines charges, simply by changing a fuse.”

Mr Weir advises that before defusing, you’ve got to make sure the smaller fuse will still handle your peak load.

“Smaller sites will need to get an electrician to measure what their peak is when everything is turned on at the same time, as this will tell them the minimum capacity fuse they need to get by. Larger sites usually have a Time-Of-Use meter installed that records peak demand, and this monthly peak is usually printed on their energy invoice. Many sites in both camps will have far larger capacity fuses installed than they will ever come close to needing.”

“Sometimes installing a larger fuse will also result in a load group that’s cheaper. For instance, still on the Wellington Electricity network, the GV14/GX14 load groups – for medium-sized commercial premises – are set so high that you could save thousands regardless of whether you install a larger fuse or a smaller one. By way of example, if you use around 150,000 kilowatt Hours per year – 19 times the average domestic household’s annual consumption – then you should save over $3,000 per year regardless of whether you shift to the next plan up or down.

Wellington Electricity documents show there are 403 connections on the commercial GV14/GX14 load groups, and 525 sites on the Industrial GV99/GX99 load groups.

“Most sites on the commercial GV14/GX14 group would probably benefit if they can change off it, and sites on the industrial GV99/GX99 group with peak demand less than 300 kVA could well save in excess of $20,000 per year by changing to the lower-capacity GV30 plan. Check your energy invoice: this should show what load group you’re currently on, and if you have a Time-of-Use meter it will also show your peak demand figure.”

Mr Weir can’t think of any rationale for such a pricing structure.

“Wellington’s network offers no incentive for you to move energy use away from peak times, and the pricing structure of some load groups compared to others seems fairly arbitrary. By way of comparison, on Vector’s Auckland and North Auckland networks, businesses get a big cost reduction if they can shift electricity use to before 8am or after 10pm”

“Lines companies are natural monopolies and while they’re regulated by the Commerce Commission regarding how much profit they make, they can pretty much do what they want when it comes to divvying up their charges among their various load groups. But while you can’t exactly vote with your feet, you may well be able to vote with your fuse”.

Mr Weir says that while these examples are on the Wellington Electricity network, pricing structures on other networks also offer potential savings.

“For instance, switching to a lower load group might save some smaller industrial sites on the Powerco network in the North Island as much as $30,000 per year or more. And on the Northpower network, 140 sites can freely choose whether to be on a demand-based load group or a consumption-based load group – one of which might easily cost tens of thousands less than the other, depending on your specific energy use.”

Mr Weir estimates that hundreds of businesses also likely have their fused capacity incorrectly recorded by retailers and distribution companies.

“This means they will be incorrectly assigned to one load group, when in actual fact they belong in another. So they could be due a refund going back years.”

Mr Weir advises businesses to review the appropriateness of their lines plan at least every two years.

“You don’t want to pay a cent more than necessary, let alone tens of thousands of dollars.”

 

ENDS

 

CONTACT INFORMATION

Jeff Weir, Senior Tariff Analyst, www.HeavyDutyDecisions.co.nz
Mobile: 021 0252 3031
Landline: 0508 DECISIONS (0508 332 474)

Vector Business Tariff changes creates winners and losers.

PRESS RELEASE
20 February 2013
Jeff Weir, Senior Tariff Analyst, HeavyDutyDecisions.co.nz

VECTOR BUSINESS TARIFF CHANGES CREATES WINNERS AND LOSERS.

A Commercial Tariff Consultant says a major tariff rebalancing across Vector’s Auckland and Northern electricity distribution networks will see some large businesses potentially paying thousands more, while others could potentially save thousands.

Jeff Weir of tariff analysis company HeavyDutyDecisions.co.nz was referring to Vector’s just-released pricing disclosures for Vector’s Auckland electricity network – covering Auckland Central, Waiheke Island, Manukau and parts of Papakura – and Vector’s Northern network – covering North Shore, Waitakere and Rodney.

“In general, the changes more fairly share the costs of maintaining Vector’s networks across different business groups. But the sheer number of different tariffs that apply to some customer groups may have many scratching their heads,” said Mr Weir. Larger connections will see up to eight separate charges for delivery of their electricity itemised on their energy bills.

And the sheer increase in one tariff in particular – Vector’s Power Factor charge ­­– will “raise eyebrows as well as power prices”. From 1st April, Vector are increasing their Power Factor tariff by around 6,500 percent.

“While that increase is off a very low base, it’s fair to say that the sheer size of this increase will come as a surprise to many businesses,” said Mr Weir.

Power Factor is a measure of how effectively businesses convert the electrical current delivered by lines companies into useful output power.  “In layman’s terms, the worse your power factor, the harder that Vector needs to work to push electricity through your site. So Vector charge you a penalty if your power factor drops beneath the limit that Vector deems acceptable.”

Around 1000 large businesses across Vector’s networks are already subject to a modest Power Factor tariff.  As from 1 April 2013, these sites as well as a further 1,700 connections will be subject to the tariff at this greatly increased rate.

“Vector warned last year that an unspecified increase in this charge was on the way, but they probably could have done more to signal the likely quantum in advance…a few weeks’ notice does not give businesses a heck of a lot of time to get their heads around this.”

Mr Weir says that increases in tariff changes on Vectors’ Auckland network will probably be fairly modest for most businesses. But around 340 medium to large sites on Vector’s Northern network will be particularly impacted by changes, both positive and negative.

“In addition to the Power Factor increase, these 340 connections also face a 19% increase in their Demand Charge, and a 10% increase in their Capacity Charge on average.  So that’s a potential triple-whammy. However, there’s some good news too:  these 340 customers will see their Fixed Daily Charge decrease by an average $3,400 per year under this rebalancing.”

Whether these sites will come out better off overall will depends largely on what kind of equipment businesses operate, and how smart they are about managing their energy use around Vector’s tariffs, says Mr Weir.

“Many affected businesses on both networks could mitigate their exposure to some of these tariffs, or even avoid them altogether. For instance, businesses pay no Peak Demand or Power Factor charges on any electricity they use before 8am or after 10pm. So instead of firing up your air conditioning or industrial furnaces at 8am when lines charges and underlying energy rates are high, fire them up a bit earlier, when your total delivered electricity cost is much, much cheaper by comparison.”

Even if sites can’t easily shift load to cheaper periods, installing power factor correction equipment could be a great investment if poor power factor is an issue. “This might also help decrease their exposure to Capacity and Demand charges as well.”

Mr Weir says that while the new tariffs are complicated, they seem a progressive step towards rewarding businesses for making the right decisions about their energy use.

“And the rebalancing was probably long overdue – some businesses on Vector’s Northern network in particular seemed to be paying a lot more than others simply because they happened to be in a certain customer group. This rebalancing helps address that”.

ENDS

 

CONTACT INFORMATION

Jeff Weir, Senior Tariff Analyst, HeavyDutyDecisions.co.nz
Mobile: 021 0252 3031
Landline: 0508 DECISIONS (0508 332 474)

FURTHER INFORMATION

  • Lines charges are what you pay to your local lines company to deliver your electricity from the national grid and across their network to your site, and typically account for around 35 – 45% of many electricity bills.
  • Line companies generally change their prices on the 1st of April each year. While they have to work within Commerce Commission guidelines in terms of how much profit they make, how they divvy up their charges amongst different customer groups is largely up to them. Consequently, often they’ll make changes to their tariffs that radically alter the economics of one customer group compared to another.
  • Lines companies put their customers into different categories – called load groups – depending on how much electrical load a site is likely to use. Each load group has a different tariff – and these tariffs can be radically different in terms of end cost.
  • The particular load group your lines company puts you in is often determined by the size of the main fuse on your switchboard. But the appropriateness of that fuse size might not have been checked in years, if ever. Consequently, many businesses have a far higher capacity fuse than they actually require.
  • Lines charges for domestic consumers and smaller businesses are usually bundled in to the rates your electricity retailer quotes you. Lines charges for larger customers with Time-of-Use metering are usually itemised separately on your energy invoice by your energy retailer.
  • Vector operates two electrcitiy networks -
    • Vector’s Auckland electricity network covers Auckland Central, Waiheke Island, Manukau and parts of Papakura. Lines charges on this network are subject to a 10% prompt payment discount.
    • Vector’s Northern network covers North Shore, Waitakere and Rodney. Lines charges on this network are NOT subject to a 10% prompt payment discount.
  • Vector’s latest pricing documents and disclosures can be accessed at:

Some Canterbury businesses overcharged tens of thousands for lines charges

PRESS RELEASE
7 December 2012
Jeff Weir, Senior Analyst, HeavyDutyDecisions.co.nz

CANTERBURY BUSINESSES OVERCHARGED TENS OF THOUSANDS BY ENERGY RETAILERS

A commercial tariff consultant says some electricity retailers are significantly overcharging Canterbury businesses by incorrectly calculating refunds due for overpayment of electricity lines charges.

Jeff Weir of tariff analysis company HeavyDutyDecisions.co.nz says he’s seen some cases in the tens of thousands of dollars.

“I’ve just helped one customer secure a $76,000 refund for overpayment…$45,000 more than their retailer was originally going to refund them,” said Mr Weir.

“Another energy retailer made the exact same mistake last year… to the tune of $52,000. So this clearly wasn’t an isolated case.

“You’ve got to wonder how many other businesses out there have got no idea that they’ve been significantly overcharged. And you’ve got to hope that retailers will work damn hard to check their math, and to contact any businesses that are owed a refund.”

Mr Weir says that larger businesses in Canterbury pay lines charges based on their average power use during peak winter periods – usually the coldest mornings and evenings on working days. Before finalized winter figures are to hand, retailers charges businesses based on an estimate.

“In October, retailers are supposed to work out the actual amount used and refund large customers for any overpayment in what’s termed a ‘wash-up’. But they don’t always get the math right. As a result some businesses pay thousands – or tens of thousands in the above case – more than they should.

“Another question in my mind is whether retailers check for a refund in the case that you switched retailers or shut up shop before they do their annual wash-up. There were a heck of a lot of businesses changing sites or closing down altogether in the aftermath of the Canterbury quakes. I wouldn’t be surprised if some of them didn’t get the refunds they deserved.”

Mr Weir says that the annual October wash-ups usually only cover the period between April and October, with retailers assuming any previous payments were correctly calculated based on actual usage figures from the previous winter.

“But if you switched on your site in spring or summer, then you didn’t have any actual winter figures, and so your retailer must have used a guestimate – often a very high one. If they neglected to take this into consideration when they did your wash-up, then you’ve been significantly overcharged.”

Mr Weir believes all energy retailers should review their methodology behind wash-ups for the last several years – particularly given the issue could have been exacerbated by businesses changing sites following the Canterbury Earthquakes.

“There were a heck of a lot of businesses changing sites or closing down altogether in the aftermath of the Canterbury quakes….I wouldn’t be surprised if some of them didn’t get the refunds they deserved.

“Any overcharge as a result of this is the last thing these businesses need.”

Mr Weir says that any miscalculation by retailers is exacerbated by the high tariffs in force during these peak winter periods.

“If you so much as routinely boil the jug during these peak periods, you’ll face an extra $52 of lines charges per year…and that’s on top of the cost of any electricity used. Imagine how much more firing up a large electrical furnace or motor during these periods would cost you.”

Mr Weir says that as well as ensuring that Energy Retailers get their math right, businesses can reduce their lines charges ‘by up to 70%’ if they reduce their load during winter peak periods.
Mr Weir emphasizes that the local lines company Orion is not at fault, and that the issue is due to some retailers incorrectly passing through Orion’s charges to customers.

ENDS

CONTACT INFORMATION

Jeff Weir, Senior Tariff Analyst, HeavyDutyDecisions.co.nz
Mobile: 021 0252 3031
Landline: 0508 DECISIONS (0508 332 474)

FURTHER INFORMATION

  • Lines charges are what you pay the local lines company to deliver your electricity from the national grid and across their network to your business.
  • In the Canterbury region, the local lines company – Orion – charges retailers in bulk, and retailers in turn pass these costs through to their customers.
  • A major component of Orion’s delivery prices is a ‘Peak Charge’, usually applicable during the top 100 to 150 demand peaks during the winter season (May to August).
  • Orion use ripple control signals, text alerts, and emails to advise major customers that a peak period is occurring. Businesses can reduce lines charges by up to 70% by reducing load during these signaled peak times.
  • Around 1000 connections have Time-Of-Use metering required for retailers to pass through these charges transparently. Because the exact timing of winter demand peaks can’t be predicted, retailers use an estimate of peak load until finalized figures are available in October.
  • Once finalized figures are to hand, retailers are supposed to refund customers for any overpayment in what’s termed a ‘wash-up’. Some retailers forget to apply these wash-ups to uncorrected estimates from previous periods.
  • A copy of Orion’s Application of Delivery Prices can be downloaded from http://www.oriongroup.co.nz/downloads/ApplicationOfDeliveryPrices.pdf