Queensland Energy Prices July An update report on the Queensland Tariff-Tracking Project

Queensland Energy Prices July 2018 An update report on the Queensland Tariff-Tracking Project

Queensland Energy Prices July 2018 An Update report on the Queensland Tariff-Tracking Project May Mauseth Johnston, August 2018 Alviss Consulting Pty Ltd www.alvissconsulting.com twitter.com/alvissc www.vinnies.org.au twitter.com/vinniesaust Contact: Gavin Dufty Manager, Social Policy Unit Victoria St Vincent de Paul Society Phone: (03) 98955816 or 0439 357 129 twitter.com/gavindufty St Vincent de Paul Society and Alviss Consulting Pty Ltd This work is copyright. Apart from any use permitted under the Copyright Act 1968 (Ctw), no parts may be adapted, reproduced, copied, stored, distributed, published or put to commercial use without prior written permission from the St Vincent de Paul Society.

Disclaimer The energy offers, tariffs and bill calculations presented in this report and associated workbooks should be used as a general guide only and should not be relied upon. The workbooks are not an appropriate substitute for obtaining an offer from an energy retailer. The information presented in this report and the workbooks is not provided as financial advice. While we have taken great care to ensure accuracy of the information provided in this report and the workbooks, they are suitable for use only as a research and advocacy tool. We do not accept any legal responsibility for errors or inaccuracies. The St Vincent de Paul Society and Alviss Consulting Pty Ltd do not accept liability for any action taken based on the information provided in this report or the associated workbooks or for any loss, economic or otherwise, suffered as a result of reliance on the information presented. If you would like to obtain information about energy offers available to you as a customer, go to Australian Energy Regulator s Energy Made Easy website or contact the energy retailers directly. Acknowledgments This project was funded by Energy Consumers Australia (www.energyconsumersaustralia.com.au) as part of its grants process for consumer advocacy projects and research projects for the benefit of consumers of electricity and natural gas. The views expressed in this document do not necessarily reflect the views of Energy Consumers Australia.

Contents The Queensland Tariff-Tracking Project 1 1. Energy price changes from July 2017 to July 2018 2 Methodology and assumptions 2. Market offers post July 2018 5 2.1 Electricity: Market offers post July 2018 5 2.2 Gas market offers post July 2018 10 3. Supply charges 13 3.1 Electricity supply charges 13 3.2 Gas supply charges 14 4. Cost components and bill-stack analysis 15 6. Solar offers 19 Methodology and assumptions 19

The Queensland Tariff-Tracking Project This project has tracked electricity and gas tariffs in Queensland from July 2009 to July 2018, and developed a spreadsheet-based tool that allows consumer advocates to build on the initial analysis and continue to track changes as they occur. The first report for the Queensland Tariff-Tracking project was published in August 2012 and this is the fourth up-date report focusing on price changes that have occurred over the last year. We have developed workbooks that allow the user to enter consumption levels and analyse household bills for regulated gas and electricity offers from July 2009 to July 2016, as well as published electricity and gas market offers post the price resets in July 2012, 2013, 2014, 2015, 2016, 2017 and 2018. 1 A recent addition to the Tariff-Tracking project is market offers available to new solar customers. The workbook allows users to calculate annual bills based on retailers rates, feed in tariffs offered and additional discounts. Again, the user can enter consumption level as well as choosing to run the bill calculation based on 1.5 kw or 3 kw solar systems. Workbook 1: Standing/Regulated electricity offers July 2009-July 2018 Workbook 2: Standard gas retail offers July 2009-July 2018 2 Workbook 3: Electricity market offers July 2012 - July 2018 Workbook 4: Gas market offers post July 2012 - July 2018 Workbook 5: Solar market offers post July 2016, July 2017 and July 2018 The jurisdictional update reports will be followed by a NEM comparison report that discusses market issues and customer impacts in more detail as well as making recommendations. All workbooks and reports can be accessed at the St Vincent de Paul Society s website: www.vinnies.org.au/energy 1 All market offers are published offers and do not include special offers that retailers market through door-knocking campaigns or brokers. We use the retailers own websites to collect market offer for the Queensland Tariff-Tracking tool. If the retailer has more than one market offer we use the offer that produces the lowest annual bill and/or the offer the retailer promotes as it s best offer. Prior to July 2016, the Tariff-Tracking tool does not include any additional discounts or bonuses but key market offer features are listed in the spreadsheets. This report contains analysis of some of those features. 2 Note: Queensland does not have regulated gas offers. 1

1. Energy price changes from July 2017 to July 2018 In terms of general trends, the tariff analysis has found that: 3 Annual electricity bills for all-electric households on and Origin s standing offers (tariff 11) have typically decreased by around $40 (or 2%) since July 2017. 4 See chart 1 below. For customers on the Time of Use tariff (tariff 12), the annual bill has typically decreased by $60 (or 2%) since July 2016. See chart 1 below. Gas bills have remained unchanged in all areas since July 2017. See chart 2, 3 and 4 below. The average annual electricity bill (all retailers) for households using 8,000 kwh per annum is currently around $2,755 for standing offer customers and just under $2,330 for market offer customers (including pay on time discounts). See chart 5 in section 2.1. Compared to last year (July 2017), the average electricity market offer (inclusive of pay on time discounts) has decreased by $190 or 7.5%. See section 2.1. A household switching from Origin or s standing offer (Tariff 11) to the best electricity market offer may save around $540 - $600 per annum. See section 2.1. The difference between market offers is also significant. The difference between the best and the worst market offers is between $705 and $775 (depending on tariff type) for customers that always pay bills on time. See charts 6-9 in section 2.1. As most retailers offer pay on time discounts, and many charge late payment fees, paying late can significantly erode savings available from switching to a better market offer. Customers on Alinta s offer, for example, may pay $641 more per annum if they do not pay their bills by the due date. 5 See section 2.1. There have been no changes to and Origin s gas market offers since last year (July 2017). See section 2.2. As retail charges are no longer regulated, the supply charge varies between retailers. While the majority of retailers apply the same fixed supply charge to their standing offer as they do to their market offer, some retailers apply higher supply charges to their standing offers. They are Q Energy, Mojo, Energy Locals, Dodo and Red Energy. See chart 15 in section 3.1. The network charge component of the bill continues to decrease. The NUOS proportion of standing offer bills is currently 32%. See chart 17 in section 4. We estimate that the 2018/19 retail component of annual bills (based on retail offers available as of July 2018) will be approximately $670 for standing offer customers, $440 for market offer customers (including pay on time discounts) and $75 for market solar customers (including pay on time discounts). See table 7 in section 4. The average annual bill is approximately $1,420 for households with 3 kw systems and $1,835 for households with 1.5 kw systems installed. This means that the average annual bill is $910 less for solar households with 3 kw systems installed compared to non-solar households. Compared to last year, the average market offer for solar customers (3 kw systems) has decreased by $160 or approximately 10%. See section 5. 3 These calculations are based the regulated/standing offer for all-electric households using 8,000kWh per annum (thereof 15% off-peak for customers on tariff 31 or 33) and the average changes to gas offers based on customers using 10,000Mj per annum. 4 According to the AEMC, 82% of small customers in South East Queensland were or Origin customers in 2016 and more recent reports have not indicated a major move away from these two retailers (AEMC, Retail Competition Review 2016, Final report, 174). 5 Alinta offers 28% off usage charges if bills are paid on time. Based on households using 8,000 kwh per annum. 2

The comparison of market offers available to new solar customers shows that there are significant differences between the bills the retailers offers produce, and that it is not necessarily the retail offers with the highest feed in tariffs (FIT) that produce the lowest bill. Brisbane solar customers with a typical consumption and a 3 kw system installed, may save $730 per annum if switching from the worst market offer to the best. See section 5. Chart 1 Changes to annual electricity bills from July 2017 to July 2018, 8,000kWh per annum, GST inclusive 6 2,800 2,700 2,600 2,500 Annual bill ($) 2,400 2,300 2,200 2,100 2,000 1,900 Tariff 11 Tariff 31 Tariff 33 Tariff 12 Jul'17 Jul'18 Table 1 Increases to annual bills for electricity by tariff type July 2017 July 2018 7 Tariff 11 Tariff 31 Tariff 33 Tariff 12 $ Increase -$40 -$40 -$40 -$60 % Increase -2% -1% -1% -2% Both and Origin left their gas prices unchanged on 1 July for all gas pricing zones. This means that Origin continues to offer the lowest gas prices in both Brisbane North and Brisbane South. 900 Chart 2 Changes to annual gas bills 850 from July 2016 to July 2017, 10,000Mj - 800 South Brisbane & South Queensland 8 750 Annual bill ($) 700 650 600 550 500 450 400 South Brisbane (APT) Origin Jul'17 Jul'18 6 Based Origin and s standing offers. For Tariff 31 and 33, 15% of consumption has been allocated to off-peak rates. For Tariff 12, the allocations are: 20% peak, 55% shoulder and 25% off-peak. 7 Ibid. 8 and Origin s standard rates and customers using 10,000Mj per annum. 3

Chart 3 Changes to annual gas bills from July 2017 to July 2018, 10,000Mj - North Brisbane & Ipswich 9 850 800 750 700 Annual bill ($) 650 600 550 500 450 400 North Brisbane (Envestra) Origin Jul'17 Jul'18 Chart 4 Annual gas bills as of July 2017 and July 2018, 10,000MJ Origin s rates in the Northern retail area and Wide Bay 10 900 800 700 Annual bill($) 600 500 400 300 200 Northern retail area Envestra/Origin Wide Bay area Jul'17 Jul'18 9 Ibid. 10 The Northern retail area covers Rockhampton and Gladstone and the Wide Bay area covers Bundaberg, Maryborough and Hervey Bay. Origin is the only retailer with offers for residential customers in these areas. Bill estimates based on customers using 10,000MJ per annum. 4

2. Market offers post July 2018 2.1 Electricity: Market offers post July 2018 Chart 5 below shows that the average annual bill for households using 8,000kWh per annum is around $2,755 for standing offer customers and just under $2,330 for market offer customers (including pay on time discounts). Furthermore, it shows that many retailers apply the same rates to their standing offers and their market offers but offer pay on time (POT) discounts for market offer customers. Compared to last year (July 2017), the average market offer (inclusive of pay on time discounts) has decreased by $190 or 7.5%. Chart 5 Electricity offers as annual bills, July 2018, Single rate (tariff 11) 8,000kWh per annum, GST inclusive 11 Annual bill ($) 3,800 3,600 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 Click Energy Diamond Energy Dodo Power & Gas EnergyAustralia Energy Locals Origin Energy Powerdirect Sanctuary Energy Mojo Power Powershop Red Energy Alinta Energy Standing Market (excl POT) Market (incl POT) Q Energy Avg. standing Avg. market (excl POT) Avg. market (incl POT) As stated above, many market offers include features such as discounts on consumption rates, vouchers, sign-up credits, loyalty bonuses and discounts if bills are paid on time or paid by direct debit. Consumers assessing market offers should take these additional features into account and be aware of contract conditions such as late payment fees, the length of the contract and fees for exiting the contract early. Charts 6-9 below show the difference in annual bills between retailers standing offers and market offers based on guaranteed discounts (if any), as well as market offers including pay on time discounts (if any) for tariff 11, 31, 33 and 12. Tariff 11 customers on and Origin s standing offers can save $600 and $540 respectively by switching to the best market offer (Alinta s). If the same standing offer customers switched to Dodo, however, they would be $135 and $195 worse off respectively. The maximum difference, or price spread, between annual bills for market offers (including pay on time discounts) is $730 for tariff 11, $705 for tariff 31 and 33, and $775 for tariff 12. 11 The retail offers were collected from the retailers websites between the 1st of July and the 1th of August 2018 and it must be noted that retailers may change their rates at any time. Annual bill calculations shown as green columns include guaranteed discounts and pay on time discounts. 5

Chart 6 Tariff 11: Annual bills based on guaranteed discounts vs. pay on time discounts as of July 2018 (8,000kWh per annum, including GST). Chart 7 Tariff 31: Annual bills based on guaranteed discounts vs. pay on time discounts as of July 2018 (8,000kWh per annum, 15% off-peak, including GST). Annual bill ($) Annual bill ($) 4,000 3,500 3,000 2,500 2,000 1,500 4,000 3,500 3,000 2,500 Click Energy Diamond Energy Dodo Power & Gas EnergyAustralia Energy Locals Origin Energy Powerdirect Sanctuary Energy Mojo Power Powershop Red Energy Alinta Energy Q Energy Standing offer Guaranteed discounts Pay on time discounts 2,000 1,500 Click Energy Diamond Energy Dodo Power & Gas EnergyAustralia Energy Locals Origin Energy Powerdirect Sanctuary Energy Mojo Power Powershop Red Energy Alinta Energy Q Energy Standing offer Guaranteed discounts Pay on time discounts Chart 8 Tariff 33: Annual bills based on guaranteed discounts vs. pay on time discounts as of July 2018 (8,000kWh per annum, 15% off-peak, including GST). Annual bill ($) 4,000 3,500 3,000 2,500 2,000 1,500 Click Energy Diamond Energy Dodo Power & Gas EnergyAustralia Energy Locals Origin Energy Powerdirect Sanctuary Energy Mojo Power Powershop Red Energy Alinta Energy Q Energy Standing offer Guaranteed discounts Pay on time discounts 6

Chart 9 Tariff 12: Annual bills based on guaranteed discounts vs. pay on time discounts as of July 2017 (8,000kWh per annum, 20% peak, 55% shoulder and 25% off-peak, including GST). Annual bill ($) 4,000 3,500 3,000 2,500 2,000 1,500 Click Energy Diamond Energy Dodo Power & Gas EnergyAustralia Energy Locals Origin Energy Mojo Power Powershop Red Energy Powerdirect Alinta Energy Standing offer Guaranteed discounts Pay on time discounts Figure 1 below shows estimated annual bills for market offers post discounts ranked from the lowest annual bill to the highest (for Tariff 11). the highest (for Tariff 11) as well as how they ranked compared to other retailers one year ago (in brackets). 12 Figure 1 Lowest to highest annual bills (incl GST) for market offers post July 2018, including discounts and pay on time discounts - Households consuming 8,000kWh per annum (Tariff 11) Alinta QEnergy $2,044 $2,052 $2,057 Energy Australia $2,064 Powerdirect $2,102 Powershop $2,116 Red Energy $2,198 Origin Energy $2,271 Diamond Energy $2,293 $2,357 Click Energy $2,414 Energy Locals $2,420 Sanctuary Energy $2,665 Mojo Power $2,694 $2,698 Dodo Power & Gas $2,775 12 These bill estimates are based on rates published on the retailers websites between the 1st of July and the 1th of August 2018 and it must be noted that retailers may change their rates at any time. Additional discounts for customers choosing to pay by direct debit are not included in these bill calculations. 7

The discounts (including pay on time discounts) used to estimate annual bills for Charts 6-8, as well as Figure 1, above are shown in table 2 below. Table 2 also shows other contract terms and features, such as early termination fees, associated with these market offers. Some of the retailers have multiple market offers and may offer higher discounts than those listed here. However, if discounts are higher they are typically tied to other conditions such as payment by direct debit, e-billing or dual fuel contracts. Table 2 Published electricity market offers, effective as of July 2018: Key additional features and contract conditions Savers Origin Bill Saver Energy Australia Anytime Saver Click People Agate Energy Locals Save Me Plus Diamond Pay on time Sanctuary Negotiated Mojo Power Connect Powershop Power Saver Red Energy Easy Saver Powerdirect Market offer Dodo Market offer Electricity 4 Alinta Home Saver Plus Guaranteed discounts Contract term/fixed benefit period ETF* LPF* Pay on time discounts Offer took effect No 1 year No $12.73 26% off usage 3/7/18 12% off bill 1 year No $12 No 1/7/18 28% off usage 1 year No $12 No 2/7/18 No No No $12 15% off bill 1/7/18 No No No $13 No 10/7/18 No 2 years No No 18% off usage 14/5/18 No No No No 7% off bill 1/8/18 No No No No No 1/7/17 No No No $12 No 1/12/17 No No No No 12% off bill^ 1/7/18 No No No No 10% off bill 1/7/18 No 1 year No $12.73 24% off usage 4/7/18 No No No No No** 23/2/18 No No No $12 5% off bill 1/7/18 No 2 years No No 28% off usage 11/2/18 Q Energy Flexi Saver Home No 2 years No No No 12/6/18 * ETF = Early Termination Fee and LPF = Late Payment Fee ^ To qualify for Pay on Time discount, customer must log in to Powershop at least once a month and buy enough of the Power Saver to cover consumption for the Account Review period. ** Dodo offers a Pay on Time discount if the customer signs up to Direct Debit. As many retailers tend to apply the same rates as the regulated rates to their market offer and then offer discounts, it is important that customers are aware that many of these discounts are conditional upon bills being paid on time. Pay on time discounts, combined with late payment fees on market offers, means 8

that Queensland households can be significantly penalised for late payment. 13 Or conversely, Queensland households can be significantly rewarded for prompt payment. It does, however, highlight an issue that negatively impacts on households with cash-flow problems. Table 3 below shows that paying late can become very expensive on some market offers. Households on the Alinta Energy and market offer, for example, would be approximately $640 worse off if they pay late compared to paying on time. Powerdirect customers would be $590 worse off if they pay their bills after the due date. As most retailers bill customers quarterly, these numbers are based on four late payment fees (where applicable) per annum. Click Energy and Mojo, however, issue monthly bills for these offers and customers can therefore be charged up to $144 per annum in late payment fees alone. 14 Table 3 Electricity offers as of July 2018: Difference ($) in annual bill between paying all bills on time vs. paying all bills late (based on 8,000kWh and 4 bills per annum) Tariff 11 Alinta Energy 641 634 Powerdirect 589 Click Energy 474 444 Powershop 288 Red Energy 244 190 Diamond Energy 173 Energy Locals 52 EnergyAustralia 48 Origin Energy 48 Mojo Power 48 Dodo Power & Gas 0 Sanctuary Energy 0 Q Energy 0 As both the size of pay on time discounts and the number of retailers applying them have increased, the difference in electricity bills between customers that pay on time and customers that pay late is at a record high. Chart 10 below shows the estimated annual electricity bill (tariff 11) for customers that always pay on time and for those who always pay late. 13 The Queensland Electricity Industry Code (clause 4.13.5) does not permit retailers to apply late payment fees to the regulated offer unless the fee is expressly provided for in the notified prices. 14 Click Energy and Mojo s late payment fees are $12. 9

Chart 10 Tariff 11: Estimated annual bill for customers that pay on time vs. pay late, electricity offers as of July 2018, 8,000kWh per annum (GST inc). Annual bill ($) 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 Dodo Power & Gas Sanctuary Energy Q Energy EnergyAustralia Origin Energy Mojo Power Energy Locals Diamond Energy Red Energy Powershop Click Energy Powerdirect Alinta Energy Paid on time Paid late 2.2 Gas market offers post July 2018 There are no regulated gas offers in Queensland and currently only Origin and have gas market offers for residential consumers. As only North Brisbane (including Ipswich) and South Brisbane (including Gold Coast, Toowoomba, Oakey) have more than one market offer, this analysis only comprises market offers in these two areas. 15 Chart 11 below shows that there is a relatively small ($40) difference between and Origin s market offer rates (prior to additional discounts) in the Envestra zone (Brisbane North). In the APT zone (Brisbane South) Origin s market offer produces an annual bill that is approximately $90 less than for households with this consumption level. The average market offer (inclusive of pay on time discounts) has remained unchanged since July 2017. 16 Chart 11 Gas offers as annual bills, Post July 2018 (10,000MJ per annum) 880 860 840 820 Annual bill ($) 800 780 760 740 720 700 APT Envestra Origin The calculations for the market offers in Chart 11 include their rates only (cost per MJ and fixed charges) and do not include other market offer features such as discounts on consumption rates, vouchers, sign-up credits, loyalty bonuses and discounts if bills are paid on time. Consumers assessing market offers should take these additional features into account and be aware of contract conditions such as late payment fees, the length of the contract and fees for exiting the contract early. 15 Gas customers in Rockhampton, Gladstone, Bundaberg, Maryborough and Hervey Bay only have access to Origin s market offers. 16 Average market offer bill based on Origin and s offers in the APT and Envestra gas zones. 10

Table 4 Published gas market offers in the APT and Envestra gas zones as of July 2018: Key features and contract conditions Savers Guaranteed discounts Contract term/fixed benefit period ETF* LPF* Pay on time discounts Offer took effect No 1 year No $12.75 5% off usage 3/7/18 Origin Saver No 1 year No $12 4% off usage 1/7/18 * ETF = Early Termination Fee and LPF = Late Payment Fee The discounts (including pay on time discounts) used to estimate annual bills for Figures 2 and 3, as well as charts 12-13 below, are shown in table 4 above. Table 4 also shows other contract terms and features, such as late payment fees, associated with these market offers. The difference between the best and the worst market offers is less for gas than electricity. Furthermore, as there is only a small difference between and Origin s discounts, the difference between the two market offers post discounts is similar to the difference prior to discounts (see chart 11 above) for this consumption level. Figures 2 and 3 below show estimated annual bills for gas market offers post discounts in the APT and Envestra gas zones as well as how they ranked compared to other retailers one year ago (in brackets). 17 Figure 2 APT gas zone: Lowest to highest annual bills (incl GST) for market offers post July 2018, including discounts and pay on time discounts - Households consuming 10,000MJ per annum Origin Energy $757 $842 Figure 3 Envestra gas zone: Lowest to highest annual bills (incl GST) for market offers post July 2018, including discounts and pay on time discounts - Households consuming 10,000MJ per annum Origin Energy $736 $771 Charts 12-13 below show the estimated annual gas bill for customers that always pay on time and customers who do not, for published gas offers in the APT and Envestra gas zones. Chart 12 shows that both and Origin s annual bills are $60 - $70 less for prompt payers compared to late payers in the APT gas zone. 17 These bill estimates are based on rates published on the retailers websites between the 1st of July 2017 and the 1st of August 2018, and it must be noted that retailers may change their rates at any time. 11

Chart 12 APT gas zone: Estimated annual bills for customers that pay on time vs. pay late, gas offers as of July 2017 (10,000Mj, GST inc) 18 950 900 850 Annual bill ($) 800 750 700 650 600 Origin Paid on time Paid late Chart 13 below shows that there are similar differences between and Origin s offers in the Envestra gas zone. Annual bills are $65 - $75 less for prompt payers compared to late payers in this pricing zone. Chart 13 Envestra gas zone: Estimated annual bills for customers that pay on time vs. pay late, gas offers as of July 2018 (10,000MJ, GST inc) 19 950 900 850 Annual bill ($) 800 750 700 650 600 Origin Paid on time Paid late 18 Annual bill calculation includes discounts, pay on time discounts and late payment fees as per energy offer. 19 Ibid. 12

3. Supply charges 3.1 Electricity supply charges The supply charge is a fixed daily charge that is paid in addition to the consumption charges for electricity used. In Queensland the supply charge for single rate electricity customers (tariff 11) has decreased by 2% since July 2016. In July 2013, 2014 and 2015, however, there were significant increases to the supply charge. The average supply charge (based on and Origin s standing offers) is still almost 116.50 cents per day meaning that households pay around $425 per annum in fixed charges. Chart 14 below shows the changes to the daily supply charge from July 2009 to July 2018. Chart 14 Daily supply charge, Tariff 11, regulated/standing electricity offers, 2009-18 20 140 120 100 Cents per day 80 60 40 20 0 July '09 July '10 July '11 July '12 July '13 July '14 July '15 July '16 July '17 July '18 As the retail charges are no longer regulated, the supply charge varies between retailers. Chart 15 shows that around half of the retailers apply the same fixed supply charge to their standing offer as they do to their market offer. Some retailers (Mojo, Simply, Energy Locals, Dodo and Red), however, apply higher fixed charges to their standing offers. Click Energy, on the other hand, applies a higher supply charge to its market offer than it does to its standing offer. Chart 15 Daily supply charge July 2018, Tariff 11, Cents/day incl. GST 240.00 220.00 200.00 180.00 Cents/day 160.00 140.00 120.00 100.00 80.00 60.00 40.00 Click Energy Diamond EnergyAustralia Origin Energy Powerdirect Sanctuary Energy Powershop Alinta Energy Red Energy Dodo Power & Gas Energy Locals Mojo Power Q Energy Standing Market 20 The 2016, 2017 and 2018 charges are based on and Origin s average supply charge 13

3.2 Gas supply charges In July 2018, APT (Brisbane South) and Envestra (Brisbane North) distribution zones maintained their same respective July 2017 average fixed supply charge for rates. The average gas supply charge is still just over 120 cents/day in the APT distribution area and approximately 77 cents/day in the Envestra (Brisbane North) pricing zone. This effectively means that South Brisbane households (APT zone) continue to pay $440 per annum in order to be connected to natural gas. Chart 16 below shows changes to the gas supply charge from July 2009 to July 2018 for both gas zones. Chart 16 Gas supply charges from July 2009 to July 2018, Cents per day 21 140 120 100 Cents per day 80 60 40 20 0 July '09 July '10 July '11 July '12 July '13 July '14 July '15 July '16 July '17 July '18 APT AGN/Envestra The average domestic gas consumption in Queensland is relatively low and as such the supply charges comprise a significant proportion of the annual gas bill. 22 For households consuming 10,000MJ per annum in the APT gas zone, the supply charge makes up 52-56% of the annual bill, depending on the retailer. In the Envestra zone (Brisbane North), the supply charge makes up approximately 35-37% of the annual bill (for the same consumption level). 21 Based on the average gas supply charge ( and Origin). 22 We have assumed typical residential annual gas consumption in Queensland to be 10,000MJ per annum while in Victoria we base it on 63,000MJ. 14

4. Cost components and bill-stack analysis The Queensland electricity networks, Energex and Ergon, introduce new Network Use of System (NUOS) charges as of 1 July every year. These NUOS charges are approved by the Australian Energy Regulator (AER) and comprise Transmission Use of System (TUOS) and Distribution Use of System (DUOS) and the retailers can, and generally will, build changes to the NUOS (in relation to both shape and price) into their retail tariffs. Chart 17 shows annual retail bills (solid line), NUOS charges as annual cost (dotted line) and NUOS as proportion of annual bill (columns). 23 It shows that both the NUOS charge and the NUOS proportion of bills have decreased from July 2015. This year (July 2018) the overall retail bill has also decreased slightly. The NUOS proportion of bills is currently 32%. Chart 17 Energex: Retail bill per annum (incl. GST), NUOS charges and NUOS as proportion of total bill (incl. GST) from 2009 to 2018 (based on the regulated/ standing retail offer, Tariff 11, 8,000 kwh per annum) 24 $ per annum 3000 2500 2000 1500 1000 500 100 90 80 70 60 50 40 30 20 10 % of annual cost 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 NUOS proportion (%) NUOS ($) Retail ($) 0 In addition to NUOS charges and retail, other key cost components of electricity bills are generation (wholesale market) costs, green schemes costs, and other costs associated with other public policy initiatives. To estimate the wholesale cost, we have relied on both the AEMC s annual price trend report for 2017. Table 5 Wholesale costs in Queensland ($/MWh) from 2016/17 to 2018/19 2016/17 $94 2017/18 $113.9 2018/19 $93.6 Electricity Purchase Cost * Estimated energy purchase cost for 2016/17, 2017/18 and 2018/19 (financial years). Based on Figure 24 in Frontier Economics, 2017 Residential Electricity Price Trends Report, A report prepared for the AEMC December 2018, 59. Note that the AEMC has supplied the numbers that the base case scenario in Figure 24 is based on. 23 The regulated residential retail tariff, which applies to residential customers across Queensland, is based on Energex network tariff only. 24 Based on the regulated retail offer rates from 2009 to 2015 and and Origin s standing offers (average) as of July 2016, 2017 and 2018. Presented as annual bills for households using 8,000kWh per annum (flat rate). The annual NUOS charges have been calculated by allocating 2,000kWh per quarter (again based on annual consumption of 8,000kWh) to the step charges stipulated in the NUOS. The annual NUOS cost also includes fixed charges. 15

The AEMC s Residential Electricity Price Trends report have also been used as a source to estimate green scheme costs for Queensland. 25 The significant decrease to the impact of green scheme costs on electricity bills from 2017/18 is due to the Queensland Government s decision to move charges associated with the Solar Bonus Scheme away from energy bills to the Queensland Government budget. 26 Table 6 below shows the cost of green schemes used for this analysis. Table 6 AEMC estimated Green scheme costs (c/kwh) from 2016/17 to 2018/19 2016/17 3.85 2017/18 1.06 2018/19 1.20 Green Schemes (c/kwh) In order to examine what households actually pay for the various services (and policies) that are costed by the supply chain and passed on to consumers in the form of a retail bill, table 7 below estimates the retail component of bills for standing offer customers, market offer customers and new solar market offers. All tables are based on households consuming 8,000 kwh per annum at a single rate tariff. By deducting GST, NUOS costs, wholesale costs and the cost of environmental policies ( green schemes ), amounts in the final row represent the estimated retail component (retail costs and profits). As of July 2018, the estimated retail component is approximately $670 per annum for standing offer customers, $440 for market offer customers (including pay on time discounts) and $75 for solar customers (including pay on time discounts). 27 Table 7 Deduction of bill components for standing, market and solar offers in the Energex network area, average annual bill based on offers effective as of July 2018 (8,000kWh per annum, single rate) Standing offer^ Market offer^^ Solar offer^^^ Retail bill incl. GST 2,611 2,326 1,418 Retail bill excl. GST 2,374 2,115 1,289 Retail bill excl. GST and NUOS* Retail bill excl. the above and wholesale*** Retail bill excl. the above and Green Schemes 1,544 1,285 664 795 536 142 699 440 75 ^ Based on and Origin s average standing offers (July 2018) ^^ Average across all retailers (July 2018), including pay on time discounts ^^ Average across all retailers (July 2018), including pay on time discounts, metropolitan households with 3kW systems installed * NUOS as of July 2018 **Based on $93.6/MWh ***LRET @ 0.87 c/kwh, SRES @ 0.33 c/kwh, Solar Bonus @ 0.0 c/kwh Based on the calculations in table 7 above, chart 18 shows the estimated bill proportion (%) of each cost for standing offer, market offer and solar customers. 25 Estimated energy purchase cost for 2016/17, 2017/18 and 2018/19 (financial years). Based on Figure 24 in Frontier Economics, 2017 Residential Electricity Price Trends Report, A report prepared for the AEMC December 2018, 59. Note that the AEMC has supplied the numbers that the base case scenario in Figure 24 is based on. 26 See AEMC, Residential Electricity Price Trends Reports, 2017, Figure B3, 89. 27 Note that this is based on components of customers bills and not retailers revenue from each customer type. The energy exported by solar customers does, for example, have a value to the retailers. Other charges such as market fees and ancillary service fees as well as losses have not been accounted for in this bill-stack. 16

Chart 18 Bill-stack (%) for standing, market and solar offers in the Energex network area, average annual bill based on offers effective as of July 2018 (8,000kWh per annum, single rate, excl GST) 100% 90% 80% 70% 60% 50% 40% 4 5 5 6 29 32 21 35 40 30% 20% 35 39 49 10% 0% Standing Market Solar NUOS Wholesale Retail Green Schemes In terms of changes over time, the average retail proportion of bills has increased significantly for standing offer bills (chart 19 below) while the NUOS and green scheme proportions have decreased. Chart 19 Bill-stack (%) for average standing offer bills ( and Origin), from July 2016 to July 2018 (8,000kWh per annum, single rate, excl GST) 13 6 NUOS Wholesale Retail Green Schemes 4 4 21 29 33 38 32 48 38 35 JAN-16 JAN-17 JAN-18 For market offers (chart 20 below), the retail component comes up as negative (-1) in 2016 and while this could indicate that retail margins on market offers were low that year, there are a few issues worth considering. Firstly, the electricity retail market in South East Queensland was deregulated on 1 July 2016 and such significant market changes typically have an immediate impact on retailers behaviour, in relation to price setting and discounting. With the announced deregulation in Queensland, we saw more retailers entering the market and higher discounts being offered. Secondly, we stress that these bill calculations are inclusive of conditional pay on time discounts which only a proportion of customers would have been able to obtain. 28 Retailers with pay on time discounts (9 out of 11 retailers in July 2016) would therefore have had higher revenue from bills than that estimated here. Thirdly, it should be noted that most retailers have numerous live (but no longer marketed) offers available in each jurisdiction. Many Queensland customers would therefore have been on other (older) offers, with different discounts, to those advertised as of July 2016. Most retailers will have customers on more expensive contracts (e.g. contracts with lower discounts) while attracting new customers with higher discounts. Just as there will be cross-subsidies between different customer segments (i.e. standing offer customers, market offer customers and solar customers), 28 According to the ACCC, residential customers achieve pay on time discounts at 73% of the time. See, ACCC, Restoring electricity affordability and Australia s competitive advantage, Retail Electricity Pricing Inquiry Final Report, June 2018, 264 17

there are also cross-subsidies between customers within each segment. Fourthly, most retailers operate in more than one jurisdiction and as gaining market share in a newly deregulated market would have been a likely business strategy, customers in other jurisdictions may have cross-subsidised offers available to customers in South East Queensland immediately after deregulation took effect. 29 Since July 2016, the retail proportion of market offer bills have increased significantly while the NUOS and green scheme proportions have decreased. Chart 20 Bill-stack (%) for average market offer bills (all retailers), from July 2016 to July 2018 (8,000kWh per annum, single rate, excl GST) 14 NUOS Wholesale Retail Green Schemes 4 5 17 21 35 40 35 52 40 39-1 JAN-16 JAN-17 JAN-18 As in the case of market offer bills, the estimated retail proportion of solar bills (including pay on time discounts) was negative in July 2016 (see chart 21 below). 30 Unlike the non-solar market offers, however, the retail component of solar bills has continued to remain relatively low in both 2017 and 2018. Chart 21 Bill-stack (%) for average solar offer bills (all retailers), from July 2016 to July 2018 (8,000kWh per annum, single rate, excl GST), metropolitan households with 3kW systems installed 15 36 NUOS Wholesale Retail Green Schemes 4 5 4 6 44 40 57 48 49 JAN-16-8 JAN-17 JAN-18 29 As we do not know the retail cost and profit component of bills, we estimate the amount by subtracting more known costs from the average bill (see table 7 above). Obviously, there will always be a cost associated with electricity retailing and a negative number for the retail cost component simply indicates that the retailers margins for that customer group (in that jurisdiction/ network area) was lower that year compared to years where there is a positive number. 30 Note discussion on relevant market issues in discussion above chart 20. 18

6. Solar offers There are almost 550,000 small to medium scale solar systems in Queensland and eight out of ten top solar postcodes (by installations) are in the state of Queensland. 31 Many of these households are currently receiving a solar feed in rate (FIT) of 44 cents per exported kwh but as these schemes are closed to new entrants, customers currently looking for solar offers need to assess both the retailers FIT rates as well as the cost of electricity imported. This section analyses and compares market offer bills for South East Queensland customers with 1.5 kw and 3 kw systems installed. As retailers are not required to publish rates for solar products purchased and installed through them, this analysis only examines electricity offers available to customers independently of solar panels and installation. Methodology and assumptions To calculate the annual bills for the various solar market offers the following assumptions and methodology have been applied: An annual household consumption of 8,000kWh (including both produced and imported). Calculations have been produced for households with 1.5 kw and 3 kw systems only. For Brisbane households, an annual generation capacity per kw installed of 1.736 MWh and an export rate of 53.4% for 3 kw systems and 24.6% for 1.5 kw systems. 32 For rural households, an annual generation capacity per kw installed of 1.857 MWh and an export rate of 56.4% for 3 kw systems and 29.5% for 1.5 kw systems. 33 Only FIT rates available to new customers have been included. Retailer funded FIT rates have been applied as per offer. For tariffs with controlled load, 15% of the total load has been allocated to the off-peak rate. A flat annual consumption has been assumed. The annual bills have been based on quarterly bill calculations and all step increases have been applied as quarterly thresholds (including when the retail offer refers to daily or monthly thresholds). Daily fixed charges have been multiplied by 91 to calculate the quarterly amount. Most retailers offer a higher FIT rate to Queensland households as of July 2018 compared to last year. Table 8 shows retailers FIT rates for offers included in this analysis. 31 Clean Energy Council, Clean Energy Australia Report 2018, 43 32 These figures are based on NSW (outside Sydney) and were used for the analysis presented in a report for the Alternative Technology Association (ATA) by Alviss Consulting (Alviss Consulting, Retail Offers and Market Transparency for New Solar Customers, June 2013). 33 Ibid 19

Table 8 Retailers FIT rates July 2018 Retailer* Offer FIT rate (c/kwh) Solar Savers 20.0 Click Energy Solar Bright 16.0 Diamond Energy Pay on time discount 10.0 Dodo Power & Gas Market offer 8.5 EnergyAustralia Anytime Saver 16.1 Energy Locals Save Me 12.1 Origin Energy Solar Boost Plus 16.0 Powerdirect Market offer 10.6 Sanctuary Energy Supplementary FIT 10.0 Plus 11.3 Mojo Power Connect 20.0 Powershop Power Saver 9.5 Red Energy Easy Saver 11.5 Solar 4 14.0 Alinta Home Saver Plus 11.0 Q Energy Flexi Saver Home 8.0 Chart 22 below compares annual retail bills for solar customers in Brisbane with 3 kw and 1.5 kw installed. It shows that Click, Dodo, Sanctuary, and Mojo s offers produce annual bills above the average for both 3 kw and 1.5 kw systems. Brisbane solar customers with 3 kw systems (and this consumption level) would be approximately $730 per annum better off on Energy Australia s offer compared to Dodo s offer. Customers with a 1.5 kw system installed may save $590 per annum if they switched from Dodo to Energy Australia s offer. The average annual bill is approximately $1,420 for households with 3 kw systems and $1,835 for households with 1.5 kw systems installed. This means that the average annual bill is $910 less for solar households with 3 kw systems installed compared to non-solar households (see section 2.1 above). Compared to last year, the average market offer for solar customers (3 kw systems) has decreased by $160 or approximately 10%. 34 34 For non-solar households, the average market offer bill (including pay on time discounts) decreased by $190 or 7.5%. See section 2.1. 20

Chart 22 Annual bills including discounts and FIT credits for Brisbane customers with 3 kw and 1.5 kw solar systems. Electricity offers post July 2018 as annual bills, Tariff 11, 8,000kWh (GST inc) 35 2,300 2,100 1,900 1,700 1,500 1,300 1,100 900 700 500 Click Energy 3 kw 1.5 kw 3 kw avg 1.5 kw avg Diamond Energy Dodo Power & Gas EnergyAustralia Energy Locals Origin Energy Powerdirect Sanctuary Energy Mojo Power Powershop Red Energy Alinta Energy Q Energy Figure 4 below shows estimated annual bills for solar market offers post discounts ranked from the lowest annual bill to the highest. 36 2,300 2,100 1,900 1,700 1,500 1,300 1,100 900 700 500 35 Calculations include discounts off usage or bill as well as pay on time discounts off usage or bill. 36 These bill estimates are based on rates published on the retailers websites between the 1st of July and the 1th of August 2018 and it must be noted that retailers may change their rates at any time. Additional discounts for customers choosing to pay by direct debit are not included in these bill calculations. 21

Figure 4 Lowest to highest annual bills (incl GST) for solar market offers post July 2018, including discounts, pay on time discounts and Feed-in-tariff Metropolitan households with 3 kw solar systems, consuming 8,000kWh per annum (including generated and imported electricity), Tariff 11 Energy Australia Alinta Powerdirect Red Energy Powershop QEnergy Origin Energy Diamond Energy Energy Locals Mojo Power Click Energy Sanctuary Energy $1,087 $1,233 $1,260 $1,287 $1,291 $1,305 $1,348 $1,398 $1,399 $1,432 $1,436 $1,479 $1,585 $1,630 $1,706 Dodo Power & Gas $1,814 Charts 23 and 24 below show annual bills for Brisbane solar customers on tariff 11, tariff 31 and tariff 33. Chart 23 Annual bills including discounts and FIT credits for Brisbane customers with a 3 kw solar system. Electricity offers post July 2018 as annual bills, Tariff 11, 31 and 33, 8,000kWh (GST inc). 37 $ per annum 2,200 2,000 1,800 1,600 1,400 1,200 Click Energy Diamond Energy Dodo Power & Gas EnergyAustralia Energy Locals Origin Energy Powerdirect Sanctuary Energy Mojo Power Powershop Red Energy Alinta Energy Q Energy Tariff 11 Tariff 31 Tariff 33 37 Ibid 22

Chart 24 Annual bills including discounts and FIT credits for Brisbane customers with a 1.5 kw solar system. Electricity offers post July 2018 as annual bills, Tariff 11, 31 and 33 8,000kWh (GST inc). 38 $ per annum 2,000 1,800 1,600 1,400 1,200 1,000 800 Click Energy Diamond Energy Dodo Power & Gas EnergyAustralia Energy Locals Origin Energy Powerdirect Sanctuary Energy Mojo Power Powershop Red Energy Alinta Energy Q Energy Tariff 11 Tariff 31 Tariff 33 Homes outside Brisbane s metropolitan area will typically have less overshadowing and therefore a higher generation capacity and export rate. Chart 21 compares annual retail bills for solar customers in Brisbane with 3 kw and 1.5 kw installed. It shows that the annual bills for solar customers are somewhat lower in non-metropolitan areas but the same retailers produce higher than average bills and the price-spread is similar to that in metropolitan areas (see chart 22 above). Chart 25 Annual bills including discounts and FIT credits for regional and rural customers with 3 kw and 1.5 kw solar systems. Electricity offers post July 2018 as annual bills, Tariff 11, 8,000kWh (GST inc). 39 2,300 2,100 1,900 1,700 1,500 1,300 1,100 900 700 500 Click Energy 3 kw 1.5 kw 3 kw avg 1.5 kw avg Diamond Energy Dodo Power & Gas EnergyAustralia Energy Locals Origin Energy Powerdirect Sanctuary Energy Mojo Power Powershop Red Energy Alinta Energy Q Energy 2,300 2,100 1,900 1,700 1,500 1,300 1,100 900 700 500 38 Ibid 39 Calculations include discounts off usage or bill as well as pay on time discounts off usage or bill. 23