Viticulture– Electricity procurement

1. Viticulture– Electricity procurement • Site / company name and logo here This is an AgriFood Skills Australia Ltd project developed in partnership with Energetics Pty Ltd and funded by the Australian Government under the Clean Energy and Other Skills Package

2. National Electricity Market (NEM) • National Electricity Market established in 1998 to facilitate deregulation. • Electricity can physically flow between states. • Each state has separate markets where generators can sell their output and retailers can buy their demand. • Prices set by supply and demand • WA electricity market and billing differs significantly to the NEM Source: AEMO SOO 2009

3. Deregulation– electricity • For customers, deregulation means: • The right to choose who supplies your electricity invoices • No change to network provider • Small sites typically retain bundled billing • Large sites on contract move to unbundled billing • NSW, ACT, SA, VIC, QLD fully deregulated • WA, TAS, NT partially deregulated • For other energy supplies, ask your supplier if your account is ‘contestable’

4. Electricity Invoices Formats and Components of Electricity Billing

5. GENERATION Electricity Supply Chain MAKES THE PRODUCT - ELECTRICITY Costs included in Energy Charges DELIVERS THE PRODUCT TO THE SYSTEM Regulated & Passed on to Retailer via Network Charges TRANSMISSION DELIVERS THE PRODUCT TO THE CUSTOMER Owns the Poles and Wires. Regulated Network Charges. DISTRIBUTION SELLS THE PRODUCT TO THE CUSTOMER Manages Risk & Bundles Charges. RETAILER THE END USERUses the electricity & pays the retailer CUSTOMER

6. Typical bundled invoice small sites Individual Cost Elements Not Identified On Bill

7. Typical unbundled invoice large sites Generator Contestable. Prices vary by supplier. Non-Contestable. Prices vary by location. Transmission lines Distribution lines Non-Contestable. Prices vary by state. Market Manager Contestable. Prices vary by supplier. AEMO Meter Agent

8. Charge components • Energy – generator, retail margin (in c/kWh, may be a single rate or have time-of-use components, e.g. night-rate) • Network – transmission + distribution (c/kWh for small customers, includes demand ($/kW or kVA) for large users) • Market – NEM fees (in c/kWh and typically <1% of costs) • Metering – fee for each metering point • Environmental – renewable energy, retailer obligation scheme pass-through fees, carbon price (usually passed through as c/kWh charges) • GreenPower – users may voluntarily purchase accredited renewable energy on top of charges passed through – e.g. as part of being ‘carbon neutral’

9. Contracting Principles – for vineyards that are large enough to warrant using a structured market approach

10. What does a contract cover? • Energy price and quantity • Contribution to mandatory environmental obligations (RECs, NGACs, GECs etc) • Metering (optional) • Account management • Billing Not: • Delivery of energy • Security of supply • Regulated charges • Losses

11. Types of Contract Decreasing budget certainty, but potentially higher reward 1. Fixed price fixed volume forward contracting 2. Flexible forward purchase of variable volume 3. Fixed block purchase (e.g. with generator) with partial pool exposure 4. Portfolio purchase of fixed volume (partial pool exposure) 5. Managed pool exposure with active demand management or financial cover 6. Pool price pass-through Over 95% of contract customers use Option 1

12. Option 1–Fixed Price Fixed Volume • Customer agrees to buy from retailer for fixed price for a set term • “Standard” form of electricity contract

13. Issues to consider when contracting • Timing and approvals • take advantage of price dips, reduce the offer validity period and have a rapid approvals process • Duration of contract sought • Short term (e.g. 12 month) contracts for new supplies to allow load profiles to be built • Information / data • Provide detailed and accurate data, including information about future changes where known • Environmental charges (RECs, GECs, NGACs and NRECs) • Additional account services – are services such as electronic billing and data provision required? • Voluntary GreenPower – e.g. for carbon neutrality

14. Opportunities for Savings

15. Steps to assessing savings Assess opportunities for: • Switching franchise tariffs , particularly to offpeak rates for water pumping (if applicable) • Your network (wires and poles) operator may be able to incentivise you to reduce peak demand at critical times (e.g. peak summer heat) • Enquire about peak pricing with your retailer • Moving to contract - evaluate risks and opportunities in contracting separately for energy, enviro and metering • Switching supplier – if you are a smaller user you should shop around to find the best deal for the short and medium term, taking on board forecast trends in energy prices • Power factor correction, if your site is on a kVA-demand tariff • Evaluate ways to change your supply mix that can produce long term benefits (e.g. diesel or electric motors, solar PV, biomass energy generation) • Use your knowledge of your energy rates to work out the cost to run equipment that you are considering purchasing, and make this part of your decision-making • Monitor and meter your energy use regularly!