Canterbury Businesses Overcharged by Energy Retailers
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.”
Mr Weir says that larger businesses in Christchurch 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.”
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.
“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.
• 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