Ideally when you sign a contract you expect that your contract price will remain fixed for the duration of the contract.
For example for a mobile phone contract, you pay a set price and it will remain the same for the duration of the contract.
The Energy industry is a highly regulated industry. There are so many components that make up your energy cost such as capacity charge, network charge, renewable charges and energy charge.
The electricity suppliers here in Perth are making money only from the energy they procure and on sell to consumers. The rest are risks and the majority of them are beyond their control.
You will find on that on almost every single contract, the Energy suppliers here in Perth will have a provision where they may pass through those associated risks such as network costs increase and changes in law.
So what is network cost and how often does it get adjusted?
Every electricity company in Perth uses Western Power’s network to transport the energy from the suppliers site (power station) to the end users site. All the network infrastructure such as poles, transformers, substations are owned and maintained by them. From time to time, Western Power as the network operator may adjust the transportation cost in order to ensure the network is reliable and capable to deliver the energy.
Western Power will submit their proposal to an independent government body (Economic Regulation Authority –ERA) who basically will have a say on the amount it increases as well as the frequency of the increase. Historically speaking the network cost increase occurs almost every financial year.
The government regulations play a major part in the energy industry. The Energy industry is a business where it is involved in polluting the environment directly and indirectly. Therefore, the government has a significant influence on where they will be taking the industry. Any changes in government regulations will affect the electricity price that you pay to your electricity supplier. For instance, in 2012 the Federal Government introduced a carbon cost scheme that caused energy costs to increase up to 10%. Although the carbon scheme has been repealed, any future legislation changes that will impact the industry will be passed through to the consumer, whether want it or not.
A fixed electricity contract is difficult to secure but if you are willing to pay premium price to reflect the risks some electricity companies in Perth will consider selling a fixed contract to you.