How energy is priced
At AGL, we’re experts at all things energy. If you want to learn more about how energy is priced or the recent pricing changes – let us break it down for you.
The costs explained
There are many factors that affect the cost of getting electricity and gas to you. Our business activities include buying wholesale energy and providing network services to deliver that energy to you. In addition, we arrange connections, metering and billing.
Wholesale market costs
The wholesale market cost is the amount we pay to buy enough gas and electricity to supply to our customers. Electricity can be bought directly from the wholesale electricity market where generator companies sell their output. Of course, it’s not like a Sunday market with stalls and crafts, it’s all done electronically, and prices fluctuate depending on availability and demand.
Gas can be bought directly from gas extraction or production plant operators, or through indirect energy trading markets.
Network costs
Network costs are the costs that a distributor incurs to send energy to homes via poles, wires, pipes and meters. AGL will pay distributors for the cost of delivering this energy to you.
Government and regulatory costs
There are also a number of federal and state government schemes that can add costs. This may include renewable energy targets and energy efficiency schemes.
Retailer costs
AGL also has direct and indirect costs in arranging the supply of wholesale energy and network services, complying with regulation and in providing customer service. This cost is calculated into our energy rates.
Recent changes to electricity prices
The industry has just gone through some changes
The reference price is a benchmark electricity price set by the government that makes it easier to compare prices between energy retailers.
DMO stands for Default Market Offer and is a price cap set by the Australian Energy Regulator on most ‘standing offers’. The caps differ depending on the distribution areas and tariff types.
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