Understanding Your Electricity Bill

For the eastern and southern states of Australia, the supply of electricity comes from one of thelargest geographically interconnected power systems in the world – the National Electricity Market.

Physically linked by a transmission grid, the NEM is in operation 24-hours a day, 365 days of the year.

A supply chain of generators, networks and retailers, which are required to distribute the electricity from the NEM into Aussie homes and businesses, all contribute to the cost of your electricity bill.

3 costs involved in electricity

When customers receive their Origin Energy bill, it is based on costs incurred from the three ‘steps along the chain’. They are as follows:

  1. Generators produce the main source of electricity from renewable sources or the burning of fossil fuels.  The buying of fuels and the building, operation and maintenance of power plants are where costs are incurred.
  2. Network businesses own and operate the transmission and distribution systems. The building, maintenance and repairs of new and existing powerlines are where costs are incurred.
  3. Retailers are the electricity providers for homes and businesses. The connection of customers to the grid, purchase of electricity from generators and management of customer accounts are where costs are incurred.

Typical costs in a NSW electricity bill

To put the above into perspective, the cost of the average electricity bill in NSW is as follows1:

Generators  (24%)
The cost of generating electricity.

Retail services  (15%)
Managing your accounts, billing and customer services.

Networks  (55%)
Paying for the maintenance, upgrading and operation of the poles and wires.

Government green schemes  (6%)
The national renewable energy target and other state based schemes.

Network costs

Despite electricity prices varying from state to state, generally around half of the average electricity bill is made up of transmission and distribution network costs.

Different organisations own and manage these transmission and distribution networks. Queensland, New South Wales and Tasmania are all state-owned, while South Australia and Victoria are privately owned. 

Each of these organisations has costs associated with the following:

  • The building of new substations, power line towers and wires to cope with growing peak demand.
  • Fixing faults and damaged power lines to ensure there will be no unnecessary outages.
  • The maintenance of poles and wires, related infrastructure such as substations, and the electricity meters located at every house and business across the country.

The majority of these costs are passed onto energy retailers, who then pass them onto consumers via an electricity bill. The Australian Energy Regulator is tasked with overseeing the entire process.

Other costs

A few other factors may influence the electricity prices for your home or business.

  • The wholesale market cost of electricity from generators all the way to customers is largely determined through the NEM, with around $10 billion of electricity traded through it annually;2
  • States differ in their pricing structures due to grid investment strategies and the use of cheaper fuels, such as Victoria’s use of brown coal.
  • Rooftop solar panels and other Government energy-efficiency schemes play part in electricity costs, as does the Australian Government’s Renewable Energy.

For a better understanding of Australia’s gas and electricity markets, view the State of the Energy Market 2015 report.

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  1. Costs included in your electricity bill data based on information found at Independent Pricing and Regulatory Tribunal (IPART), Review of regulated retail prices and changes for electricity 2013 to 2016. This data is based on a typical NSW bill as at June 2013. Note IPART’s estimate of the carbon scheme has been removed and percentages adjusted accordingly.
  2. Energy purchase value. Australian Energy Market Operator AEMO fact sheet 2016 – http://www.aemo.com.au/-/media/Files/PDF/National-Electricity-Market-Fact-Sheet.ashx


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