How do bill estimates work?
How do bill estimates work? Have you recently signed to a new energy retailer and suffered from what is known in the industry as “bill shock”? Keep reading to understand how retailers bill you and how you can minimise unexpected increases in your bills.
As you might be aware, energy retailers traditionally bill customers quarterly based on when they receive a meter reading from the network distributor (ie Ausgrid, Endeavour, Essential, Energex, SAPN, etc) responsible for where the customer lives. Over recent years, retailers have begun to bill customers monthly to allow for a more regular payment schedule of smaller amounts.
Monthly billing helps customers better manage their energy expenses and keep on top of their energy consumption. By billing monthly, the bills will often include a mix of actual reads and estimated reads (based on your historical household usage) dependent on when the Distributor reads your meter.
When customers switch from retailers who bill quarterly to those that bill monthly, the first few bills can differ to what you expect as they may be based on usage estimates for the past month. The longer you are with a new energy retailer, the more the retailer knows about your historical usage and your estimate bills will be closer to what you expect.
How do energy retailers estimate my bill?
We need to get a bit technical to explain how your bill is estimated, so stick with us! Retailers have access to a properties’ average daily energy consumption, known as average daily load (ADL) from the National Energy Market (NEM). The ADL figure is based on a period of time set by the NEM and may only go back as far as three months or further. This average is not updated daily so the ADL for a property may remain the same for a while.
The calculation of the estimate may vary within each Retailer, but in most cases the energy bill will be charged based on the ADL figure and the rates you are charged per month – providing an estimate dollar amount.
There are a number of usage considerations that will impact on the ADL figure accessed by the Retailer for a property. The following scenarios may be reflected in the estimate.
1) Your household’s energy use over an historical period
If you have lived in your home for at least 6 months, the energy market may have conducted at least 2 actual meter reads that will provide indicative household usage to base your bill on. However, energy retailers do not always take a meter read each quarter and are in fact, only required to take one actual meter read per year.
It makes sense then, that the longer you live in the same home, the more relevant the historical data is in allowing your energy retailer to determine the usage.
The historical data used in the estimate can be impacted by a few variables, such as:
- How many people were living in your home over that time – such as did you have friends staying, did you have a new baby or had you been on holidays or business trip?
- Changes in your energy usage across the day – were you (and other members of your household) working from home more than normal (Covid has certainly impacted on this), were you spending more time at home due to sickness, childcare, study, or loss of job?
- Did you begin using a new source of energy or increased your energy use of heated floor tiles, heated towel rack, clothes dryer, air conditioner, heaters etc?
2) Moving to a new home
If you move into a new home, your energy company will not have access to your personal historical energy usage from your previous property. To estimate usage in the new property, your retailer will use a combination of historic usage from that new property (accessed from the NEM) and if the property was previously supplied by Nectr, the previous resident’s usage.
Historical data for the new property will be based on the previous residents’ usage, which could be larger or smaller than you or your family. Additionally, the previous occupants may not consume energy in the same way as you or may not have lived there for some of the previous year.
Therefore, if you are new to a property, the first lot of energy bills you receive (if estimates) may not match what you expect. The first few bills are likely to be based on a combination of estimated and actual electricity usage. Many retailers will wait until they receive a meter read from the Network Distributor before switching you across so your first bill includes an accurate read. Here at Nectr, will order a meter reading from the relevant Network Distributor so the first bill includes an actual meter reading and minimises bill shock.
What happens if I think I’ve been overcharged on a bill that is an estimate.
As you can see, there are so many variables that impact on calculating an estimate. Thankfully, you are protected from being overcharged (or even undercharged) due to Industry regulations. When the Retailer receives the actual meter read, they then re-calculate your energy usage and in the next bill provide a ‘true-up’ of what has been paid over last three bills, or since last meter read versus what should have been paid.
It’s important to note at this point that not all monthly bills will be based entirely on an estimated reading or an actual reading. When we have received a meter reading at your property, you will see an adjustment from the last estimated reading on your bill to the meter reading that has been received. The remaining period for your bill will be based on estimated usage. This means the calculation to determine the bill is not black and white and includes different methods.
If your estimated bills were higher than what your actual electricity consumption has been over the quarter, or since your last two meter readings, you will be given a credit on your next bill for the overcharge. Conversely, if you were undercharged, Retailers will need to debit you this figure on your next bill. Depending on the amount over or under, you may also receive the credit on your account within 7 days.
Unlike other industries, the billing of electricity for customers, where they do not have a Smart meter can be tricky and is not an exact science. Every Retailer who bills monthly does their best to calculate the estimates to ensure the customer doesn’t suffer from bill shock. As a consumer you are protected from being unduly as the Retailer is required to true up all overcharges and undercharges within a set time period. Each Retailer is also obliged to share their calculation methodology with the Australian Energy Regulator to prove they are compliant.