Carbon pricing FAQs

Frequently Asked Questions – Clean Energy Scheme for aurora's tranche 1 to 4 contracted customers.

• 1. Why will the introduction of carbon pricing under the clean energy legislative package increase electricity prices across australia from 1 july 2012?
• 2. Why will the cost of electricity increase in tasmania when tasmania has renewable energy sources (i.e. hydro generation)?
• 3. My business has a contract with aurora energy that extends past 1 july 2012. Will there be a separate carbon charge to pay as a result of the introduction of the clean energy scheme?
• 4. How will i know if my contract is carbon inclusive or carbon exclusive?
• 5. How much will the increase be for customers where the pricing has been quoted as carbon exclusive?
• 6. How has aurora energy calculated the pass-through?
• 7. I have a contract with carbon exclusive pricing that extends past the 2012–13 year. Will the 2012–13 rate continue to apply for 2013–14 year?
• 8. When the time comes to sign a new contract' will carbon be a separate part of the quote?
• 9. How will loss factors be applied in aurora energy's carbon cost calculation?
• 10. Will carbon costs be bundled into the commodity charges' or listed as a separate line item on the invoice?
• 11. Where can i learn more about the clean energy future scheme?
• Disclaimer

Answers

1. Why will the introduction of carbon pricing under the clean energy legislative package increase electricity prices across australia from 1 july 2012?

Under the Clean Energy Legislation' the Australian Government will introduce a carbon price to reduce Australia’s carbon pollution and move towards a clean energy future.

From 1 July 2012' the cost of carbon in Australia will be A$23 per tonne of pollution (i.e. per tCO2)' and increase' to A$24.15 in 2013–14 and A$25.40 in 2014–15. This cost of carbon is prescribed by the Clean Energy Regulator. From 1 July 2015' the carbon price mechanism will transition to an emissions trading scheme where the price will be determined by the market.

The introduction of carbon pricing will have a significant impact on the cost of generating electricity. The majority of generators will increase the wholesale cost of energy they charge electricity retailers to recover the cost of carbon. As a result' electricity prices will increase.

2. Why will the cost of electricity increase in tasmania when tasmania has renewable energy sources (i.e. hydro generation)?

While Tasmania’s electricity supply is sourced mainly from renewable sources' electricity prices in Tasmania will still increase due to the introduction of the carbon pricing mechanism.

As Tasmania is part of the National Electricity Market' the State relies on importing electricity from Victoria via Basslink. The electricity imported into Tasmania comes from electricity generators that have higher emissions-based generation which will be subject to carbon costs.

For customers in Victoria' New South Wales' and Queensland the cost of sourcing electricity contracts will increase at a higher rate' as the majority of energy is sourced from high emission based generation. The fact that some electricity consumed by Tasmania is sourced from carbon-emitting generation means that the State’s electricity prices will be subject to an increase as result of Clean Energy Future Scheme' although not as high as other states.

3. My business has a contract with aurora energy that extends past 1 july 2012. Will there be a separate carbon charge to pay as a result of the introduction of the clean energy scheme?

It depends on when you entered into your contract with Aurora Energy.

Contracts executed before 16 November 2011

If you entered into a contract with Aurora Energy before 16 November 2011' the pricing under the contract would exclude carbon. These contracts allow that Aurora Energy may ‘pass through’ the additional cost of wholesale energy as a result of the introduction of the carbon pricing mechanism. Therefore' from 1 July 2012 onwards' there will be an additional charge applied to contracts entered into before 16 November 2011.

Contracts executed on or after 16 November 2011

If you entered into a contract with Aurora Energy on or after 16 November 2011' the pricing quoted is carbon inclusive. As such' there will be no additional amount charged to you above the rate stated in your contract.

4. How will i know if my contract is carbon inclusive or carbon exclusive?

The contract schedule will specify whether the pricing is ‘carbon inclusive’. 

Carbon inclusive pricing

A ‘carbon inclusive’ offer contains the following notes on the contract schedule:

• the words ‘carbon inclusive’ on the top right hand side of the page
• under the ‘Additional Terms and Conditions’ section' the following wording is noted:  ‘For the avoidance of doubt all electricity charges specified in item 7 of this schedule are inclusive of carbon as defined in the Clean Energy Legislative Package.’

Carbon exclusive pricing

A ‘carbon exclusive offer’ does not make any reference to ‘carbon’ in the contract schedule.

Customers that have entered into contracts with carbon exclusive prices will incur an additional charge from 1 July 2012.

5. How much will the increase be for customers where the pricing has been quoted as carbon exclusive?

The increased cost of electricity due to the introduction of the carbon pricing mechanism will be different in each state. The level of increased cost will depend on the location of the site(s) where the electricity is to be supplied.

For ‘carbon exclusive’ contracts' the following rates will be charged to Aurora Energy’s customers from 1 July 2012 for the 2012–13 year:

These rates are prescribed by Aurora for the 2012–13 year and are not subject to change.

6. How has aurora energy calculated the pass-through?

Our contract with you allows that Aurora Energy may pass through the additional cost of wholesale energy as a result of the introduction of the carbon pricing mechanism.

In calculating the pass-through' Aurora Energy has made a true and reasonable estimate based on the prescribed increase in electricity costs (sourced both through hedging and the spot market) as result of the introduction of the carbon pricing mechanism. Effectively' the calculation looks at the portion of customer load that is either hedged or sourced from the spot market. Aurora Energy has then assessed the increase in costs from sourcing electricity from both of these options. The increase in cost has been averaged to apply a standard carbon adjustment rate for customers in each state.

In calculating the cost increase' an emissions intensity factor (EIF) was assumed. For Tasmania' Aurora Energy applied an EIF of 0.23 (largely reflecting Tasmania’s renewable energy supply with some electricity sourced from Victoria via Basslink). For price adjustments in Victoria' Queensland' and New South Wales' the EIF applied was the National Electricity Market average' which at the time of calculation was 0.92.

Aurora Energy’s methodology was reviewed independently.

7. I have a contract with carbon exclusive pricing that extends past the 2012–13 year. Will the 2012–13 rate continue to apply for 2013–14 year?

No. At the end of the 2012–13 year' Aurora Energy will recalculate a new rate for the 2013–14 year taking into account the prescribed increase in the cost of carbon for the 2013–14 year.

8. When the time comes to sign a new contract' will carbon be a separate part of the quote?

No. When you recontract with Aurora Energy' the cost of carbon will be captured in the energy pricing that we quote. There will be no separate rate for carbon.

9. How will loss factors be applied in aurora energy's carbon cost calculation?

The pass-through amount is to be calculated on energy supplied before line losses. Therefore' the amount of the pass-through will be calculated on energy consumption after the application of the transmission loss factor (TLF) and distribution loss factor (DLF) as displayed on your electricity account.

10. Will carbon costs be bundled into the commodity charges' or listed as a separate line item on the invoice?

To ensure our charges and rates are transparent' carbon will be a separate line item for customers who are on ‘carbon exclusive’ contracts. As discussed above' for customers under contract where pricing is ‘carbon inclusive’' the increased cost will be captured in the energy rate as stated in your Agreement.

11. Where can i learn more about the clean energy future scheme?

If you would like more about the Clean Energy Future Scheme and the Carbon Pricing Mechanism' please visit the following websites:

• Clean Energy Future: www.cleanenergyfuture.gov.au/
• Clean Energy Regulator: ret.cleanenergyregulator.gov.au/

Disclaimer

The information provided in this document does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon or treated as a substitute for specific professional advice. Aurora Energy recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Aurora Energy does not warrant the accuracy, completeness or currency of the information provided in this document.