Not sure what to make of your retail electricity bill? Here’s everything you need to know to cut out the jargon, get back to basics and identify potential savings for your business.

Understanding your electricity bill is crucial to knowing whether or not you’re getting the best deal for your business, and a little knowledge can only strengthen your negotiating position. Here, we’ve broken down a typical bill into its component parts, so you can see what you’re actually paying for.

It’s important to note that the formatting of your bill will change from one energy retailer to the next, so yours won’t necessarily look like this, but the important information it should contain is standard.

1. Contact Details

Any questions about your bill? You’ll find your retailer’s contact details here, including the name and number of your Account Manager if you’ve been assigned one. You should also see a supplier’s number to call in case of any urgent electricity supply issues.

2. Current Invoice Summary

A summary of the key details about this invoice at a glance.

This is likely to include your National Metering Identifier (NMI), which is a unique number used to identify the electricity connection point at your premises – think of it like a serial number for your electricity meter. No two NMIs are the same, so this is a good number to quote if you have any questions about your electricity supply or your bill.

Your bill will also include your invoice period, which is the date range and the number of days that it covers, and your supply address, which is the registered site address connected to the NMI.

You should also see a summary of the charges that make up the bill – see sections 8-12 below for more detail on those charges.

3. Your Bill Summary

Your bill should include a purchase order number (a unique number given to a specific transaction), if you’ve requested one. It will also contain your unique account number, and an invoice number.

The information on your bill is correct as of the invoice date. The due date is, of course, the date by which you need to pay the amount due – make sure you pay the correct amount by this date at latest to avoid being charged interest, and to receive any discounts you might be entitled to for early payment.

4. Daily Electricity Usage Summary

This is a graphical representation of your electricity consumption in kilowatt hours (kWh), so you can easily see how much your business is using on a day-to-day basis. It’s a good idea to keep your bills on file, so you can see how this usage compares to the same period in previous years, and track the impact of new equipment you’ve installed and new business practices you’ve implemented.

5. Monthly Consumption

This is a graphical representation of how your energy usage has changed month-to-month, which can help you to see the impact of seasonal spikes on electricity usage. Again, it’s useful to keep your bills on file, so you can see how your average monthly consumption has changed from year to year.

In this example, this section also includes your Total Greenhouse Emissions for this billing period, and represents your average monthly emissions as a line on the graph.

6. Payment Methods

There’s more than one way to peel an orange, so your energy retailer will lay out the methods that are available for you to pay your bill.

7. Previous Amounts

This will show you if there is any outstanding balance carried over from the previous invoice, which will be added to the total amount due.

8. Energy Charges

How you’re charged for the consumption of electricity will depend on whether you’re on a flat rate or a time-of-use rate, and the different time-of-use periods specified in your contract.

If you’re on a flat rate, you’ll pay a fixed price for electricity, no matter what time of day you use it. But if you’re on a time-of-use rate, the price you pay for electricity will depend on when you use it.

This is the section of your bill that offers the most potential for cost savings, if you’re able to modify your business practices so that most of your energy use occurs in ‘off-peak’ periods.

To be charged a time-of-use rate, you’ll usually need to have a digital smart meter installed.

Your energy charges will be impacted by loss factors, which compensate for the energy lost as electricity flows through transmission and distribution networks. Approximately 10 per cent of the electricity that leaves Australian power stations is lost before it makes it to the end user. Loss factors are calculated by the Australian Energy Market Operator (AEMO) and adjusted annually.

9. Environmental Charges

Your energy bill will also contain environmental charges related to State and Federal Government green schemes, which require retailers to acquire certificates to support renewable energy generation – for instance, these can include large-scale generation certificates (LGCs), small-scale technology certificates (STCs), NSW energy saving certificates (ESCs) and Victorian energy efficiency certificates (VEECs).

These charges are calculated using a standard regulated scheme percentage and a customer-agreed price, which can be found in your contract with your energy retailer.

10. Market Charges

These are pass-through charges paid to AEMO. They reflect the cost of managing the National Electricity Market (NEM) and ensuring its safety, security and reliability.

11. Metering and Other Charges

These are charges for the provision of metering services to monitor your electricity usage. These services can be arranged directly by you under an agreement with a metering company.

12. NMI Profile

The total amount of electricity consumed at your National Metering Identifier (NMI) for the billing period. For more on your NMI, see Section 2 above.

13. Loss Factors

As described in Section 8, roughly 10 per cent of electricity is lost as it flows through transmission and distribution networks from the point of generation to the end user. Loss factors are determined in order to compensate for this. They are calculated by AEMO and adjusted every July; your energy retailer has no control over these calculations.

14. Maximum Daily Demand

Your maximum daily demand charge reflects your maximum electricity usage over a 30-minute interval during a certain time window. Your highest demand during this time is then used to calculate the demand value. Demand charges vary across electricity distributors and retailers, so consult with your retailer to learn how yours are charged.

15. Network Charges

These are charges for use of the distribution network that delivers electricity to your site. Through these charges, you contribute towards the building, operation and maintenance of the poles and wires that make up the network.

The network provider determines your site’s tariff based on your electricity usage and consumption patterns. If you feel your tariff is too high, you can place a tariff change request once every 12 months via your energy retailer.