Load Following Ancillary Services Cost pass through: Questions and Answers


On July 1 2012, changes were made to the electricity market rules and as a result of these changes the cost to supply electricity to retail customers has increased.
The changes relate to the provision of Load Following Ancillary Services (LFAS) which is the service provided by electricity generators to ensure supply constantly matches demand.  These services are necessary for the stability and security of the supply of electricity in the network.
Further information about this change is provided below.

What are Load Following Ancillary Services?
  • Load Following Ancillary Services (LFAS) is the service provided by electricity generators to ensure supply of electricity matches demand.  This is necessary for the security of the electricity network.
  • The Independent Market Operator (IMO) manages for the supply of LFAS from electricity generators.  All retailers pay for these services. 
Why is Alinta Energy passing on the costs of Load Following?
  • Alinta Energy has incurred an increase in its costs as a result of the introduction of the new LFAS market on 1 July 2012.  Our LFAS costs are set by the market which is administered by the IMO and are outside of our control.
  • Previously this cost was included in your energy price, however the cost to supply this service to the market has increased this amount and under the change in law provision in your electricity contract, Alinta Energy will pass through the additional cost of providing this service.
How much will my bill go up by?
  • Included in the current energy charge is an amount of 0.10 c/kWh (including GST and loss factors) based upon our previous LFAS costs incurred during 2011/2012. Any additional cost above this amount will be passed through to customers who have signed contracts before 1 July 2012. The charge will be included in your monthly bill.  
  • This charge will vary each month depending on the additional costs imposed on Alinta Energy for LFAS.
  • The additional cost for 2012/2013 are estimated to be 0.35 c/kWh (including GST and average loss factors).
  • In addition, in your January bill, Alinta Energy will be passing through its costs from 1 July 2012 to the end date of your last bill. These costs represent the additional LFAS costs incurred by Alinta Energy for your energy usage during that period. 
Why is Alinta Energy charging me a retrospective LFAS charge?
  • It has taken a number of months to analyse the exact impact of the change in the rules and Alinta Energy needed this time to ensure the accuracy and transparency of the charges. 
Can Alinta Energy charge me for LFAS?
  • We are entitled to pass-on increases to our costs which result from a change in law.
  • The introduction of the LFAS market was a change in the law governing the wholesale electricity market.
How are Alinta Energy’s costs of LFAS determined?
  • The costs of LFAS are required to be paid by all electricity retailers and are determined by the wholesale electricity market operator - the IMO.
  • The LFAS charges are allocated by the IMO to each retailer on the basis of the amount of electricity each retailer has consumed in that period. 
  • GST is required to be added to the LFAS charge.  This is because, if a company passes on a cost to a customer in connection with the supply of a good or the provision of a service, GST will be incurred.
What happens if the estimate charges are higher or lower than the actual charges? Will I receive a refund or be charged extra?
  • If the actual costs are materially lower than the estimate costs, then Alinta Energy will look to recalculate the charges and provide a refund
  • If the actual costs are materially higher than the estimate costs, then Alinta Energy will look to recalculate the charges and pass on this extra cost to customers.
How can I calculate my LFAS cost?
  • Your monthly cost is calculated by multiplying the amount of electricity supplied to you during a billing period (adjusted for transmission and distribution loss factors) multiplied by the monthly LFAS amount.
  • Forecasted values for the additional cost to change in law customers in FY13 are estimated to be 0.35 c/kWh (including GST and average loss factors)
What are Loss Factors?
  • The term loss factor refers to electricity that is lost through the process of its transportation. When Alinta Energy purchases electricity for supply to you, it does so at a point in the electricity network. Alinta Energy accounts for the electricity lost in transit between that point of wholesale sale and your point of supply in calculating the LFAS charge.
Will the LFAS costs stay the same?
  • The costs for LFAS that will be passed through to you will vary each month in line with the costs passed through to us from the IMO.
  • LFAS charges vary in line with the amount of LFAS required to ensure supply and demand match in a particular period. 
Will I always have to pay this charge?
  • The costs for LFAS will be passed through by Alinta Energy indefinitely.
Where can I find the charge on my bill?
  • The LFAS Charge will be provided as a separate line item on your bill.
  • This charge will appear on the back of your bill under your other energy charges.
What happens if this back charge will cause us payment issues?
  • We’re here to help.  Call us on 9486 3252 to discuss your situation.
  • If necessary, we can work out a suitable payment scheme to assist you and your business. 
What happens when I resign my contract on expiry?
  • On expiry, if you have a bundled electricity contract then the LFAS Charge will be included in the energy rate on renewal.
  • On expiry, if you have an unbundled contract then the LFAS Charge will be identified as a separate line item on your invoice.
What is the IMO?
  • The Independent Market Operator (IMO) is a government organisation that is funded by the electricity industry. The IMO is responsible for the operation and development of the wholesale electricity market.
  • More information about the IMO can be found at www.imowa.com.au
Who can I talk to about this?