Unaccounted for Energy is the difference between electricity drawn into a distribution area and what marks up as consumption on end-user meters after technical losses are considered.
Energy losses resulting from commercial losses include unmetered connections, theft and metering malfunctions.
Estimation errors relating to accumulation metering is another factor that contributes to Unaccounted for Energy.
Raw accumulation meter data cannot be used for settlement as readings are only taken intermittently and cover long periods of electricity use.
Standard electrical losses are the third factor at play.
The concept of Unaccounted for Energy was introduced under the Global Settlement Framework in May 2022, to address outdated issues that were causing an unfair burden on legacy retailers.
Legacy retailers or “local retailers” were retailers that were trading before the National Energy Market came into existence and were given the financial responsibility for all Unaccounted for Energy.
It was originally to be implemented in February 2022, however, was delayed due to the Covid pandemic disruption.
The introduction of Global Settlement has become possible through the advancement of technology including smart meters.
One of the problems in tracing the source of Unaccounted for Energy was that analogue meter data cannot be traced with precision.
The Australian Energy Market Operator is overseeing the change, and they have been collecting and publishing data on Unaccounted for Energy (UFE) since October 1, 2021.
AEMO believes that the process will lead to fewer settlement disputes because of the improved ability to identify metering errors and will assist in other areas such as forecasting and the management of distributed energy resources.
Who pays for Unaccounted for Energy?
When the National Energy Market was set up in 1998, Unaccounted for Energy was settled and paid by legacy retailers through the Settlement by Difference mechanism.
Incumbent retailers would be financially responsible for paying for Unaccounted for Energy on a regional basis as the designated “local retailer”.
Through the Settlement by Difference Mechanism, all electricity would be billed to the local retailer, including UFE, but with the energy consumption of customers of other retailers subtracted.
The problem with the Settlement By Difference mechanism is that “local retailers” were responsible for their own energy losses, as well as the losses incurred by customers of any other retailers that have entered the market since 1998.
The “local retailer” would have little control over these losses and costs which were inevitably passed onto the consumer in their electricity bills.
Another problem created by Settlement By Difference is that newer retailers had little to no incentive to reduce energy losses because someone else was footing the bill.
If that sounds unfair, it is and the Global Settlement Framework will address this issue and ensure that all retailers are responsible for their share of UFE.
How will Global Settlement work?
Global Settlement will mean that AEMO settles the market using the same process for all retailers.
This means all retailers will be billed for the energy uncertainties or UFE within a distribution area.
The UFE portion passed on to customers may be a new line item on electricity bills as “separate market charges” or through energy rates.
Every retailer will be billed for the loss-adjusted metered electricity consumed by customers within a given region.
AEMO will allocate the UFE to market customers in that local area, pro-rated based on their “accounted-for” energy.
An example of how this may present on your energy bill can be seen below (redacted).
Do you need more information about Unaccounted for Energy?
We understand that the energy market can be confusing.
If you need more information about UFE and how it could impact your business, one of our Energy Management Consultants would be more than happy to have an obligation-free chat.
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Leading Edge Energy is an energy brokerage firm in Australia specialising in energy cost reduction, solar and storage procurement, electricity and natural gas use monitoring and reporting for commercial and industrial clients. Follow us on LinkedIn or Facebook for updates on the energy industry and more.