What is an electricity retailer?

Electricity retailers buy and sell electricity and are highly regulated. Many people get confused about the role of retailers, generators and electricity distribution companies. One way to think about the difference is to split the physical electricity flows from the financial flows.

• Electricity retailers are the main point of contact between electricity customers and the electricity system. They deal with the financial flows, the accounting side of the system. They receive payments from customers, and make payments to the distribution companies and generators.
• Distribution companies are responsible for delivering the electricity to households and businesses, and for operating the poles and wires.
• Generators are the companies that operate the infrastructure to make the electricity - the wind turbines, solar farms, hydroelectric plant, or gas and coal generators.

Our explainer on how electricity bills are broken down gives you some insight into the costs of different parts of the electricity system.

Retailing is intended to be a competitive activity with different companies vying for customers by offering good service, affordable electricity, access to renewables and innovative approaches. This doesn't always work as many households can't, won't or don't know how to get the best deal or the tariff that suits them best.

The retailer activities listed below are split into those which involve interacting with customers and those which are primarily about managing interactions in the electricity system.

Customer-facing activities

• Recruiting new customers and promoting the tariffs they offer, including a sign on process that follows the rules for information transparency.

• Branding and marketing, maintaining website and promotional materials

• Managing billing and finances to oversee the account between the retailer and each customer.

• Managing customer service, inquiries and complaints.

• Managing hardship policies for when people fail to pay or struggle to pay.

• Accessing customer data from electricity meters and can include upgrading and owning electricity meters.

Interactions with other retailers

• A process for moving customers between retailers.
• Independent metering companies often charge to manage the data from customer meters and these arrangements are transferred when customers switch retailers .

Interactions with distribution and transmission companies

• Integrating regulated tariffs into retail tariffs and customer bills.
• Passing through the network cost element from customer bills (noting that often the network tariff doesn't correspond well to the tariff the customer pays).

Interactions with generators

• Hedge agreements.

• Market purchases for future energy consumption.

• Power purchasing agreements that can sit alongside market interactions.

• Forecasting electricity consumption.

Interactions with electricity markets

• Purchasing through wholesale energy market.
• Data interactions for market settlements.
• Monitoring purchasing and settlements.
• Reconciling with customer metering.
• Making payments.

Interactions with other electricity market bodies

• Regulatory reporting.

• Business systems for regulatory compliance and license management.

• Systems set up and approval for interacting with energy markets (eg AEMO in the NEM).

• Registration if involved in additional activities such as aggregation or ancillary services markets.

• Payments for jurisdictional and market charges.

• Involvement in mandatory regulatory activities such as rule changes.

• Policy and advocacy through market peak bodies.

Other Resources

MyTown Energy suggests nine different types of projects that involve buying and selling electricity, ordered here from difficult to easy:.

1. Creating your own retailer is the most difficult, time-consuming and risky project but it has the highest impact because your community will control every step of the process. The other project options will build capacity in your community for electricity retailing and provide many ways to achieve similar aims and impacts.

2. Creating a white label retailer removes much of the difficulty of interacting with the electricity market because a licensed retailer will do that on your behalf. You get to build a following of customers in your community and talk about the transformation of energy use.

3. Allow an aggregator to control the use of generators, batteries or loads like hot water. This project offers a big step toward better use of renewable energy and cost savings.

4. Setting up a power purchase agreement can link your community directly to the production of a local generator. If you are creating a community-owned generator, you will be on the other side, i.e. needing a power purchase agreement to sell your electricity.

5. Retailing through peer to peer or blockchain can be tricky to explain to customers but it helps everyone better understand the future of local electricity production and consumption.

6. Partnering with a retailer can help you with a number of the projects above and might be necessary if you want to;

7. Create bespoke tariffs.

8. Promoting virtual power plants or;

9. Promoting green power can get you started explaining the value of tariffs and deals in the electricity retailing space.