Frequently Asked Questions


1. What is the PPA price going to be?

The AHA are seeking the lowest possible price for AHA members. We believe we will be able to achieve an energy charges price of between 6-8c/kWh (inducing for peak, off-peak and shoulder). This price takes into account the ‘raw PPA’ price from the power generator, and the cost of ‘firming’ the load to achieve continuous supply. The deal will also be able to significantly reduce the ‘green/environmental charges’ component of your bill.

 

2. What is the current status of the PPA?

The AHA have been collecting the data of all participants to build a ‘load profile’ of the consumption of participating pubs.

On Friday 6 July 2018, we will issue a Generator Request for Tender to generators in NSW (ie developers of solar and wind projects) to obtain offers on price and other terms. Following the completion of the Generator Request for Tender, we will then run a Retailer Request for Tender, to obtain the best possible price to ‘firm’ the PPA.

We are likely to have a fully-developed offer, including the final price, ready by late-October 2018.  

 

3. If I haven’t responded to the EOI (either by providing a Letter of Authority, Interval Data, or an Energy Bill), is it too late to join the deal?

If you would like to participate in the PPA deal but haven’t responded to the EOI, please send an Energy Bill to energy@ahansw.com.au.

The offer will be made available first to those pubs that already sent their details. Then it will be opened to everyone else.

If you miss out on this deal, you can join the next one.

 

4. If I have responded to the EOI and my contract is expiring soon (before the end of 2018), should I re-sign a new contract now?

Yes – you should sign a new contract if your contract is expiring in 2018. We do however recommend that you ask your retailer to sign a one (1) year contract, instead of a normal three (3) year contract. That will allow you to move on to the PPA Deal as soon as possible.

The PPA is due to start on 1 Jan 2020 or sooner.

If your contract is expiring in 2019, we are seeking to negotiate a ‘transition’ price with the chosen retailer, who will cover your energy needs until the PPA price at a favourable price.

 

5. I’ve heard the deal is for a 10-year energy contract. Why not three (3) year contract?

We are proposing a 10-year energy deal because the longer the term of the contract, the better price we are able to achieve with the PPA. Prices even below the wholesale spot price can be achieved with long-term contracts.

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The reason for this is that owners of new electricity generators are looking for long-term purchasers of their power and are willing to offer prices below the current wholesale price.

By signing a 10-year deal, we are also protecting against possible future electricity price rises. The graph below shows the trends in the wholesale spot price over the past three years, as well as the trends for retail contracts (on average) for small and large pubs.

Signing long-term contracts is not unusual – in fact, many large organisations, such as the University of New South Wales, the Commonwealth Bank, and Telstra, have signed 10 or even 20-year PPA deals.

 

6. Under the PPA deal, who will my contract be with, and who will my bills come from?

You will simply enter into a contract with the retailer that is selected through the competitive tender process and will receive bills from that retailer.

AHA will have a management agreement with the retailer to ensure that the terms of the deal are enforced for members.

We will only consider proposals from reputable retailers who have a good credit rating.

 

7. I have heard that renewables are ‘intermittent’ – will the PPA provide certainty of supply?

It is essential that we are able to ensure ‘continuous’ supply of electricity to AHA members. Given that some renewables are intermittent (ie a solar farm only generates power when the sun is shining), the retailer will be responsible for ‘firming’ the PPA – i.e. providing continuous supply when the generator is not generating power.

 

8. How “green” or “renewable” will the deal be?

We are seeking to purchase between 80-100% of the power under the PPA Deal from renewable sources.

 

9. You have said that the ‘firming’ prices is set only for the first three (3) years. How will the price be calculated beyond three (3) years?

Retailers are only willing to provide a price on the ‘firming’ component of the PPA Deal for the first three years.

To ensure that AHA members are not being price gouged for years 4-10, we are requiring retailers to provide their ‘open book formula’ for how they will calculate their ‘firming’ charges, based on a transparent market-based formula.

Ideally, we are asking them to link the ‘firming’ price to the wholesale spot rate and fix their margin for the duration of the 10-year term.

 

10. Who is participating in this PPA Deal?

589 AHA Members across NSW have signed up to the EOI to participate in this PPA Deal. Together, these pubs have significant buying power, which enables us to achieve a better price than pubs negotiating individually with their retailer.

 

11. What is a PPA?

A PPA is a contract between the final energy user (hotel and the generator to purchase energy at a pre-agreed price for a pre-agreed period of time.

Usually PPAs are only available to very large energy users.

Pubs have small energy volumes, meaning their electricity prices are high. They also cannot access the PPA market on their own.  

By aggregating their load, AHA Members can gain access to the PPA market collectively and negotiate a significantly lower prices.

 

12. Will country pubs be advantaged or disadvantaged by the deal?

All AHA members who have signed up to the EOI will be able to access the same competitive price under the deal. Country pubs will pay the same prices as city-based pubs.

 

13. Has a PPA been done before across an entire industry body?

No. The largest PPA deal in Australia done to date had 15 large businesses participating. This will be the first PPA in Australia (and possibly the world) with hundreds of participants.

 

14. How will the AHA and CES select a generator/s?

In order to ensure the lowest cost of power for pubs, it is essential that the right generator(s) are selected, based on both price and power generation profile.

CES will run a competitive tender process, calling on the renewables sector – with solar, wind, and pumped hydro generators – to submit tenders to enter into a PPA.

The partner generator will be selected based on price competitiveness, generation profile, and attractiveness of commercial terms.

 

15. By entering into the PPA Deal, does this lock me into the contract for its entire duration (eg. 10 years)?

PPAs generally require you to commit for the term of the contract. This allows an exceptionally low price to be negotiated for the life of the contract. The competitiveness of pricing is linked to load size – ie the greater the number of hotels included in the scheme, the greater likelihood of obtaining more favourable pricing and commercial terms.

 

16. Why can’t I enter into a PPA on my own, outside of this Deal?

The main barrier to individual businesses entering into PPAs directly is the fact that generators will only enter into PPAs with customers with a very large energy load. It is highly unlikely that standalone pub would have a sufficient load to enter a PPA directly.

Other barriers to entering into PPAs include the cost of setting up the PPA (including legal and energy market advice), and the issue of meeting the creditworthiness requirements of generators and their banks.

By aggregating a large number of hotels under the AHA industry umbrella, members can access a PPA price that would typically it would only be available to very large energy users. Although individual hotels are commonly small energy users, the combined load of AHA NSW members large, and provides a strong bargaining position with the generator(s) and retailer.