Unaccounted For Energy and Global Settlements

5 July 2022 

The global settlement change and unaccounted for energy - what does it mean for your business?

From June 2022, business energy users may notice a new line on their invoices - ‘Unaccounted For Energy’ (UFE). This is as a result of changes by the Australian Energy Market Operator (AEMO) to the way these losses are accounted for, moving from a  ‘Settlement-by-Difference’ to a ‘Global Settlement’ approach for retailers. While the impact on businesses is expected to be minor, it is still important to understand what this change means.

What is UFE?

Very simply, UFE is the energy that is ‘lost’ in the system once ‘technical loss’ factors - those through Marginal and Loss Factors (MLF) and Distribution Loss Factors (DLF) - are accounted for.  UFE can include a number of things, such as unmetered connections, theft or metering malfunctions.

UFE must be ‘settled’ i.e. allocated and paid for, by market participants. The previous mechanism for this - Settlement-by-Difference - meant that local area retailers carried all of the risk i.e. they were financially responsible for all UFE in the local area. However, independent retailers were not exposed to such risk..


What is Global Settlement and why was it introduced?

The Settlement-by-Difference approach was first introduced by AEMO in 1998 as a way to settle the wholesale market in the National Energy Market (NEM). However, since then, metering has undergone significant changes, particularly with the increased use of smart meters and other innovative technologies.

In addition, there have been numerous entrants into the market during this time that were not subject to the same rules, resulting in the local ‘incumbent’ retailers bearing disproportionate risk when compared to these later entrants. In essence, it meant that local and independent retailers were not competing on the same terms, and independent retailers had less financial incentive to reduce commercial losses.

Following the application for the change by AEMO, the Australian Energy Market Commission (AEMC) released its determination on UFE on 23rd December 2021, confirming the rule change. The new mechanism for settling UFE is now part of the ‘Global Settlements’ procedure - which officially began on May 1 2022 - and will treat all retailers equally by allocating a share of UFE to all retailers in a distribution area.


How will it impact businesses?

Fortunately, the impact on businesses should be relatively minor, although it could result in a small increase in invoice volumes as the new UFE calculation comes into effect. This will be displayed on your invoice as ‘Unaccounted For Energy’. The calculated rate for UFE is shown on your invoice rounded to 4 decimal places under standard rounding principles.

At the moment, it is not possible to tell the full impact until the settlements data is received from AEMO each month. However, we have seen minimal impact, and in some cases, a credit is issued when the unaccounted for generation is greater than the unaccounted for consumption.


Get in touch

If you have any questions or concerns about how the changes to UFE charges could impact your business, please contact us here