Utility sourcing: what it covers, and how the cycle runs

Most organisations spending seven figures a year on energy cannot say, to the dollar, why they are on the contract they are on. Not for want of competence. The register of what the business actually buys was never built, and without it every renewal starts from scratch on somebody else's deadline.

What utility sourcing is

Utility sourcing is strategic sourcing applied to electricity, gas and water. It covers building a complete register of what the organisation consumes and where, specifying what it wants to buy, approaching the market on one set of assumptions, evaluating offers on delivered cost rather than on the headline rate, awarding, and managing the contract through to the next renewal.

Buying energy is a transaction that closes at signature. Sourcing is a cycle that begins well before an expiry date and carries on after one, because the register of connection points, end dates and network tariffs is what makes the following cycle possible.

The frame is already familiar to a procurement function. The Commonwealth Procurement Rules put value for money at the centre, state that price is not the sole factor, and require whole-of-life costs to be weighed. Utilities are a category where that instruction earns its keep, because an offer that looks cheaper on the energy rate can cost more once network charges, demand charges and the contract terms are counted.

The same questions, answered differently by a purchase and by a sourcing cycle.

On the service side this work is energy procurement. The vocabulary differs by function: procurement and finance teams tend to say sourcing, energy teams tend to say procurement, and both describe the same cycle.

Why utilities resist a standard category playbook

Four features of this market change how the cycle has to run, and none of them shows up on an invoice.

The unit of purchase is the connection point

Electricity is identified by a National Metering Identifier and gas by a MIRN, and the identifier attaches to the connection point rather than the building. One premises can carry more than one. Each connection point sits with one party who carries financial responsibility for it, and that is usually the retailer.

A site count and a connection point count are different numbers. So the first question on a portfolio is not what you pay, it is how many connection points you actually have, and that is rarely a number anyone can produce from memory.

The price is a stack of four components

The AER sets out four components in a retail electricity price: network costs, wholesale costs, environmental costs, and retailer costs and margins. Wholesale and network costs are the largest component, and which of the two leads varies by distribution network.

Two offers cannot be compared on the energy rate alone unless both treat network costs the same way, and how those costs reach a price is each retailer's own choice rather than a standard format. So the cheaper-looking offer is sometimes genuinely cheaper and sometimes the same money shown differently. Telling which takes a rebuild.

Protections thin out as the portfolio grows

The consumer protection Part of the National Energy Retail Law governs the relationship between retailers and small customers. Above the threshold, which the national regulations set at 100 MWh a year for electricity and 1 TJ for gas, with some jurisdictions setting a different figure, a business is a large customer.

The 40 to 20 business day notice before a fixed term ends is a small customer rule. So is the limit on early termination charges, which for a small customer cannot include the retailer's lost profits. A large customer contract carries whatever it says it carries.

Businesses cross that threshold by accident, usually by opening a site. Nobody writes to tell you the protections have gone.

Network charges move on their own calendar

Each distributor sets its charges through a tariff structure statement approved by the AER, and prices update every 1 July, on a date with no relationship to when your contract starts or ends. Demand charges go further. There is no national definition at all: the interval, the unit, the time window, the look-back period and any minimum chargeable level are each distributor's own design.

So two sites with identical load, in two networks, get two different bills, and nothing on either invoice tells you which design you are on. Somebody has to know that per site. And moving a site to a better-suited tariff is the distributor's decision against published criteria, which in some networks only your retailer can lodge.

Source: AER, Annual retail markets report 2024-25, 30 November 2025. Segments are drawn equal because no proportions are published for commercial customers.

The vocabulary, and where each term comes from

Energy borrows procurement words and procurement borrows energy words, and the two do not always mean the same thing. Every definition below is taken from the instrument or the body that publishes it. Where no regulator defines a term, that is said.

What you are actually buying

NMI. National Metering Identifier, the unique identifier for an electricity connection point. Standing data, including the address and the metering arrangements, is recorded against it. Source: AEMO, MSATS technical guide and NMI procedure.

MIRN. A ten-character identifier for a gas supply point, and a sub-class of National Metering Identifier. Western Australia sits outside this structure. Source: AEMO, MIRN Structure version 2.0.

Connection point. The point at which an installation connects to the distribution or transmission network. Contracts, metering obligations and network tariffs all attach to it. Source: AEMO, MSATS technical guide.

Interval data. Consumption recorded in intervals that match or divide into a market trading interval. A trading interval in the National Electricity Market is five minutes, and older meters record in thirty-minute intervals. Source: AEMC, National Electricity Rules, chapter 10 definitions.

Going to market

Letter of authority, or LOA. A written authority allowing a third party to obtain information about your energy accounts and to deal with retailers and distributors on your behalf. It does not transfer the power to enter or change a contract unless it says so. Source: Built on the right of access in the National Electricity Rules, clause 7.15.5.

Customer authorised representative. The term the rules use for a person authorised to act on a customer's behalf on metering data and connection information. It is the statutory concept a letter of authority gives effect to. Source: AEMC, National Electricity Rules, clause 7.15.5.

Tender. A process inviting suppliers to offer against a defined requirement. An open tender is published and anyone may respond; a limited tender approaches one or more suppliers directly. Source: Department of Finance, Commonwealth Procurement Rules, appendix B.

Request for proposal. A document inviting suppliers to propose how they would meet a requirement, covering approach and commercial terms as well as price. The rules name it as one form an approach to market may take without defining how it differs from the others. Source: Department of Finance, Commonwealth Procurement Rules, appendix B.

Request for pricing. A document inviting suppliers to price a scope that is already specified. Commercial convention: the phrase does not appear in the Commonwealth Procurement Rules, which use request for quote for the same idea. Source: Industry usage.

Procurement readiness. Holding the information and the authority needed to go to market before a contract expires: current interval data, a complete list of connection points, known end dates and a signed authority to act. Source: Industry usage, not a defined term.

Price structure and contract terms

Large customer. A business consuming at or above the upper consumption threshold, which the national regulations set at 100 MWh a year for electricity and 1 TJ for gas. Some jurisdictions set a different figure. Crossing it changes what the contract has to do, because the small customer rules stop applying. Source: AER, Retail Exempt Selling Guideline version 7, August 2025.

Bundled pricing. Network charges and other costs combined with the energy rate into a single price. The bundled price carries the retailer's estimate of future network and regulated costs, and the risk of that estimate being wrong. Source: No regulated definition. Distributors state the packaging is at the retailer's discretion.

Pass-through, or unbundled, pricing. Network charges, market fees and regulated costs billed as they are incurred, separately from the energy rate. Source: No regulated definition. Distributor pricing overviews.

Fixed price contract. The energy rate is agreed for the term and does not move with the wholesale market. Network charges and regulated costs are commonly passed through and can still change. Source: Industry usage.

Progressive purchasing. The requirement is bought in tranches across a period rather than fixed at a single point, so the final price is an average of several purchases. Also called flexible purchasing. Source: Industry usage.

Network charges, DUOS and TUOS. The component of the bill that pays for transporting electricity. DUOS is distribution use of system; TUOS is transmission use of system, covering prescribed transmission services. Source: AER tariff structure statement decisions; AEMC network use of system charges fact sheet.

Demand charge. A network charge based on the rate at which electricity is drawn rather than the total consumed. There is no national definition, so an identical load is billed differently in different networks, and a single peak can keep being charged for twelve months. Source: Distributor tariff structure statements approved by the AER.

kVA. Kilovolt-ampere, the unit of apparent power. Networks commonly bill demand in kVA rather than kW, so a site with a poor power factor pays for apparent power it never converts into useful work. Source: AER, tariff structure statement glossary.

Early termination charge. A charge for ending a fixed term contract early. For a small customer the amount or its method must be stated and be a reasonable estimate of the retailer's costs, excluding lost profits. No equivalent restriction applies to a large customer contract. Source: AEMC, National Energy Retail Rules, rule 49A.

Retailer of last resort, or RoLR. The arrangement transferring customers of a failed retailer to a designated replacement. A transferred large customer goes onto published terms that must be fair and reasonable, with no price cap, and a portfolio spread across distribution areas can be transferred to several retailers at once. Source: National Energy Retail Law, sections 145 and 146; AER RoLR guidelines and plan 2026.

Renewables and reporting

LGC. A large-scale generation certificate, created for each megawatt hour generated by an accredited renewable power station. Certificates are traded separately from the electricity and surrendered to make a renewable claim. Source: Clean Energy Regulator.

STC. A small-scale technology certificate, created for small-scale installations including rooftop solar, usually assigned to the installer in exchange for a discount at the point of sale. Source: Clean Energy Regulator.

GreenPower. A government-managed accreditation program under which retailers sell renewable electricity products, with the renewable generation independently audited. Source: greenpower.gov.au.

PPA. A power purchase agreement, a long-term contract to buy electricity, or the renewable attributes of electricity, directly from a generator rather than from a retailer. Source: Industry usage.

Scope 2 emissions. Indirect emissions from electricity, heat or steam you buy and consume. They can be calculated on a location-based method, using the grid's average intensity, or on a market-based method reflecting the instruments you have bought. The two can produce different numbers for the same site. Source: Greenhouse Gas Protocol Scope 2 Guidance; DCCEEW, National Greenhouse Accounts Factors.

How a sourcing cycle runs

The first stage takes the longest and is the one organisations skip, which is why so many renewals end up negotiated on the retailer's timetable rather than the buyer's.

1. Build the register. Every NMI and MIRN, with its distributor, its network tariff, its current rate, its contract end date and the entity that holds it. This is the asset the next cycle runs on, and a structured portfolio view is what keeps it current.

2. Take the authority. A letter of authority, scoped deliberately. Information only, unless you intend to delegate signing. It is usually the first document signed and the most common cause of delay.

3. Pull the interval data. Twelve months per connection point, so offers are priced on how the load actually behaves rather than on an assumption. A retail customer or its authorised representative can obtain metering data on request under the National Electricity Rules, clause 7.15.5.

4. Write the specification. Term, price structure, how network costs are treated, any renewable claim, billing format, reporting, and the data you want back during the contract. Specify it once and every offer answers the same question.

5. Approach the market. One set of assumptions to every retailer, a common return format, and a validity window you set. The ANAO's procurement guidance puts it plainly enough for any category: market research and sounding should be commensurate with the scale, scope and risk of the procurement.

6. Evaluate on delivered cost. Rebuild every offer on the same basis, then read the terms that move money after signature. Termination, price variation, reconciliation and what happens if a site is added or closed.

7. Award, then manage it. A contract management plan before the contract is signed, not after. Validate the first bills against the contract and the network tariff, keep the register current, and diarise the next renewal window.

The first stage is the longest. Everything after it is faster when the register already exists.

Renewable sourcing, inside the same cycle

A renewable supply claim is a certificate transaction. The certificate conveys the renewable attribute of generation; the physical electricity delivered to your site comes from the grid mix either way. That is how the accounting works, and knowing it is what lets you buy the claim deliberately rather than by accident.

Certificates. A large-scale generation certificate is created for each megawatt hour generated by an accredited renewable power station. Buying and surrendering certificates is the mechanism underneath almost every renewable claim.

An accredited retail product. GreenPower is a government-managed accreditation program under which retailers sell renewable electricity products, with the generation independently audited. It is bought as a line in the retail contract.

A power purchase agreement. A long-term contract for electricity, or for its renewable attributes, directly with a generator. It carries term, volume and credit considerations a retail contract does not.

Where the claim lands matters as much as what it costs. Scope 2 emissions can be reported on a location-based method, using the average intensity of the grid supplying the site, or on a market-based method reflecting the instruments you hold. The same site can produce two different numbers, so the reporting method belongs in the specification rather than being settled afterwards.

The build side of this sits with renewables and energy efficiency, and the reporting side with carbon and climate reporting.

Who owns it, and what to hand over

Finance owns the cost and the forecast. Procurement owns the process and the contract. Facilities owns the load and the plant that creates it. Most organisations have all three and no single owner, which is how a renewal date passes unnoticed and a portfolio ends up on rates nobody chose.

Who holds the market view. Run it in-house: Your energy manager, if you have one with time for it. Leave it with the incumbent retailer: The retailer, which prices its own book. That is their job, not a criticism of it. Retain an independent adviser: The adviser, across every retailer that will quote your load.

Who holds the data and the register. Run it in-house: You, if someone maintains it between renewals. Leave it with the incumbent retailer: Whoever sent the last offer, for the sites they supply. Retain an independent adviser: The adviser, under an authority you grant and can withdraw.

How it is paid for. Run it in-house: Internal time, which is real cost even when it is invisible. Leave it with the incumbent retailer: Inside the rate, wherever the retailer has placed it. Retain an independent adviser: A disclosed fee. Our clients sign an authority that states what we earn.

What happens at renewal. Run it in-house: Depends entirely on whether the end date was diarised. Leave it with the incumbent retailer: An offer arrives, with no comparison attached. Retain an independent adviser: The market is approached before the window closes, on your assumptions.

Where the risk sits. Run it in-house: With you, including the risk of the register going stale. Leave it with the incumbent retailer: With you, priced into the rate as a return for the risk the retailer carries. Retain an independent adviser: With you, but visible and specified, which is what makes it manageable.

Run in-house by somebody who owns it and has the time, this works. The reason it usually does not is that the time never appears, not that the people are not capable.

Utilizer is an independent energy consultant, and the mechanism is the whole argument. We go to the retailers that will price your load, show you everything they quote, and tell you which one fits and why.

We disclose what we earn. Clients sign an authority that states our fee, which is not something most buyers have ever been offered.

Then we stay. A named contact, regular reviews, and the register kept current between renewals, because that is where the rest of the value sits. Every state, every territory, and New Zealand.

The service itself sits under energy consulting.

The procurement figures come from a not-for-profit portfolio, an education provider and a food processor. The net promoter score was measured independently by Synaval in the 2024 client survey.

Questions procurement teams ask

What is utility strategic sourcing?

Utility strategic sourcing applies the standard sourcing cycle to electricity, gas and water. It covers building a register of every connection point, specifying what you want to buy, approaching the market on one set of assumptions, evaluating offers on delivered cost, awarding, and managing the contract through to the next renewal.

How is utility sourcing different from energy procurement?

They describe the same work in two vocabularies. Procurement and finance teams tend to say sourcing, because it names the discipline rather than the transaction. Energy teams tend to say procurement. The practical difference is scope, since sourcing includes the specification before the market approach and the contract management after the award.

What is a utility contract strategy, and what belongs in one?

It sets out how you will hold your utility contracts. Which sites sit together and which stand alone, how long each term runs, whether prices are fixed at one point or bought in tranches, how network costs are treated, what renewable claim is attached, and what reporting the contract has to produce. It also records when each contract ends and who acts on it.

The detail is in what belongs in a utility contract strategy.

Should you outsource utilities management?

It turns on who currently holds the market view and the data. An organisation with a dedicated energy manager, live interval data and a maintained contract register can run its own cycle. Most have none of those, and the choice is between leaving the work with the incumbent retailer or retaining an independent adviser who holds the register and runs the market approach.

How far ahead of expiry should we start?

No regulator publishes guidance on this, so treat what follows as our view rather than a rule. Allow long enough to assemble the register, obtain twelve months of interval data and write a specification before you approach the market, then leave room to go back to the market if the first round prices badly. For a multi-site portfolio that is a matter of months, not weeks. Procurement readiness covers what to have in hand.

What does renewable sourcing involve?

A renewable supply claim is a certificate transaction. Large-scale generation certificates are created for each megawatt hour generated by an accredited renewable power station, traded separately from the electricity, and surrendered to make the claim. You can buy the claim through an accredited retail product, through certificates purchased and surrendered on your behalf, or through a power purchase agreement with a generator.

Who should own utilities: finance, procurement or facilities?

Each owns part of it. Finance owns the cost and the forecast, procurement owns the process and the contract, and facilities owns the load and the plant that creates it. Which one leads matters less than whether anyone holds the renewal date. One named owner with the register and the calendar is what stops a contract expiring quietly.

Can we treat a group of sites as one customer?

One commercial supply agreement covering many sites is ordinary contracting. Aggregating premises so that sites below the threshold are treated as part of one large customer is a separate, regulated act: it requires written agreement and the customer's explicit informed consent, and a retailer cannot do it on its own initiative. It also removes the small customer protections from the sites it covers.

Read next

The pieces that sit under this one, each on a single part of the cycle.

• What is a utility contract strategy, and what belongs in one? Term, structure, treatment of network costs, renewable claim, reporting, and who acts when it ends.
• Utility strategic sourcing: what it covers, and how it differs from buying energy. The discipline against the transaction, and the stages a buyer tends to skip.
• Should you outsource utilities management? What stays in-house, what is worth handing over, and how to scope the authority you grant.
• How renewable sourcing works for an Australian business. Certificates, accredited products and power purchase agreements, and what each does to your reporting.
• Energy strategic sourcing across a multi-site portfolio. Connection points, mixed thresholds, several distributors, and one specification that covers them all.
• What a utility procurement process looks like, end to end. The documents, the sequence and the decision points, written for someone running it for the first time.
• Who should own utilities: finance, procurement or facilities? How the three functions divide the category, and what the named owner has to hold.

Adjacent to this cluster: energy management and analytics for the data layer, energy bill validation for what happens after the award, gas procurement where the portfolio includes gas, and commercial property where the load sits across tenancies.