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What are electricity tariffs in Australia?

Electricity tariffs determine how you’re charged for power. Here’s how they work and how you may save by switching to a different tariff.

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Tariffs are price structures for electricity. They are rules for how you get charged when you use power.

Here are the main tariffs you'll run into:

Choosing the right tariff can help you save on your energy bill or prevent you from paying too much.

Electricity tariffs explained

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Single use tariff

  • Available to: Anyone.
  • Price structure: You'll pay the same amount for energy regardless of when you use it.
  • Good for: People who are home at night during the week and those who don't want to worry about when they're using energy.
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Time of use tariff

  • Available to: Anyone with a smart meter.
  • Price structure: You'll pay extra for energy used during peak periods (when everyone else is using power) and less at other times. Peak periods differ from state to state and across providers but always apply on weekday evenings.
  • Good for: People who use energy mostly during the morning and on weekends (depending on your state).
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Controlled load usage tariff

  • Available to: Anyone with an appliance on its own dedicated circuit.
  • Price structure: You'll get lower rates on power for a single appliance, but only for a limited number of hours per day.
  • Good for: Anyone with a power-hungry appliance such as an electric hot water heater.
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Demand tariff

  • Available to: Mandatory on some energy plans.
  • Price structure: This is an extra premium added onto your supply charge. It's calculated based on the highest amount of energy you've used at one time and can vary with seasons.
  • Good for: This is an automatic extra fee and not good for anyone.

Regardless of single rate or time of use, you'll see these charges on your bill:

Usage charges

This is the charge for the amount of power you've used.

It's listed as a single "peak" entry on a single rate tariff, or split into "peak", "off-peak" and potentially "shoulder" periods on a time of use tariff.

Supply charges

This is the amount you're charged simply for being connected to the energy grid. Supply charges are a flat daily rate independent of the amount of power you use.

These also reflect the costs involved in maintaining and repairing the power grid.

What is peak and off-peak energy?

Peak and off-peak energy refer to energy consumption during 2 different periods of the day – peak periods when energy demand is at its highest, and off-peak periods when energy demand is at its lowest.

The exact periods and prices vary from state to state and between providers, but generally:

  • Peak. Weekday afternoons/evenings – electricity is at its most expensive.
  • Off-peak. Overnight and during weekends – electricity is at its cheapest.
  • Shoulder. In between peak and off-peak periods – electricity costs a little less than peak.

You only need to worry about these periods if you're on a time of use tariff. On a single rate plan, all your power use will be referred to as "peak" usage.

Examples of peak and off-peak energy times
Peak times vary from state to state and can also depend on your energy distributor and provider. Here's an example of the peak, off-peak and shoulder periods from 4 major energy providers on the Ausgrid network in NSW.

Note that Origin Energy, Energy Australia and Simply Energy have no peak periods in April, May, September and October. Instead, they charge shoulder rates during peak periods.

Time of use vs single tariff: Which is better for me?

There are 3 main things to consider when answering this question:

electric consumption

  • Your energy usage habits. If you use the majority of your energy during off-peak periods, you may be able to save with a time of use tariff.

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  • Your state. Some states have peak rates that are more expensive than off-peak rates (e.g. NSW peak rates are usually around 4 times greater than off-peak).

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  • Time of use periods. Some states have few peak hours every day (NSW usually has 6 hours between 2pm and 8pm) while others have many (SA has 14 peak hours between 6am and 10am and from 3pm to 1am). Fewer hours mean it's easier to use power at off-peak times.

In theory, time of use tariffs should benefit anyone who uses most of their power outside of peak periods.

In reality, they're highly dependent on where you live and how easily you can shift your usage. You'd need to shave your peak power use down to just 25% or so of your total consumption to break-even in NSW compared to a single rate tariff – a gigantic change for most households.

Here's an example to illustrate how the 2 tariffs compare.

Example: You use 40% of your power during peak periods

In this example, we assume that you manage to shift your energy habits such that you're using 40% of your power during peak periods, 30% during off-peak periods and 30% during shoulder periods.

In this example, we assume that you manage to shift your energy habits such that you're using 40% of your power during peak periods, 30% during off-peak periods and 30% during shoulder periods.

Here's the difference between what you'd pay on single rate and time of use tariffs in 3 states:

Note: Usage rates were calculated as an average among the best market offers (as of January 2022) from 3 major providers in each state: Origin, AGL and Energy Australia. We assumed a quarterly power use of 1,250kWh and ignored supply charges, which are the same between time of use and single rate plans.

With this usage pattern, you're way better off with a single rate in NSW and about even in QLD. A time of use tariff could save you a fair chunk in SA.

How realistic is low peak consumption?

For NSW and QLD, 40% peak power use is highly achievable. Peak rates only apply for 5 or 6 hours in each state, so you have plenty of daylight hours to run your energy-intensive appliances.

However, in SA peak rates apply for most of the day. You'd have to use 60% of your energy between 10am and 3pm (or 1am–6am, which isn't too practical) to see the kind of savings suggested in the table above. This makes it way harder to achieve.

How to take advantage of these energy tariffs for cheap electricity

If you're on a straightforward single rate tariff, your tariff won't have much of an impact on your electricity prices. As long as your energy-hog appliances (such as a water heater or pool pump) are on their own controlled load tariff, the only other thing to consider is whether you'd benefit from a time of use tariff.

Beyond that, the plan you pick – not your tariff – determines your power prices, including its base usage and supply rates, guaranteed discounts and conditional discounts such as pay-on-time or other sign-up incentives.

Should I switch to time of use?

For the majority of customers, adopting a time of use tariff will result in higher and not lower bills. The only way to benefit from a time of use tariff is to make a radical shift in how you use energy.

A 2020 study by the Victoria Energy Policy Centre found that most customers barely adapt their energy usage to increasingly expensive peak prices versus off-peak prices. Other studies have shown this to be the case outside of Victoria too. Very few people are able to shift their habits enough to save on a time of use tariff.

All of this means that unless you're really prepared to adjust your usage habits (or if you already wash your clothes at 10pm and rarely use heaters in the evenings), you're better off avoiding time of use altogether.

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2 Responses

  1. Default Gravatar
    BrianOctober 19, 2016

    Does Alinta gas have any concessions for pensioners?

    • Avatarfinder Customer Care
      HaroldOctober 19, 2016Staff

      Hello Brian,

      Thank you for your question.

      Unfortunately, gas is not listed as one of the concessions of a pensioner. If you wish to learn more, you can read our seniors card guide and be informed about the discounts and other privileges of a pensioner.

      Cheers,
      Harold

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