Understanding what the different numbers on your electricity bill mean is the first step in reducing your energy bill. The next step is finding the company that, given your unique usage profile, will give you the lowest bill.
Different tariffs and charges
A tariff is how an electricity retailer will charge you for your usage.
The standard “flat” tariff has only two charges: the usage charge, and the supply charge.
The usage charge, in c/kWh, is how much electricity you actually use (see our calculating how much energy you use article).
The supply charge is a fixed daily charge.
The usage charge can be 20~40c/kWh (the average is ~26c/kWh), and the daily charge are about $1/day.
This is often called tariff 11.
You can see how different charges affect your bill by playing with the values on our Solar Calculator.
There is also a controlled-load or hot-water tariff. This means you have two usage charges, one for general use (same as the flat tariff above), and one for a specific circuit (usually for hot water only). This latter one only activates during certain times, usually overnight, and is cheaper than the flat charge.
This is often called tariff 33.
Another option is a time-of-use (TOU) tariff; this has the supply charge, and multiple usage charges depending on when you use the energy (usually cheaper at night and more expensive during the day). There are usually two or three time periods: peak and off-peak; or peak, shoulder and off-peak.
Some tariffs, especially for businesses, have a demand charge – this is a separate charge for the highest amount of energy you used in any 30-minute period throughout the month. For people being charged a demand charge, it’s important not only to not use too much energy, but to not use too much energy at one time.
Large commercial businesses have even more complex tariffs, which I won’t discuss here.
Note: Some bills give your charges excluding GST, and some with GST. The one including GST is the important one!
Solar and feed-in tariffs (FIT)
If you have solar, you’ll also have a feed-in tariff – this is how much your retailer will pay you for every kWh of electricity you export back to them. Sadly this rate is usually lower than your usage charge, at about 10c/kWh (i.e. you pay more for the electricity you buy than how much you get paid when you sell it) – however, with smart energy management you can still end the quarter with the energy company owing you money and not vice versa!
You’ll also often have a fixed charge for being on a solar tariff, perhaps about $28/year.
If you don’t already have solar, you can play around with what your bill would be after adding solar by using our Solar Calculator by inputting your charges and usage and testing different size solar systems.
Which tariff is best for me?
Your usage patterns determine which tariff is best for you. As a simple example, if you’re home during the day, the flat tariff may be cheaper; if you’re only home at night, the TOU tariff may be best. If you export a lot of solar to the grid (i.e. have a large solar system with little daytime usage), look for a tariff with a high FIT. If you use very little, then you can find a tariff with a low daily standing charge (this is usually paired with a high usage charge, but if you have low usage it doesn’t matter).
Different retailers
The tariffs are reasonably standardised across the industry – tariff 11 on Origin and tariff 11 on AGL are still in the usage-charge-plus-daily-charge format. However, how much they actually charge you can vary.
The Australian energy market has become full of energy retailers, and there is real opportunity to save if you live in a metro area. Unfortunately, many regional areas of Australia are still left with one or two choices. Some regional providers are incredibly competitive; others are not.
How do I compare retailers?
There are dozens of sites that compare energy rates. Sites like Canstar Blue offer great information about typical tariff rate for your state or territory. What you should also be aware of with many comparison sites is that they receive a referral fee when you sign up via their website. There is no problem with this business model, but it is open to the comparison site favouring companies that pay higher commissions. For this reason, I do suggest you look at a few of these sites if you would like information, but also consider the government websites below that don’t have these bias issues.
And there is a government website comparing energy tariffs here: https://www.energymadeeasy.gov.au/
Hints and tips for finding the best retailer for you
Once you have an idea of what your usage patterns are like and what tariff you are on, it’s time to start comparing!
Here are some pieces of advice:
- Look for the lowest usage rate possible first, then look for a lower daily rate. Your usage charge is generally the largest portion of your energy bill and deserves the biggest focus for savings. You can check this for yourself by looking at your past bills.
- Pay on time discounts are also a consideration, but make sure they are genuine discounts from the standard rate and not matched with higher-than-standard rates.
- Some companies will use the ‘creep’ strategy, starting with low rates but slowly increasing the rates over time – without making it obvious to you. Be sure to regularly check the rate you’re being charged.
- Don’t choose a high feed-in rate on a plan with a high usage rate – they do not balance out. Getting a 20c feed-in rate may sound great, but if you were offered a 33c usage rate when you could have gone with a 28c usage rate with 10c feed-in you will likely end up with a bigger bill.
Let’s use an example for this last point:
- You consume 2,000kWh of electricity and feed 500kWh back into the grid
- In the first option, your bill would be 2000kWh x 33c – 500kWh x 20c = $560
- The second option, your bill would be 2000kWh x 28c – 500kWh x 10c = $510 – 10% less
Again, you can adjust these numbers on our Solar Calculator to find out for yourself!
