Skip to main content

The way we pay for electricity has changed – demand tariffs

The way we pay for electricity has changed. Now, more than ever before, your behaviour when using appliances in your home could have you paying a much higher price for your electricity. LPE is here to help by explaining how these new changes could affect you and how you can avoid paying higher bills.

What’s Happening?

Required by the Australian Energy Regulator and implemented by electricity distributors such as Energex and Ergon, Demand Tariffs are being introduced to homes and businesses with smart meters to encourage households and businesses to use less electricity during peak demand times when there’s more pressure on the electricity grid. This is happening across all electricity providers, not just LPE.

Watch this video to learn more.

What is a Demand Tariff?

A demand tariff is a pricing structure that includes a ‘demand’ charge for your use of the electricity network.

How Demand Tariffs Work and How They Differ to Standard Tariff Electricity Plans

Normally, electricity costs are based on the following charges:

  • Supply charges – a flat daily cost charged by your distributor to get electricity to your home or business, and for the maintenance of poles and wires.
  • Usage charges – the total amount of electricity you use over the billing period (often with different rates for peak, shoulder, and off-peak periods), with rates charged per kWh of electricity used.

However, if you’re on a demand tariff, your bill will also include an additional ‘demand’ or ‘capacity’ charge. This extra charge is calculated using your highest electricity usage period (measured in 30 minute blocks between the peak times of 4pm and 9pm) and resets monthly, meaning, you only need to hit your peak once for that same demand charge to be applied to your bill for every single day of that month. This means that the price of your electricity bill is influenced not only by how much electricity you use overall, but also by the ‘demand’ you put on the electricity network during peak times. In simple terms, that means if you turn on lots of devices (eg. the TV, washing machine, dryer and dishwasher) within a 30-minute period between 4pm to 9pm, the ‘demand’ you put on the electricity network will be high. And if you have a smart meter and are on a demand tariff electricity plan, your charges will be too. Therefore the key is to spread your electricity usage out over the 5 hours between 4pm and 9pm, rather than turning on everything at once.

Saving Money on Demand Tariffs

You can avoid high demand tariff charges and save money on your bills by understanding how and when your home uses electricity, as well as monitoring and adjusting your electricity usage monthly, when you receive your bill. Our top tips include:

1. Staggering your use of appliances between 4pm and 9pm

Avoid running lots of appliances at once to avoid a high demand peak. Instead, stagger your use of appliances across 30 minute intervals. For example, you could turn your aircon on at 6pm, begin cooking dinner after 6:30pm, and put the dishwasher on after 7pm.

2. Changing the time you use appliances to avoid peak times

Use appliances outside the peak demand window when the demand charge isn’t being measured. For example, you could run your dishwasher, clothes dryer and pool pump overnight (after 9pm) or in the morning.