Block rate energy tariffs

Block rate energy tariffs: What you need to know

A block rate tariff, sometimes listed on energy bills as peak, demand or single rate, is a type of tariff which charges customers a different price depending on how much electricity or gas they have used. Despite the block tariff being a standard pricing arrangement for many Australian households, the usage blocks and applicable costs can be a little tricky to wrap your head around. However, knowing the basics can help you cut your overall power bills. That’s why Canstar Blue has produced this guide, to help energy customers better understand block rates, their charges and how they can work in your favour.

For those who aren’t familiar with the wider subject of energy tariffs, Canstar Blue has also published a general guide to tariffs to bring you up to speed.

What is a block rate tariff?

Customers on this tariff are charged for electricity or gas in tariff blocks (i.e. a quantity of energy usage). The price you’re charged will either increase or decrease with each block of electricity or gas consumed. A block rate tariff is the only option for all natural gas customers, as well as South Australian electricity customers. Electricity block tariffs are common in New South Wales, but are not offered in Queensland. In Victoria, only households on the AusNet network have block tariffs.

The number of blocks that make up your energy charges varies across providers, with most offering between two and six. These blocks are usually described in terms of daily electricity or gas usage, but may also apply to monthly or quarterly usage. Below are three examples of how a block tariff might operate.

Gas block tariff with five daily usage blocks

Block Price (Incl GST)
First 27 MJ per day 3.8 cents per MJ
Next 20 MJ per day 3.3 cents per MJ
Next 41 MJ per day 2.9 cents per MJ
Next 83 MJ per day 2.2 cents per MJ
Remaining usage per day 1.9 cents per MJ

Electricity block tariff with three quarterly usage blocks

Block Price (Incl GST)
First 4000 kWh per quarter 27c/kWh
Next 3450 kWh per quarter 29c/kWh
Remaining usage per quarter 23c/kWh

Electricity block tariff with two daily usage blocks

Block Price (Incl GST)
First 11 kWh per day 34c/kWh
Remaining usage per day 38c/kWh

Examples only, with typical pricing

It is most common for natural gas prices to fall with each subsequent block of usage. The same applies for electricity across most New South Wales networks. As for South Australia and Victoria, however, it is more common (though not always the case) that electricity prices will rise as more electricity is consumed.

For more details on what electricity tariffs are available in your state, check out our below guides.

How do I compare block rate tariffs?

Comparing energy offers is somewhat complicated by block rate tariffs. While one electricity provider might offer you a low price on the first block of usage, the later blocks may be considerably more expensive. It can also worth the other way around, where the first block of usage is most expensive and becomes subsequently cheaper.

This means that, when it comes to block rates, there is no one size fits all energy plan out there. A plan that works out cheapest for a household with modest energy usage will likely be different to the cheapest offer for households with much larger energy usage.

Consider your own household’s energy usage. If you live in a large household and tend to use a considerable amount of gas or electricity, then you should probably lean toward offers with low prices on the later blocks. Households with only one or two people should instead focus on lower prices in the earlier blocks.

Is a block rate tariff right for me?

If you live in New South Wales, or on the AusNet distribution network in Victoria, then you may have the option to choose between a block rate electricity tariff and a time of use/flexible pricing tariff.

Whether or not a block rate tariff will save you money is very circumstantial. Since time of use tariffs impose high rates during peak hours (usually between 3pm and 9pm), a block rate tariff may be the more affordable choice if you tend to use most of your energy around these hours.

Tariff blocks may, however, be a less economical option for New South Wales households which use very little electricity, as usage rates start high and fall with subsequent blocks. It’s another story for Victorian customers on the AusNet Network. Electricity usage rates tend to start low, and increase with each block, potentially making it more expensive for large households with high electricity usage.

For those who can’t choose their tariff, remember to compare energy retailers to ensure you’re getting the best deal.

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Original Author: Brendon O’Neill

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