Energy Tariffs and Charges Explained

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The energy market is admittedly quite daunting and confusing, putting many Aussies off regularly comparing their electricity and gas contracts. However, fully understanding your energy plan is important for finding the best deal,

In this guide, Canstar Blue walks you through energy tariffs, charges, contracts and everything else you need to know to start comparing providers.

What is an energy tariff?

An energy tariff refers to how you are charged for electricity or gas usage (the variable part of your bill). Regardless of the tariff you’re on, expect to always pay for fixed charges and variable charges:

As mentioned, your electricity or gas bill is comprised of both fixed and variable charges:

• Fixed charge (supply charge): This is usually referred to as a ‘daily supply’ or ‘service to property’ charge. As long as your home is connected to an energy distribution network, you will pay a price in cents per day, regardless of your energy use.
• Variable charge (rates): This is commonly known as a ‘usage’ or ‘consumption’ charge. It is the amount you pay for each unit of gas or electricity consumed, usually listed as cents per kilowatt hour (c/kWh) for electricity use and cents per megajoule (c/MJ) for gas.

Some of the most common tariffs you might encounter include:

• Single rate: The same rate on energy usage applies at all times. It is also known as peak, demand, standard or flat rate.
• Time of use: A different usage rate is charged depending on the time of day. Electricity is most expensive on weekdays in the afternoon and during the early evening, and cheapest late at night and early in the morning — these are known as peak and off-peak periods, respectively.
• Block rate: The price of electricity or gas increases or decreases with each daily or quarterly ‘block’ of energy usage. This is the only tariff available for gas customers.
• Controlled load: A large household appliance (usually hot water systems or pool pumps) is metered separately from the rest of the property. The price of electricity is much lower for controlled load appliances, but electricity will only be supplied during off-peak hours.
• Feed-in tariff: Customers with solar panels will receive a small credit for each kWh of electricity their solar system exports to the electricity grid.

Keep in mind that some tariffs won’t be available across all states or through every energy retailer.

Customers also require a compatible meter type for particular tariffs. For a more localised overview of what electricity tariffs might be available to you, check out the guides below.

• Victoria electricity tariffs
• South Australia electricity tariffs
• Queensland electricity tariffs
• New South Wales electricity tariffs

Energy Contracts: Default vs Market

All electricity and gas retailers must compare each market offer against what’s known as the Default Market Offer (DMO) in NSW, south-east QLD and SA, and the Victorian Default Offer (VDO) in VIC. The default pricing acts as a reference point from which all market offers must be compared.

Default offers are designed to give customers in these areas a reliable and simple energy deal, with prices set by the retailers in accordance with the new default pricing.

Customers may alternatively choose a market offer contract. With market offers, energy retailers are free to set their own prices, contract lengths and conditions, and will often include incentives and discounts to encourage new customers to sign up.

Canstar Blue found that market offers often provide better value than products aligned with the default pricing after comparing electricity prices across SA, VIC, NSW and QLD.

That said, market offers can be slightly convoluted, increasing the risk of getting caught in a bad deal. When comparing market offers, be sure to check the fine print in the retailer’s energy price fact sheets.

Canstar Blue’s comparison table below shows you some of the cheapest deals available in each state, with each market offer conveniently showing the percentage difference versus each state’s standing offer.

Fees and Charges

As well as fixed and variable charges, energy contracts can include additional fees and charges, such as:

• An establishment fee for setting up your contract
• An exit fee for cancelling your contract
• A disconnection or connection fee if you intend to move homes
• Fees for opting for paper bills instead of e-invoices
• A payment processing fee, usually charged if you pay by credit card
• A rejected payment fee if you have insufficient funds in your bank account when a direct debit payment is due
• A late payment fee if you don’t pay your bill on time.

Discounts

Market offer contracts often include discounts on electricity or gas usage charges. These discounts provide a great opportunity to save. However, they are usually conditional on the fulfilment of certain conditions. Some examples include:

• Pay on time discount
• Direct debit discount
• E-mail correspondence discount
• Online sign-up discount
• New customer sign-up or switching discounts

Market contracts with discounts include a ‘benefit period’, usually between 12 months and two years, depending on the offer. However, some retailers do offer ongoing discounts for the life of your agreement.

Some plans might even offer guaranteed discounts with no conditions attached for the life of the contract.

Once this benefit period expires, customers stop receiving their discount and are automatically charged the higher, non-discounted rate for power.

It’s unfortunately quite common for consumers to mistakenly believe they still receive a discount on energy usage.

For this reason, it’s important you frequently review your electricity and gas contracts. If your benefit period has expired, but you don’t want to switch energy companies, contact your retailer and ask to be treated as a new customer, once again getting the discount.

Cheap Electricity Deals

While you’re here, why not take the time to compare energy plans in your area? Click on your state below to compare some of the cheapest deals in our database.

Energy Price Fact Sheets

Energy price fact sheets are documents provided by your retailer for each of their electricity or gas plans , containing rates, tariff type, discounts, benefit terms and hidden fees and charges.

To comply with the National Energy Retail Law, energy retailers are required to publish energy price fact sheets on their websites for each of their gas and electricity offers.

While it’s a legal requirement to post energy price fact sheets, some energy companies make them a little tricky to find.

If the price fact documents aren’t listed in the offers section of the retailer’s website, there is often a small link at the bottom of the page.

When comparing retailers, it’s best to directly compare the price fact sheets and avoid getting caught up in the gimmicky promotions. Keep these tips in mind, and you’re on your way to finding a great energy deal. Good luck!

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Original reporting by Dean Heckscher