Types of Energy Plans Explained

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With hundreds of energy deals on offer, finding a suitable one for your household can be quite overwhelming. So it is important to understand what kind of options you have available to you. From contracts and tariffs to fees and charges, there are several moving parts to energy plans in Australia, which when combined in the right selection, can work to create the best value for you.

In this guide, we walk you through all the nitty gritty details surrounding the types of energy plans in Australia, including which options may work best for you and your household energy usage.

What are the different types of energy plans available?

Typically, there are two main types of plans for customers to choose from – market offers and standard contracts.

• Market offer: A market offer is a contract made available by energy retailers that generally consist of incentives like bill credits, discounts and other rewards programs for a certain period of time. This timeframe is known as a ‘benefit period,’ and will normally last 12 or 24 months, depending on the plan. Base rates on market offers are set by retailers, meaning energy prices can change once the benefit period has ended.
• Standard contract: Also referred to as ‘standing offers’, a standard contract is a government-regulated energy plan. Customers will likely be on a standard contract if they have never switched providers or haven’t done so in a few years. These types of plans usually have less competitive rates than market offers, as well as having no benefit periods or customer incentives. You may see standing offer plans referred to as a Default Market Offer, or Victorian Default Offer in Victoria.

Most bill-paying Australians are connected to market offers, with only about 10% of customers still sitting on a standing offer, according to the Australian Energy Regulator (AER).

What is the difference between fixed and variable rate contracts?

The base rates of an energy plan will either be locked in for a set period of time (i.e. benefit period), or will be variable, meaning they can change at the retailer’s discretion. Fixed rate energy plans are great for customers looking to set and forget; however, they will need to be conscious that once the benefit period lapses, rates may change. Variable rates are usually cheaper than fixed rates, but the downside is that customers will have to be a little more watchful of energy prices.

How do energy tariffs work and what options are available?

Different from an energy plan, an energy tariff refers to the way in which a customer is charged for electricity or natural gas. These can go from a single rate charge, meaning that customers only pay one price for power, no matter the hour, to multiple rate charges, with customers charged different costs dependent on the time of day. Typically, there are four types of gas and electricity tariffs, each of which vary in the way they charge customers for power. Here’s a quick overview of tariffs available:

• Single rate tariff: A single rate tariff means customers pay the same rates for energy regardless of the time of day. Single rate tariffs have no peak or off-peak time periods, meaning electricity consumption will be charged at the same rate all day. This type of tariff is ideal for households who don’t want to wait until certain times to use power in exchange for a cheaper rate.
• Time of use tariff: A time of use tariff is a flexible pricing tariff which allows customers to take advantage of cheaper rates depending on the time of day, if there is a smart meter installed. Time of use tariffs consist of three periods – peak, off-peak and shoulder. Peak is the most expensive time of day to use power, while off-peak is the cheapest. The shoulder period is cheaper than peak but not as cheap as off-peak. Depending on the retailer and distributor, these time periods will differ.
• Controlled load tariff: A controlled load tariff is a tariff that charges customers a different rate for large household appliances that are metered separately. Appliances such as hot water systems and pool pumps will usually be connected to a controlled load tariff. Energy distributors are responsible for electing hours of electricity supply for controlled load tariffs, which is usually during off-peak periods.
• Block rate tariff: Block rate tariffs normally apply to gas customers and businesses with large electricity usage requirements. Essentially, a block rate tariff charges one ‘block’ of energy at a certain rate, with each block thereafter typically charged at a cheaper rate. For example, the first block of 30 megajoules (MJ) will be charged at 3.5 cents per MJ (c/MJ), while the next block of 25 MJ will be charged at 3c/MJ.

Keep in mind that not all energy providers offer each tariff type, and location may also dictate whether or not a particular tariff is available to you. Some energy providers may call tariffs by different names. For example, a single rate tariff could be listed as ‘flat rate’, while time of use may be called a ‘flexible pricing’ tariff. Your tariff(s) should be listed on your power bill.

On a single-rate tariff? Make sure you are still on a good power price and compare against some of the cheapest offers in your state right now

What are the energy plan fees and charges you could face?

All energy plans have different fees, charges and rates embedded inside them. The good news is that a breakdown of these costs can be found in the energy fact sheets, which all power companies must give customers access to. Here are the main fees and charges to look out for:

• Exit fees
• Connection, disconnection and reconnection fees
• Credit card surcharges
• Paper billing fees
• Post Office payment surcharges
• Direct debit processing and dishonour fees
• Late payment fees
• Monthly or annual membership fees

Can you switch from one type of energy plan to another?

Depending on how much you are looking to change, switching from one type of energy plan to another is typically a fairly easy process. If it’s just jumping between market or standing offers, this can be done quickly by either contacting your retailer, if you are just looking to be placed on a better plan with your current provider, or by signing up to a new provider with better rates. This process takes about two business days for electricity plans if you are switching to a new provider, but about 90 days for natural gas offers.

If you are looking to change energy tariffs however, this could become a little more challenging, depending on the type of energy meter you have installed at your property. If you have a smart meter, you should be able to change tariffs fairly simply as these meters are generally more compatible with flexible pricing tariffs. But, for those still with traditional meters, it could mean a new meter needs to be installed in order to access the new tariff and applicable pricing.

How does a GreenPower plan work?

Most energy providers have clean energy initiatives available to customers who choose to pay a little extra for their power. GreenPower is a government program that allows eco-conscious Aussies to support investment in renewable energy by paying a small additional cost that’s applied to their bills. Depending on the retailer, customers will be able to select how much of their electricity usage they want invested into GreenPower, usually available in increments of 10%, 20%, 50% or 100%. Some retailers may offer this as a unique plan offering, while others will have it as an opt-in on its market offers.

Interested in GreenPower? Check out which providers are offering these clean energy initiatives with Canstar Blue’s Green Energy in Australia guide.

Can I combine my electricity and natural gas plan together?

Have you ever wondered if you could consolidate your electricity and gas with one provider? Well, you can. Dual fuel energy providers are a great option for customers looking to receive power bills from the same company. Not only can this be convenient, dual fuel providers may also offer further discounts for bundling these services together. It is important to remember to compare both plans separately first though to ensure you are still getting the best value from your utility services.

What is the best type of energy plan?

Now we’ve covered the fundamentals of energy plans, it’s time to find you a great deal. But what does the ‘best’ mean anyway? Well, it’s important to understand that the best energy plan for your neighbour may not be the best fit for you. Why? Because unless the two of you have identical usage habits, you’ll likely have different needs and budgets. This is where finding a suitable deal gets very easy. Jump on the link below, type in your postcode and unlock our gift to you – comparing energy deals from 20+ providers.

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Original Author: Jared Mullane