Cutting through the waffle to explain how energy pricing works.
We are bombarded with messages about changing our energy retailer to save money, but the plans are often confusing.
The price you pay for your energy service includes the tariff and any other fees and charges that may apply under your contract.
Some retailers have offers or tariffs that are ‘regulated’, meaning the price is set by the government.
In Queensland, the ACT and Tasmania, you can ask for a contract with a regulated electricity price.
In New South Wales, Victoria and South Australia, there are no regulated offers or tariffs (for electricity or gas), which means that energy retailers set all of their own prices.
What is a tariff?
Your tariff is the amount charged for providing energy under your contract. It includes both fixed and variable charges.
The fixed charge is not based on how much energy you use. It will be separately identified on your bill and is often called the ‘daily supply charge’ or ‘service to property’ charge. It can be displayed as a daily rate on your bill but may appear as a single figure for a billing period.
The variable charge or consumption charge is the amount you pay for each unit of electricity and gas you use. It is listed on your bill as cents per kilowatt hour (c/kWh) for electricity and cents per megajoule (c/MJ) for gas.
It is important to note that different variable charges might apply in the one bill:
- depending on how much energy you use. With some offers, the first block of energy used is the cheapest, with any energy used over that charged at a higher rate. However, other offers may charge a higher rate for the first block, with extra energy charged at a cheaper rate.
- if you live in a house that has certain appliances that are separately metered and operate overnight; for example: storage hot water systems or slab heating. You may see this listed as an off-peak tariff on your bill. These off-peak tariffs are normally cheaper as electricity demand is lowest overnight.
- if you elect to have renewable energy or GreenPower added to the cost of your electricity or gas. This can be charged as a higher variable usage price, but sometimes can be included as a fixed amount (per week, or billing period).
- according to when you use your electricity and gas. For example, if your electricity meter records when you use electricity (rather than just the total amount used), you can be charged different prices for electricity used during the day, at night and on weekends. Some gas tariffs also change depending on the season, charging different rates in winter and summer.
The variable and fixed charges that make up the tariff are usually listed on the second page or on the back of a one-page electricity or gas bill. Look in the section where the cost of your bill is calculated.
Energy tariffs can change during a billing period. Your retailer will provide you with written notice of this change, usually with or on your next bill. If this happens, your bill will show you the amount of energy used at the old tariff rate and the amount of energy used at the new tariff rate. If you are unsure about the information on your bill, you should contact your retailer.
Fees and charges explained
Energy contracts can include a number of fees and extra charges. The following are examples of the types of fees that may apply to your energy contract:
- an establishment fee for setting up your contract
- a termination fee for leaving your contract early
- a payment processing fee, for example, if you pay by credit card
- a fee, if you have insufficient funds in your bank account when a direct debit payment is due
- disconnection or reconnection charges, or a charge if you request an extra or special meter reading.
When such fees are charged, your retailer will typically list these fees and charges separately on your bill. If you are unsure about any fees that appear on your bill, talk to your retailer.
Do you understand your energy bill? Should companies be forced to offer simplified energy plans?
For more information, visit aer.gov.au