A report claims many Australian households aren’t aware they are on electricity plans with demand tariffs, which are charges that can push power bills even higher.
Most Australian households are on a flat-rate or, increasingly, a time-of-use tariff for mains electricity consumption. The former is an “all-day” (and night) rate, while the latter bases charges on the time electricity is consumed. It has different rates for peak (early-mid mornings and late afternoons-evenings), off-peak (late night and early mornings) and shoulder (usually around 10am – 3pm), when solar systems are exporting the most to the grid and pushing wholesale electricity prices down 1.
But there’s another type we’ll be hearing more about – demand tariffs.
What’s A Demand Tariff?
Demand tariffs may offer cheaper grid electricity charges per kilowatt-hour, but the sting in their tail is a demand charge based on peak power draw in kilowatts2. Using multiple power-hungry appliances at the same time, particularly in the evenings, could tip a household over the threshold that attracts the charge. It may be structured as a daily capacity charge, meaning if the household hits the threshold even once in a month or during a billing period, the extra charge is applied for every day of the period. This can add a substantial amount to an electricity bill.
In years gone by, demand tariffs were usually applied to businesses, but they started appearing for residential customers in some states around 2016. And it seems the pace has been picking up recently.
Electricity Customers Caught Off-Guard
The ABC reports many Australians have contacted the organisation complaining about high charges in peak times that are stacked on top of consumption and daily service charges. In the article, Richard Foxworthy from Bill Hero3, a subscription-based energy bill comparison service, says there’s been acceleration in the number of households on demand tariffs and he’s seen bills with hundreds of dollars whacked on for demand charges.
Mr. Foxworthy says:
“Every single one of them [customers] that we’ve spoken with doesn’t understand what that tariff means, how they got migrated to it, and why.”
The ABC states:
“But few customers appear to be aware of the changes thanks to a loophole that allows power companies to pass on tariff overhauls without forewarning them.”
It seems a very unfair situation that urgently needs addressing by the powers-that-be. Check your bill and plan details for mentions of this and if comparing electricity plans, forewarned is forearmed – scrutinise the fine print and watch out for demand tariffs/charges.
As with just about anything in this life, if something appears to be too good to be true, it often is.
Footnotes
- Solar tip: Households with solar power systems will often find a flat-rate tariff plan most suitable. But for those with solar panels and batteries, a time-of-use tariff offering lower off-peak and shoulder rates is usually a better choice. ↩
- Kilowatt-hours are a measure of energy and kilowatts a measure of power. Learn more about the difference between power and energy. ↩
- Bill Hero is a bill monitoring service guaranteed to save you money that SQ has partnered with (Note: if you sign up using that link, we’ll typically get a $20 referral fee). ↩
About Michael Bloch
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Yes only 2 weeks ago I called Red Energy about changing my pensioner Aunt to a Red Energy plan. The friendly “help desk” person tried to put her on a Demand plan, despite me requesting a specific EnergyMadeEasy plan ID number. He said he had no idea what I was talking about – EnergyMadeEasy or Plan ID numbers – nothing in his system about that. The Demand Tariff was the best and really only plan on offer. But he couldn’t explain the details of the Demand Plan or point me to a Red Energy page that explains the detail.
No wonder people are getting caught out! I used to generally trust Red Energy call centre contact – not so much any more.
Demand tariffs . . . I can’t really see any user, residential, commercial, or industrial that could possibly find this as suiting their power use.
I’ve read of business users being moved onto demand tariff, with no notice or choice in the matter, but not residential.
One, a bakery in a regional north Queensland town, has to invest 10’s of thousands of dollars in new gas ovens, as electricity was killing them in their ability to making any profit.
Who does this benefit ?
Even power supplier / retailer misses out.
What if you are on quarterly billing ?
I find it incredibly unfair to base a whole period on some peak during that time, even if was only for one or two particularly high usage short interval period thrown in there for a month or quarter.
Why not just charge for power used?
The 30min intervals most power retailers use is easy to work with, and fair enough if on either of the normal tariff type rates.
Electricity distributors have to cater and plan for maximum demand in order to size the transformer and street wires/cables appropriately.
Oversizing the infrastructure is expensive.
Basically the demand tariff is to influence consumer behaviour not to have everything on all at once. Some loads can be shifted.
By reducing maximum demand, we can reduce the size of the infrastructure more efficiently.
Imagine this scenario:-
Maximum demand on grid – 4GW for 1hr, average demand is 2GW for 23 hrs.
What this means we need a generator capable of delivering 4GW, even though 95% of the time we only need 2GW. See the problem? we need a bigger generator than needed and wasteful for 95% of the time and doesn’t return a good ROI on capital. It’s like saying I need to drive 110km/hr for 30mins on the freeway but 10hrs is spent driving at 30km/hr. What is the point of having a 110km/hr speed limit? Today’s cars are capable of doing 200km/hr+ but the average person would average about 45km/hr for most of their commute. Is this wasteful of the car’s capacity? A big engine idling at the traffic lights returns the worst fuel economy(i.e., consuming fuel while going nowhere). (Which is why EVs are so much better for that reason).
That’s the whole purpose of managing maximum demand. As energy usage continues to rise, managing maximum demand becomes more important. Because if it’s not managed, then we consumers will have to pay for extra upgrades of hardware to meet maximum demand just so that it’s capable for a short period of time.
“Basically the demand tariff is to influence consumer behaviour not to have everything on all at once. Some loads can be shifted.”
Dont disagree, but the implementation is at best clumsy, and at worst unconscionable. At the absolute barest minimum every household being forced onto a demand tarif should get some sort of really simple display that sits in their house that tells them in real time the cost of their current energy use. Lets call it a BIg Red Light – and they can start to turn things off if it goes off. Most energy users dont want to solve a relatively complex mathemetical problem in their head when deciding whether to run the clothes dryer at 7pm or 10pm. Its not reasonable to ask them to not run the AC when they get home from work. Sending them a bill 3 months later and expecting them to remember what specific action caused it to be really high wont change behavior. But it will absolutely piss them off
Good point Andrew,
If you recall an ABC show from 2008(?) called “Carbon Cops” they had a simple 5 segment display with red/amber/green lights.
We could have sold one with every solar system such was the demand, but apparently they weren’t available for sale.
I believe there’s a system called emberpulse which does something similar now, but solar monitoring such as CatchControl is even better because it’s in your pocket.
I’ve just set one up last month in preperation…a simple traffic light system of a smart lamp managed by Home Assistant between 14:45-21:15 (demand window +/- 15mins).
Yellow = solar export
Green = battery export
Off = self consumption (well grid +/- 100w really)
Shades of Red = 1kwh / >2kwh
Not perfect, but adheres to the KISS principal 🙂
I saw something similar in Townsville. Thought it was brilliant. Imagine if they removed all the speed signs from the roads but still kept the fines the same and the road user would just have to figure it out themselves if they were speeding or not. That’s not a long way removed from how they are treating consumers.
Interesting over on Whirlpool Forums about demand Tariffs. I made the exact as Andrew. I don’t have a problem with Demand Tariffs, but the meter provider should be compelled to provide a display as described by Andrew.
Even though I travel at 110 once every 6 months, I still want to do it safely and not have the engine working at 100%
This should be the same for transformers, they wouldn’t be run near 100% because the power company wanted to be cheap
Even worse, the official help sources, Energy Made Easy and Victoria Energy Compare, are not even capable of calculating a comparison on a demand tariff bill!
Bill Hero is the only service in the country that can calculate a comparison on a demand bill!
Hi Richard,
That’s fascinating to know. Do you have a good link to explain what you’re doing with Bill Hero?
Cheers
We sure do. There’s more info available at our website – https://www.billhero.com.au/demandtariffs?via=sq
And in our blog site here: https://www.savingsasaservice.com.au/energy-made-easy-cant-calculate-demand-comparison
If you generate a comparison for a demand plan in either EME or in VEC, those government services will display results that include the disclaimer that ‘additional charges will apply’ for a Demand plan, but they are both unable to quantify those charges.
It’s quite extraordinary that energy consumers are being force-migrated onto these ‘cost-reflective’ tariff types when there has been no explanation or education on what it means for energy consumers and when the official sources of help, the government comparison sites, are unable to deliver results for these kinds of plans.
The Bill Hero demand “calculator” assumes the consumer has a demand tariff bill. All it does then is compares this with all other demand tariffs on offer. There’s no calculation how the demand tariff was worked out.
What if someone doesn’t have a demand tariff and would like to see how their bills look like if they were charged demand tariffs? A bill summary uploaded to Bill Hero or Energy Made Easy will not do that.
You need the full meter readings data set from the distributor to work it out because each retailer can have different demand windows (e.g, M-F 4pm-8pm or M-F 2pm-8pm).
These data sets are freely available for anyone that has a NMI. Distributors must offer them free of charge (up to 2 years worth of meter readings and up to 4 times a year, at least, it is for Endeavour Energy). They are commonly supplied in .csv file format (a format readily used by spreadsheet programs).
My last .csv data set was 2.5MB of pure data.
When imported into Excel, there were 600 rows (covering a period of 1/1 to 27/10 for 2023).
Each row had 290 columns of data. Why 290? There were 288 5min intervals of energy recorded for each day.
Why 600? One was for import and one for exports, 2 rows per day.
That adds up to 174,000 data points to analyse. If one is savvy with Excel or any spreadsheet, you can massage the data to output the demand periods and pinpoint maximum demand for any period. From there, one can work out the demand charge (demand tariff x bill period). So, what I can gather from Bill Hero, it can’t do this. So, comparing BH with Energy Made Easy is really not that much different. All Bill Hero does is look at an existing demand tariff bill and compare offers for it. What it can’t do is take data from non-demand tariff consumers and work out what a demand tariff would look like in to compare demand and non-demand tariffs.
Please correct me if I’m wrong how Bill Hero works…… there’s a grain of truth but ……
Thanks Graham,
I might even steal some of your explanation for an FAQ in the future;)
For those who want the data for their own uses, this is the link:
https://support.solarquotes.com.au/hc/en-us/articles/360001312176-How-to-access-your-smart-meter-data
To be fair though, Bill Hero is a subscription service. As such, I would expect it to be able to work out demand charges. But this requires actual 30 min data from your distributor/retailer because it needs to analyse all 30mins of data that sits within the window for a specific time period for demand (some retailers are 4pm-8pm, others are 2pm-8pm) and then work out which 30min period recorded the highest energy use, then use that figure to base the demand charges on. It’s not hard to do if one is proficient with Excel and data manipulation.
Energy Made Easy only works on total energy used for a given bill period, not every 30 mins.
Comparing chalk and cheese here.
But Demand Tariffs is really only suited for those with batteries (to prevent any peak period usage imported from the grid) and minimum import for other times (e.g., solar during the day and battery during the night – all assumming one has enough capacity to totally negate any import for a 24hour period).
It’s not hard to work out. I’ve looked at it, I’d be OK on demand tariffs for 8 months of the year but there’s no way I would use in late Autumn/Winter/early spring, wouldn’t have enough solar/battery capacity. Heating a house is a energy guzzler, unless one uses gas/wood for space heating. Then that’s an additional fuel source to pay and another appliance that can only be used for winter heating.
Point of the story, one would have to be data savvy with Excel and be very proactive how they use electricity. It’s not for the lazy consumer who thinks it’s set and forget.
Even a highly sophisticated consumer will struggle to work this out. When I enter my postcode into my retailers website they offer 108 different plans(!) and as someone pointed out for many of these the government comparison websites cant actually provide an accurate cost comparison. The whole system is working against the consumer. Get a smart meter and the retailer/distributor gets access to increasingly granular information to bill you in more complicated ways while you cant easily access or act on that real time information. Spend a lot on solar and get exposed to a negative input tariff that somewhat hilariously overlaps with the time period that both high time of use and demand tariffs also apply. And too bad if you are a renter or cant afford to invest in becoming an energy producer/storer.
Are for profit distributors investing fast enough and in the right areas given that their monopoly status means they can just pass on the costs in the form of TOO and demand tariffs and retailers and consumers just have to wear it. The energy transition is always going to be messy and political, but this sort of nonsense has the potential to derail it if consumers feel they are being played
Hopefully this topic gets some attention.
My retailer (probably under pressure from the distributor ) tried to move me to a demand tariff, so I changed retailers. I signed via their website (after putting in my meter # etc) and was offered a non-demand tariff but when the paper confirmation came they had changed it to a demand tariff. The table showed it clearly but the explanation of how it was calculated was incomprehensible if you didnt already know. (It wasnt a threshold below which it wouldnt apply either, just a multiplier of the maximum period usage – so not able to be avoided, just minimised). Of course no actionable real time ‘tool’ is provided to help you minimise the charge either, inspite of that being relatively easy with the smart meters that are required to bill it. So a fee that is directly targetting regular households in a way that is both incomprehensible, unavoidable and only the most primitive tools provided to reduce the costs. I fully get that we need to encourage shifting discretionary load to periods of low demand, but how are they getting away with implementing it like this?
Having solar+battery I could mostly avoid the demand window but on rare occasions might use some grid power (e.g. an inverter/battery reboot). This of course meant getting stung with a demand charge for every day in the month which seemed mightily unfair for a single 30 min aberration in the month. I use Amber as my retailer and the Amber app shows you the underlying tariff in the Settings section. I could see it was an Energex 3970 Flat Rate (Anytime) tariff. I checked the Energex site and found the page that lists their tariffs at https://www.energex.com.au/manage-your-energy/save-money-and-electricity/tariffs/residential-tariffs I could see the 3900 had a flat rate and demand charge but there was also a 6900 Time of Use tariff that had higher peak period charges but no demand charge. Being confident I could mostly avoid the peak period charges, I asked Amber to switch me to that underlying ToU tariff which was a very quick and easy process. Now I have no demand charge and only pay for the very rare occasions when I actually do use peak power. An added bonus is that everything is reflected in the price displayed in the Amber app and not hidden away in an end-of-month demand charge.
NSW demand tarrif essential reading, https://wattever.com.au/demand-tariffs-in-nsw/
Here are the rules about switching tariff in each network in NSW.
Network Tariff Switching Default tariff for new meter Optional tariffs for new meter Tariff change frequency Source
Ausgrid Anytime tariffs (EA010) is closed to new customers and cannot be switched to.
Switching permitted between Time Of Use and Demand tariffs.
Switching from Anytime to Time Of Use (or Demand tariffs permitted (likely requires smart meter upgrade). Demand (EA116) Time Of Use (EA025) or Demand (EA115) Only one tariff
reassignment per 12 months is allowed. Link
Endeavour Energy Anytime tariff (N70) is closed to new customers and cannot be switched to.
Switching permitted between Time Of Use and Demand tariffs.
Switching from Anytime to Time Of Use (or Demand tariffs permitted (likely requires smart meter upgrade). Demand (N73) Time Of Use (N71) Link
Essential Energy Switching permitted between Anytime, Time Of Use and Demand tariffs subject to meter capability. Time Of Use (BLNT3AL/AU) Anytime (BLNN2AU) or Demand (BLND1AR) Only one tariff
reassignment per 12 months is allowed. Link
Switching tariff strategies
If you’re thinking of switching retailers and tariffs at the same time, there are two ways to go. Either way, you must contact your retailer and request the tariff change.
1. Switch retailer first. Then, when the transfer is complete, ask your new retailer to change to your preferred tariff. We suggest you enquire before switching to check that your new retailer offers a plan for the tariff you want.
2. Alternately, you can change tariff with your current retailer. After the tariff change has been completed, then make the retailer switch.
Trying to sign up to a new retailer AND a new tariff type (not available to your current meter) upfront won’t happen. You’ll find that retailers’ online signup will only display pla
We got our recent bill a couple of days ago and was shocked at the Demand charges. We’re with Red Energy and many months they sent a notification about rate changes which I admit I read only quickly. New rates I expected so I didn’t read the letter in detail of course missing the introduction of the Demand charging. So as we happened to have a particularly high peak use in one 30min block that set the rate for the booking period giving us an additional $80 on top of our bill. I spoke to Red Energy and they admitted this system is more expensive an we were double charged for the electricity we used. To me this isn’t really Demand charging, it’s a Peak Use Penalty. Demand Management really is about charging more for a service at peak times, which is what the existing Time of Use tariff system does having Peak, Shoulder and Off Peak rates. If the electricity providers want an additional charge to further ‘encourage’ people to spread their usage then the peak charge should only be for the minutes used of peak load and not a blanket charge across the month/billing period.
Demand tariffs are like driving demerit points.
You only need to breach a couple of offences in a matter of minutes before you accrue all 13 points. Or in the case of demand, you’re slapped for the whole billing period for a small 30min window in peak period.
The whole idea is to punish for a small breach.
How to lose 13 points in one incident?
Double point weekend (for NSW)
Use of mobile phone = 5pts x 2 = 10
Not wear seatbelt = 3pts x 2 = 6
Wham, there goes 16 pts detected by those mobile detection camera systems in one go.
Is this fair?
Now, one can opt for good behaviour, but that means you can’t afford to lick another point. If that happens, the punishment period is doubled and loss of licence.
Most Australian households are on a flat-rate or, increasingly, a time-of-use tariff for mains electricity consumption (from the article)
Be aware that Energy Australia use the term “flat rate” to mean “undiscounted”.
They show usage rates on their website that vary depending on time of day (a ToU plan to you and me) but if these rates do not carry a discount they (EA) describe the plan as “flat rate”.
Copied from EA website
Off-Peak usage (if applicable)
Flat rate
27.6925 c/kWh
Peak usage
Flat rate
64.2279 c/kWh
Shoulder usage (if applicable)
Flat rate
36.0382 c/kWh
Yes I agree with you (Michael Bloch) that “flat rate” should mean “same price all day every day” but thats not how Energy Aus use the term.
I did speak to them about this but I might as well have talked to a tree.
What happens if you call EA and say “I would like to be on a flat rate plan please” ???
As someone with a smart meter and in the Ausgrid area I cannot get a plan that does not include a demand tariff. I can go to energy made easy site and find a plan that I like for my postcode but when I approach a retailer they tell me I can’t have it because Ausgrid has me on a demand tariff.
Of course the demand tariff cuts in just when people are coming home and preparing dinner. Not only do you have to plan the menu but also how you cook the dinner. Be careful not to put the oven, microwave, induction cook top on at the same time. That could blow your energy budget for the month.
People need not to be saying change consumer behavior (including authors on this site) – this give the moral high ground to the energy companies who are using it to price gouge.
Here’s the Ausgrid Demand Tariff timings:
November to March: 2pm to 8pm, Monday to Friday
April to May: 2pm to 8pm
June to August: 5pm to 9pm, Monday to Friday
September to October: 2pm to 8pm
So if you use electricity from the grid between those times in a half hour you’ll be paying the demand tariff for the highest usage for any half hour period for the entire month.
Oh! and of course these timings usually match with high time of use charges so you get hit twice.
Of course as the suppliers say and agreed by some authors on this site it’s all good – move on , nothing to see here – just changing consumer behavior.