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Energy plans: time-of-use vs. demand pricing

Understanding the pricing structure that underpins your energy plan doesn’t have to be puzzling. Here’s what you need to know.


Understanding the way your energy plan is priced and charged is key to reducing your bills. In choosing the right energy plan for you and your lifestyle, take a step back from the discounts to pause to think about your pricing. If you’re switched on to how your bill comes about, or you have a smart meter, you may already be well-versed in the world of electricity pricing. It’s the often-forgotten piece in your energy account puzzle, so let’s go through how our most-common plans are priced—jargon-free.

Your standard, everyday pricing plan.

Let’s warm up with the simplest one of them all: flat-rate pricing. Regardless of your schedule and when you use your electricity, you’ll be charged the same electricity rate—all day, every day. Morning bird, night owl, or all of the above, your household’s electricity costs are calculated and charged by a single ‘cents per kilowatt hour (c/kWh)’ rate, multiplied by your kWh usage. The exact c/kWh rate that you are charged will be determined by your energy plan.

If you have an older meter (one that needs to be read manually every quarter), this is most likely the pricing plan that you’re on. If you’re not sure, you can check the ‘Electricity consumption charges’ section on your most recent electricity bill. If you only see one line of electricity usage charges, you’re probably on a flat-rate plan.

Although simple, having one rate all day long doesn’t allow you to make the most of off-peak electricity rates. Off-peak electricity rates are cheaper, encouraging more people to use energy in quieter times of the day—similar to how buying a plane ticket in April is cheaper than December. Take a close look at your household habits and routines. If you spend a lot of time at home during the day, work in shifts or tend to use your large appliances early in the morning or late at night, you may be paying more for your electricity than you need to. This is where the benefit of time-of-use pricing plans come in, and why different pricing plans exist.

Time-of-use pricing plans.

Time-of-use (TOU) pricing is based on three periods: peak, shoulder and off-peak. As the name suggests, on this type of pricing plan, the price of your electricity depends on the time you use it.  When demand is high for electricity, when everyone is cooking dinner at night, or getting ready for work, it puts pressure on the grid—referred to as a ‘peak’ period. On a TOU pricing plan, your electricity is more expensive at peak times of the day and cheaper at off-peak times. 

A TOU pricing plan is made up of four charges, including your supply charge and three energy charges (that’s your ‘peak’, ‘shoulder’ and ‘off-peak’ rates). These times are set, so you’ll always know what you will be charged at each time of the day.

For residential customers in the ACT, your times are:

Supply charge Fixed price per day c/day
Energy usage at peak times Usage from 7am–9am and 5pm–8pm everyday c/kWh
Energy usage at shoulder times Usage from 9am–5pm and from 8pm–10pm everyday c/kWh
Energy usage at off-peak times Usage at all other times c/kWh

For residential customers in NSW, your times are:

Supply charge Fixed price per day c/day
Energy usage at peak times Usage from 5pm–8pm on weekdays c/kWh
Energy usage at shoulder times Usage from 7am–5pm and from 8pm–10pm on weekdays c/kWh
Energy usage at off-peak times Usage at all other times c/kWh
Supply charge Fixed price per day c/day
Energy usage at peak times Usage from 1pm–8pm on business days c/kWh
Energy usage at shoulder times Usage from 7am–1pm and from 8pm–10pm on business days c/kWh
Energy usage at off-peak times Usage at all other times c/kWh

If your schedule is usually outside of peak times, or you can time-shift (choose to use some of your appliances in off-peak periods instead), you may be able to reduce your electricity bills on a TOU pricing plan—even if you’re using the same amount of electricity.

Demand pricing plans.

Like TOU, a demand pricing plan also includes peak and off-peak periods—so how do they differ? The answer lies in the way that your electricity usage is calculated.

Demand pricing is based on your peak usage, rather than your total usage.

On a demand pricing plan, the electricity usage in your home is charged for the maximum level of demand you place on the network during peak hours of the day—between 5pm–8pm for residential customers and 7am–5pm for businesses. If on one day, during the peak period, you decided to run your washing machine, dryer, dishwasher, TV, heater and oven, all at the same time, you would be considered a high-peak household. If you were to use the same appliances for twice the length of time, but instead spaced them out across the day to avoid a high peak in demand, you’d be considered a low-peak household—regardless of your total electricity usage. These demand peaks are measured in 30-minute intervals and reset every month. Your maximum peak usage during that time becomes your demand charge rate—applicable for the entire calendar month. So, if you’re billed quarterly, you’ll have three demand charge rates used to calculate your bill—one for each month. Your electricity usage will still make up part of your bill too, but you’ll be charged at a much lower c/kWh rate.

A demand pricing plan works well for households or small businesses that use very little energy outside of peak hours. This might suit a bakery, restaurant or someone who is usually away from their home during peak periods, including bartenders or shift workers.

See more in the video, below:


Time-shifting for better bills.

Regardless if you’re on a demand or time-of-use pricing plan, you can take charge of your energy by time-shifting. Time-shifting refers to when you choose to run appliances or use more energy outside of peak periods. Consider if you can run your washing machine or dishwasher overnight, or if you have solar panels, set a timer to run your appliances during the day and let the sun’s rays do the rest. Pool filters, clothes dryers and (if you have electric water heating) even your showers are all things you may be able to time-shift.

By time-shifting, you’re able to make the most of cheaper c/kWh rates throughout the day—reducing the cost of your electricity usage.

If in doubt, call out (to our Energy Consultants).

If reading this makes you wonder what pricing plan your household is on, get in touch. Our Energy Consultants can take a look at your account and let you know. While we’re there, we can advise your actual electricity usage history, offer tips on how to maximise the benefits of your current pricing plan, arrange a smart meter upgrade or just double-check you’re on the best energy plan for you. You’ll have your energy sorted in the flick of switch.

To get into the nitty gritty of your time-of-use pricing plan, or your demand pricing plan, read through these fact sheets.

Time-of-use pricing plans.   Demand pricing plans.

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