Residential tariffs

Confused about electricity tariffs? Have you recently moved to, will soon be moved to a demand or time of use based tariff?

The information below will help explain how electricity tariffs are developed, how and why tariffs are changing, and what it means for you.

The electricity industry

To understand about how electricity tariffs are developed, and prices set, it’s important to understand the key components of the electricity industry. The electricity industry is made up of 4 main types of organisations, all with important roles:

1. Electricity generators – (including large and small generators, fossil fuel and renewable sources)
2. Electricity transmission network – the high voltage power lines that bring power from the generators to the local distribution network
3. Distribution network operators – the local electricity networks
4. Electricity retailers – those that sell power to customers and provide your electricity bill.

Your electricity bill

As a residential consumer, you will have an electricity account from an electricity retailer, who sends you a bill based on your usage of electricity under the tariff. For most residential customers, electricity bills are made up of three main components:

• Network charges – these are the regulated charges we provide to your retailer to cover the cost of building, maintaining and operating the poles and wires and other infrastructure to safely supply your homes and business. We typically charge your retailer both a fixed fee and a consumption fee that may change depending on when/how you choose to use the network. On your bill, the fixed fee may be shown separately as “supply charge” or “service charge” – these charges are normally a fixed rate per day. The network consumption-based fees are typically included with other consumption based retail fees, into a single consumption charge, per kWh, and per kW (if you are on a demand-based tariff).
• Retail charges – these are the costs associated with purchasing electricity from electricity generators and other related costs of having an electricity account. These are consumption-based charges¹ with the more electricity you use, the more your pay, based on the structure of your retail tariff.
• Metering charges – these are the costs associated supplying and maintaining the necessary metering hardware in your premise (some retailers have this as a separate line item on your bill – others incorporate metering costs in your retail charges).

We are responsible for setting the network tariffs that make up a significant part of your electricity tariff that is set by your electricity retailer. The role of the electricity retailer is to incorporate our network tariffs into the retail tariffs that they then offer to their customers.

We are required to review our network tariffs every 5 years and update the prices of those network tariffs every 12 months.

There are changes happening to how electricity is being charged and to help you manage your home’s energy costs, it is important to understand the features of the various tariff options that are available. Key features of the residential network tariffs are explained below.

You should also talk to your electricity retailer to understand which tariffs are available to you and ask for their assistance to use your previous consumption profile to estimate the best tariff option for you.

Residential network tariffs are changing

The way that network tariffs are structured is changing. In the past, most retail electricity tariffs featured a fixed daily charge plus a variable cost based on how many kilowatt hours (kWh) of electricity was consumed during the billing period, regardless of what time of day the consumption took place.

As there are times when the electricity network is used more heavily (peak times) and times when the network is underutilised (off-peak times), this approach to charging doesn’t reflect the cost of generating or supplying electricity. To help better manage the network and avoid the need to build more network capacity for peak times, tariffs that encourage customers to use less power in peak times, and more power in off-peak times have been developed.

These new tariffs include:

• Time of use tariffs – as the name suggests, these tariffs have charges based on when electricity is used, with peak times having higher rates, off-peak times having lower rates
• Demand tariffs – these tariffs add a charging element that charges based on the amount of electricity demand (measured in kilowatts) the premise places on the network. The demand charge can be based on either the single highest demand that occurred during the billing period, or the highest demand that occurred during the peak demand charging ‘window’ (for example, 4pm to 9pm weekdays and weekends).

To understand what these new tariffs might mean for you, there are a few other things to understand about electricity tariffs. Primary tariff and secondary tariff explained:

• All households have a primary tariff – this is the main tariff for your homes appliances. The time of use consumption tariffs and demand tariffs mentioned above are example of primary tariffs, as is the flat rate tariff (sometimes referred to as Tariff 11, but electricity retailers often refer to them by different names)
• A secondary tariff is an optional extra tariff that households can choose to have certain appliances like pool pumps, hot water systems and air conditioners connected to. Secondary tariffs are sometimes referred to as economy tariffs or load controlled tariffs, because they are cheaper than primary tariffs and the power supply to those appliances can be interrupted for up to 6 hours per day, to help reduce load on the network. Common names for these tariffs are Tariff 33 or Tariff 31 or Controlled Load 1, Controlled Load 2, though electricity retailers may refer to them by different names.

What does this all mean for me as a residential customer?

If you are on a standard, flat rate electricity tariff now, you may soon be required to move to one of the new types of electricity tariffs by your retailer. This applies to your primary tariff only – all homes have a primary tariff, which is the main tariff used for most of your light and power circuits.

If you have a secondary tariff (the tariff that may have things like hot water systems and pool pumps connected) you should be able to keep this tariff when moving to a new primary tariff (but check with your electricity retailer if they offer a secondary tariff with your primary tariff).

When this might happen is impacted by two key factors – the type of electricity meter you have, and how your electricity retailer passes on the underlying network tariffs into their retail tariffs they offer to customers.

A common trigger for a retailer to move you to a non-flat tariff is when you have installed solar, for new homes, or when your existing meter is replaced or upgraded to a smart meter. Under the network tariff rules approved by the Australian Energy Regulator, when a residential premises has a smart meter installed, the network tariff applied to that premise can no longer be the flat rate tariff (i.e. NTC8400 - see table below). It is not possible for the network tariff to be changed back to the flat rate tariff - it is up to your retailer which types of tariff they offer to their customers with smart meters.

The default network tariff that is applied to your premise after a smart meter is installed is the Residential Transitional Demand Tarif (NTC3900 - see table below), therefore retailers may also move you to a demand tariff.  However, a time of use energy network tariff is also available - you may wish check with your retailer if they offer a retail time of use energy tariff, if you think a demand-based tariff is not suitable for your household.

Visit our Managing your power bill web page to read more about:

• how to access your previous electricity consumption history
• whether a demand or time of use tariff might be best suited to you;
• and how you can adjust to either of these tariff types to save on your bill.

If you move to a time of use energy or time of use demand tariff, we’ve compiled some tips and hints to help you understand the ways to manage your electricity use in your home, to help you save on your power bills.

What are the residential network tariff options?

We publish full details on the residential and business tariffs in our network pricing guide. The following provides a high level summary of our residential network tariffs. Remember, electricity retailers tariff offerings to customers may vary from the network tariff structures below, so always check with your retailer regarding their tariff options.

Need more information on which tariff is best for you?

We hope the above information has explained how network tariffs work and you now have a better idea of your tariff options to be able to discuss with your electricity retailer.

We understand that many consumers can find tariffs complicated – if you have more questions, you can email us at residentialtariffs@energyq.com.au and we’ll do our best to help you. But remember that as retail electricity tariffs vary across retailers, they are the best to provide advice on tariff options and any personalised tariff advice for you.

For more tariff information, visit our Pricing & tariffs web page.