Some energy plans, specifically electricity plans, can include different charges depending on the time of day. It’s worth knowing if you are charged a flat rate all day, or if your plan has charges for time of use.
Flat rate
Customers on a flat rate plan are charged at the same rate for electricity all day. For example, using your heater at 9:00 am for 30 minutes will cost exactly the same as using it at 11:00 pm for 30 minutes. Customers on a flat rate typically have an older type of electricity meter on their home (not a smart meter).
Time of use (ToU)
Customers on a time of use plan will have a smart meter on their home and are charged a different rate for their electricity depending on the time of the day in which it is used. Further information about the time of day usage is below.
Looking at your most recent energy bill will help you determine if you are on a flat rate plan or time of use plan, but if you are not sure it’s suggested you contact your energy retailer.
ToU tariff structure
An example ToU tariff may consist of the following components.
- Fixed supply charge - measured as a dollar amount charged per day.
- Off-peak usage - pricing applied for a five-hour off-peak block every day, usually overnight. For example, 1:00 am to 6:00 am charged at 50% of the single rate price (a flat rate also known as ‘anytime’ or ‘general usage’ rate).
- Solar sponge usage - usually the cheapest time to use energy, in the middle of the day when solar generation is typically at its highest. For example, 10:00 am to 3:00 pm charged at 25% of the single rate price. This aims to reward customers who move their energy use into this typical time of low demand and high solar supply.
- Peak usage – this is traditionally the times of highest demand and when electricity costs the most. For example, this could be applied for the remaining hours which are not captured in the off-peak and solar sponge time blocks. This is charged at a higher cost than the single rate price. For example, 6:00 am to 10:00 am and 3:00 pm to 1:00 am at 125% of the single rate price.
Note: The exact peak and off-peak tariffs and time periods will depend on final retailer offers.
ToU pricing might benefit you if:
- you’re home during the day
- can use (or set timers on) appliances such as air conditioners, dishwashers, washing machines and dryers during the cheaper tariff periods
- have an energy storage device that can store solar generated energy for use in higher cost tariff periods.
Cost reflective pricing
South Australia is part of the National Electricity Market (NEM). All electricity sales are traded through the NEM, which is a wholesale market where prices fluctuate in response to supply and demand at any point in time. However, since retailers have traditionally offered consumers single rate price plans, the true cost of delivering electricity at different times of the day has not been visible.
In 2014, the Australian Energy Market Commission published a National Electricity Rule change which included a requirement for electricity distribution businesses (SA Power Networks in South Australia) to set cost-reflective prices.
These pricing rules, together with other reforms, respond to changes in the national electricity market and aim to address increasing peak demand, reducing the need to further expand the network infrastructure and reduce the risk of network price increases for all customers.
While the shift to cost-reflective pricing in the NEM represents a significant change, if these changes aren’t made, there is a risk that both peak and low or minimum operational demand events could continue and the technical issues, network infrastructure costs, and ultimately electricity prices, continue to grow.
ToU transition timeframe
SA Power Networks is implementing cost-reflective pricing by moving customers to ToU network tariffs. This began on 1 July 2021, following significant consultation on the network tariff structure and transition strategy which were approved by the Australian Energy Regulator (AER).
If, how, and when retailers choose to transfer smart meter customers to retail ToU offers is up to the individual retailer.
Changes for homeowners
If you have an older, accumulation meter this change will not impact on you until you choose to install or trigger the installation of a smart meter.
If you have had a smart (interval) meter installed since July 2020 you will likely already be on a ToU network tariff and retail tariff. In this case, SA Power Networks would charge your retailer for the network component of your bill, and your bill would follow a ToU structure. It will then be up to your retailer how they wish to pass these charges on to you. Your retailer may:
- continue to charge you using a single, flat rate offer similar to what you have been on in the past, where you’re charged the same rate no matter when electricity is consumed.
- transition you to a ToU retail offer where different rates apply for the different times when you use electricity.
Energy retailers are private companies that operate in a competitive market. Retail energy prices are determined solely by competitive market offers by retailers, overseen by the Australian Energy Regulator.
Retailers must abide by the National Energy Retail Rules, however, the structure of energy contracts and individual tariffs still depends on how individual retailers choose to incorporate these charges in their plans.
Smart (interval) meters are progressively being rolled out to all South Australian households customers over time.
Finding and comparing ToU offers
ToU offers are designed to provide customers with incentives for moving electricity use into low demand periods.
You may wish to shop around to find a ToU offer that best suits your needs. Over time, retailers will offer more ToU retail offers as they become the common tariff structure in the market.
The Australian Government’s Energy Made Easy website allows you to search and compare energy offers in South Australia to find a deal that best suits your needs. To make comparisons you’ll need to enter information from a recent energy bill. For the best results, use your last years’ worth of bills to help compare your energy use across all seasons.
