What are the charges for electricity and gas?
Your monthly bill is primarily made up of two main factors: How much you actually use, and what you pay for the privilege of having it hooked up to your home.
An electricity and gas supply charge is a fixed fee you pay to your provider to be connected the energy network. It’s often expressed as a per-day figure, and you pay this every billing period regardless of how much energy you use.
In Australia, supply charges will vary between retailers, but will generally be between 80 cents and $1.50 per day. It covers the cost of maintaining and operating the infrastructure (pipes, wires, etc.) that bring energy to your home, as well as any other operational expenses.
For a low-usage household (say a single or couple in a small apartment) this can be the biggest component of the bill. If you have both an electricity and gas account you will likely need to pay a daily supply charge on both, which can add to costs.
On top of your supply charge, you then pay usage charges for the amount of energy you have used. These charges are usually measured in kilowatt-hours (kWh).
This is the amount of energy it takes to power a device that uses one kilowatt in one hour. For example, running a 10 watt lightbulb for 100 hours would use a kilowatt-hour (10*100=1000, there are 1000 watts in a kilowatt).
For gas connections, such as a gas stove or heater, it’s expressed as megajoules or MJ.
Your energy supplier uses your meter to measure how much energy you have used, then multiplies this amount by the rate that they charge per unit. Rates vary based on provider and location, but a standard Australian rate would usually sit between 20 and 40 cents per kilowatt hour.
What to consider when comparing energy plans
Your usage charges can vary depending on when or how you are using energy. Below are some of the most common examples of tariffs that may apply to your plan.
Flat rate tariff
This means you pay a fixed rate per kilowatt-hour for all electricity or gas used, regardless of the time of day.
Time of use tariff
Some energy plans charge different rates depending on the time of day you use electricity or gas. In peak hours where there is more demand for energy (usually the afternoon and evening), charges will be more, while off peak hours (late at night and early morning, for example) mean a lower rate. Peak hours are determined by how much strain is on the electricity grid, so varies between areas.
People who can adjust their energy consumption habits to off peak times can take advantage of lower rates during off-peak hours. For example, if you work from home, and are able to shift laundry, dishwashing and cooking to these hours where the grid is under less pressure, you might be able to make substantial savings on your energy bill.
Controlled load tariff
Controlled load tariffs are a type of usage charge offered by energy providers for specific appliances or areas in a home that use a lot of energy, like electric hot water systems or pool pumps. With a controlled load tariff, the energy provider installs a separate meter for these appliances or areas and charges a different rate for the energy used by them.
This rate is typically lower than the standard rate, so customers with these high consumption appliances can save money. Controlled load rates are typically only charged for a limited amount of time each day. A Tasmanian who turns on their underfloor heating on June 1st and leaves it on until spring can only pay a reduced rate for as long as their controlled loan tariff applies. For the rest of the time, they would need to revert to their standard flat or time of use tariff.
Fixed or variable rates
When you sign up to your energy plan, some plans will have fixed rates, meaning the supply and usage charges will be consistent for the entire term. Other plans have variable rates, so the prices you are paying can fluctuate in response to changes in the market.
Fixed rates offer stability, and protect you against market forces that drive energy prices up. Variable rates are typically lower at any given time though, and it’s always possible that the market could go the other way, and your rates go down.
Exit fees and lock in contracts
When comparing plans, look out for those with no exit fees or lock in contracts. This gives you the flexibility to change if you spot a better deal, or need to move house abruptly. Contracts with fixed rates usually come with exit fees, and while usually not much, why pay them if you don’t need to?
Bonuses and bundles
Energy companies offer a range of bonuses to make their packages more attractive.
Airline points: Many providers have collaborated with airlines to offer Qantas or Velocity points, giving a certain amount for electricity and gas plans per billing period or per dollar spent.
Rewards programs: Many providers have their own rewards programs which can be redeemed for retail, dining, entertainment, travel and more.
Cash back or credits: Providers often offer cash back or discounts for the first month or billing period on sign-up.
Many providers also offer cheaper rates when you buy electricity or gas plans bundled with other services, like internet or home phones.
How to get set up with electricity
If you’re moving house and you’ve volunteered to sort out the electricity at the new place, the process is actually quite straightforward.
Choose a plan and a provider. With Infochoice’s comparison tools, you can quickly compare all of the above features between many different plans and providers, to find the perfect plan for you. Make sure you talk to your new provider about any discounts or bonuses that apply to you as a new customer.
Set up an account. Most providers require you to make an account with them. You may need to provide information about yourself and the property, as well as billing details.
Book in an inspection. If you are connecting to the grid for the first time, your energy provider may need to inspect the property to ensure it is safe and compliant with local regulations.
Arrange for a meter installation. If there is not already an appropriate meter on your property, your energy company will need to install one.
Start using electricity. Once your meter is installed, you should be able to start using electricity at your new home. You may need to activate your account beforehand.
Monitor your energy usage and billing information. You can typically access this information online or through an app provided by your energy provider. It’s a good idea to check every bill you receive to make sure you aren’t being overcharged, or if your energy rates are pushing you over budget.
Whether you’re moving house or switching energy providers, the new electricity provider does all the dirty work of setting you up, while the old one will give you a final meter reading. If you’re simply switching, your old provider might offer you a better deal, but you’ll need to weigh this up with your new offer.
Monthly bills and ‘bill washup’
Regardless if you choose monthly or quarterly billing, if you don’t have a smart meter, your meter will likely only be read quarterly. This means the provider makes an assumption as to your consumption for the other two months of the quarter.
This makes it possible to face bill shock, where your actual usage is much higher than your estimates. This can be true if you’re coming into the summer and using the air con, or if you’re coming into winter and using the heater. If you want to avoid this possibility, consider a smart meter or choose a quarterly bill.