Electricity Costs & Meter Tariffs Explained

When you set up your electricity plan, you’ll be asked to choose a tariff. Your tariff will determine how you are charged for your energy. Available tariffs vary depending on the state you live in and your supplier.

It’s important to carefully consider which tariff is best for you as it can have a significant impact on your energy costs over time.

Tariffs for Electricity Meters Explained

Single rate tariff

With this type of tariff there is no distinction between peak and controlled load usage. You’ll pay the same rate for your usage, no matter what time of the day you use it. This is good for customers who frequently use energy during peak times, such as weekday evenings.

You may also see this tariff type referred to as a flat rate, standard rate, or anytime rate. Type of meter required: All meter types should be compatible with a single rate tariff.

Time of use tariff

Usage prices vary depending on the time of day. You will likely see three types of usage on your bill: peak, controlled load, and shoulder. Pricing periods are determined by your supplier, but as a general rule of thumb are broken down as follows:

• Peak: The most expensive period, usually in the weekday evenings.

• Shoulder: Less expensive than peak, covers the times between peak and controlled load

• Off-Peak: The cheapest period, usually overnight on weekends.

Some suppliers also offer additional pricing periods under flexible pricing periods, though these are not available in all areas. If you tend to use electricity during controlled load times, a time-of-use tariff could be a good option. Type of meter required: Interval meter or smart meter.

Controlled load tariff

Not all customers stand to benefit from this type of tariff, which is specific to a type of device in the home that often has a dedicated meter. For example, a hot water system or under-floor heating system could fall under the controlled load tariff. With a controlled load tariff, the rate charged is only applicable to the energy used by that particular appliance.

Rates tend to be lower than regular peak rates, because controlled load tariffs usually apply to appliances that run in controlled load times. Type of meter required: All meter types, but the meter is usually specific to the device in question.

A list of reasons why your energy costs are so high

Retailer-specific reasons

Your high bill might not have as much to do with your energy usage as it does your energy retailer. There are some changes or specifications that might have occurred since your last bill, and you should consider these when trying to figure out why your current bill is so high.

Take a look at these explanations and see if any apply to you.

Was your previous bill an estimate?

One of the biggest culprits of "bill shock" is an estimated energy bill in the previous billing cycle. Estimated bills can give you a particularly inaccurate reading if you've recently changed your energy retailer.

When an energy retailer can't access your meter for some reason, they will send you an estimated bill. You can tell this is an estimated bill by some kind of indication -- usually an "E" -- next to the energy usage calculation.

Your estimation might be inaccurate, which will cause you to pay more when the retailer looks at your actual reading for the next billing cycle. Providers base your estimated energy usage on previous billing cycles or prior years during the same season.

This strategy usually gives them an accurate reading, but it isn't an exact science. You might be using far more energy than you were during this time last year -- or even during the previous billing cycle.

If this is the case, your retailer will likely send you an estimated bill that is lower than your actual energy usage, causing a higher bill the next billing cycle.

Check your benefits period

Something else you should check is your energy retailer's benefits period. Some retailers may use discounts to get new customers to purchase electricity or gas from them.

Some of these discounts last the lifetime of the plan but most run out after one or two years. One of the reasons your energy bill might be unexpectedly high is because your benefits period ended. Your pay-on-time benefit, for instance, might have concluded at the end of the last billing cycle, leaving you with a higher bill than you expected.

How long is your billing period?

Another retailer-based reason for a high energy bill could be the billing period. Your past bill might have been for a shorter period than your current bill, for instance. If this is the case, you should expect your current bill to be higher than past bills -- for obvious reasons.

Take a look at the date on your bills to make sure this isn't the case.

Energy usage checklist

Your high energy bill is likely tied to your energy usage if it's not a change on your retailer's end. Take a look at some of the reasons we've listed below to find out if you can find the high-energy culprit that applies to your circumstance.

Seasonal change

A change in seasons is one of the most prominent reasons your energy bill might have risen. Summer and winter months are both known to increase energy usage, but you might face particularly high bills in the winter. Air conditioning in the hot summer months will cause your energy bill to rise. You might have recently installed an air conditioner, and are surprised to see your summer bills skyrocketing.

Many people avoid air conditioners for this very reason. They choose to cool down by using fans instead, which is a viable option for those who don't face extreme heat in the summer. The winter, on the other hand, is a massive energy burner. It's nearly impossible to get through the winter without using a heater of some kind, which will undoubtedly cause your energy usage to rise substantially.

On top of that, appliances like space heaters can cause your bill to skyrocket after prolonged usage. The cold weather is a massive energy drainer, and it might be the culprit if you're questioning your high bills in the winter.

New appliances

Appliances like dishwashers, refrigerators, air conditioners, and washing machines use quite a bit of energy, especially if you have purchased ones without an energy saving option. Think about any appliance purchases you've made in recent months.

Could these be the energy-sucking culprits that are causing your bills to rise? In the future, try to avoid saving a bit of money in the short-term for higher energy bills in the long-term. You'll end up saving more by choosing energy efficient appliances over cheap alternatives.

3 Tips to Reduce Energy Costs

1. Compare energy suppliers

In recent years, many more energy suppliers have come to exist all over the world. The more gas and electricity providers pop up, the more competitive they become. This means they want your business, and they are much more likely to give you a good deal.

Have a look around to see if you're getting the best prices available. Check rates from various energy suppliers and find the best one for you. To make this easier, consider using a free price comparison site.

2. Insulate

When it comes to heating and cooling your home, insulation is key. Improving insulation doesn't always mean complicated DIY projects or construction work. Start by shutting doors and windows. Ensure that your curtains or blinds seal your windows properly to keep out the weather on hot and cold days.

Block draughts around doors and windows, and use external shading like awnings or shutters to keep out the sun. Furthermore, the roof of your home can waste 25% of heat in the winter if it isn't properly insulated. Consider improving the insulation of your roof either by yourself or by hiring a professional to save a significant amount of energy and money.

3. Fine-tune your thermostat

It is shocking how much money you can save by adjusting your thermostat by a few degrees. Statistics show that every degree over 20 in the winter can increase your energy bill by 10%. Avoid overpaying by keeping your thermostat around 26 degrees in the summer, and between 18 and 20 degrees in the winter.

If you have to wear warmer clothes at home to save a lot of money, it might be worth it! To avoid it getting too hot in your home in the summer months, try alternative cooling strategies that use less energy by keeping out the sun and improving air circulation.

Paul Coughran is the General Manager of Emerging Verticals at Compare Club. Paul has over 20 years of experience across a wide range of industries including Banking and Finance, Telecommunications and Energy. Paul leads a team of trusted experts dedicated to helping individuals make informed decisions about their insurance and utilities needs.

Meet our energy expert, Paul Coughran

Paul's top energy tips

• 1

  Australia’s top three energy companies still hold 64% of the total Australian market, even though competition was deregulated in 2017.

• 2

  If you don't shop around for energy providers, you’re probably leaving your savings on the table by failing to compare better value options.

• 3

  Most energy providers offer discounted rates for new customers, which is a strong incentive to switch.

• 4

  There should be no interruption when you switch energy providers. You'll need to pay a new company for your energy, but there won't be a disruption to your power supply.