Understanding your electricity bill

Are you paying too much?

Understanding your electricity bill can help you work out if you’re paying too much for energy.

Knowing how to read your bill lets you work out if you will save money by switching electricity providers.

Types of charges explained

Your energy bill is broken down into two main types of charges:

  • Supply: This is a daily fee to deliver electricity to your home. Some providers also charge a ‘membership fee’ per day. These costs do not change however much electricity you use.
  • Usage: This is the rate your provider charges for the amount of electricity (kWh) you used.

Some electricity plans have different Usage Charges for electricity charges at different times of the day, for example: 

  • Peak: tends to be evenings Monday to Friday
  • Off-peak: tends to be weekends and overnight Monday to Friday
  • Shoulder: times not covered by peak and off peak

Other charges may include:

  • Controlled load: which is often used for hot water systems
  • Capacity charge: a fee based on your maximum demand (kW) per day.

Calculating the cost

This example shows how a typical bill is calculated.  This consumer uses 4,000 kWh per year. Their plan charges different rates for electricity used at peak, shoulder and off peak times.

The total bill for the year is calculated as:

Energy used x rate charged + supply charge

The total bill comes to $1,533 per year.

This makes the average cost per unit of electricity 38 cents/kWh ($1,533/4000).

Charge Name Usage Rate Cost calculation Cost
Peak 600 kWh 48.00 cents per kWh = 600 x 48/100 $288
Shoulder 2,000 kWh 30.00 cents per kWh = 2,000 x 30/100 $600
Off Peak 1,400 kWh 20.00 cents per kWh = 1,400 x 20/100 $280
Supply 365 days 100 cents per day = 365 x 100/100 $365
Total $1533

Comparing electricity plans

Shopping around to get the best electricity plan for you is a good idea, but it is often complicated to work out how different plans compare.

Selecting the one that works best for you depends on when you typically use your electricity, so its sensible to use your past bills as a basis for calculating potential savings.

Look at the following sections to help you compare plans and work out what is best for you.

For a free, independent comparison of retail offers, visit the Australia Energy Regulator’s website, www.energymadeeasy.gov.au.

What to look for

Electricity plans vary hugely but at the moment there are three basic types:

  • Time of use: Plans that vary by time of day (e.g. peak, shoulder and off-peak/controlled load)
  • Flat rate: Plans that have a fixed price over the day
  • Market rate: Plans tied to the national market price of electricity

Time of use plans tend to be best for households that want off-peak water heating.

Flat rate plans tend to be best for households that use most of their electricity in the mornings and evenings for cooking, heating and cooling, etc.

Market rate plans tend be best for households that have a battery and can avoid using electricity in peak times.

Some plans have lower energy rates but make up for this with higher supply charges, so be sure to include both in your calculations.

See the following examples for the impact that different plans can have on your bills.

Photo credit: Solar Quotes

Lower peak usage

In this example, the cost of a Time of Use plan is compared to a Flate Rate plan for a consumer with low electricity consumer at peak times.

The Flat Rate plan has a higher daily supply charge and lower energy usage rates, however these factors even out so that the total bill is roughly the same for both plans.

Charge Name Usage Plan A – Time of Use Plan Plan B – Flat Rate Plan
Rate Cost Rate Cost
Peak 600 kWh 48.00 c/kWh $288 27.00 c/kWh $162
Shoulder 2,000 kWh 30.00 c/kWh $600 27.00 c/kWh $540
Off Peak 1,400 kWh 20.00 c/kWh $280 27.00 c/kWh $378
Supply 365 days 100 c/kWh $365 120 c/day $438
Total $1533 $1518

Higher peak usage

Now if we compare the same two plans, but for a different usage profile, the results are quite different. 

In this example, the household consumes a far higher amount of electricity during the peak times, with the result that the Flat Rate plan is over $200 cheaper per year.

Charge Name Usage Plan A – Time of Use Plan Plan B – Flat Rate Plan
Rate Cost Rate Cost
Peak 1400 kWh 48.00 c/kWh $672 27.00 c/kWh $378
Shoulder 2000 kWh 30.00 c/kWh $600 27.00 c/kWh $540
Off Peak 600 kWh 20.00 c/kWh $120 27.00 c/kWh $162
Supply 365 days 100 c/kWh $365 120 c/day $438
Total $1757 $1518

Electricity price trends

The electricity market is in transition and prices are fluctuating quite a bit, so what seems good now might not be in the future. 

However we are seeing the following trends emerging:

  • Off peak and controlled load prices are rising, as it is not cheap to generate electricity at night.
  • The cost of producing electricity during the day is very low due to the large influx of solar energy available. We are seeing more flat rate plans, and even some that provide cheaper electricity rates during the daytime.
  • Solar feed-in tariffs have fallen in response to the current oversupply to the grid. However, solar owners can still save 20-30 cents/kWh by consuming what they generate rather than buying electricity from the grid.
  • For those with batteries that charge at cheap rates to displace purchases at peak rates, the returns can be significant. As grid-connected batteries and electric vehicles become more common, new markets for exported solar power may emerge.

Feed-in tariffs for solar

A solar feed-in tariff (FIT) is the amount of money you get back from your electricity provider for the energy you put into the electricity grid. This appears as a credit on your electricity bill.

As with other rates, plans include varying FIT rates, but all have come down in recent months.

The savings from solar panels are calculated as the FIT earnings plus the value of solar energy that you consume directly within your home. Of these, the greatest value is the avoided purchases from the grid.

The quantity of self-consumption (kWh) can  be estimated using data from the app that communicates with your solar inverter.

Example:

  • My solar panels produce 6,000 kWh of electricity over the year.
  • I use 50% of this directly within my home (3,000 kWh) and export 50% to the grid (3,000 kWh).
  • I pay 35 cents/kWh for electricity from the grid and earn 3 cents/kWh for exported electricity.

My savings this year have therefore been:

  • Avoided costs: 3,000 x 35/100 = $1,050
  • Earnings: 3,000 x 3/100               =      $90 
  • Total                                                      = $1,140

Photo Mark Gable

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