My friend Mike told me a few days ago that his Inner West Sydney home used to have a flat rate electricity bill but :
“Now we have a demand charge, which was surprising and annoying. It just came in when we changed electricity providers earlier this year.”
I did some research and it turns out that flat rate electricity grid tariffs are being phased out and at least in the Ausgrid area if you’re still on flat rate retail plan and switch electricity retailers or get a smart meter then you’ll be put on a Demand tariff plan by default.
If this happens to you, what can you do? Read on to understand how Demand charges work and your options…
What is a Demand Charge and How Does it Change Your Electricity Bill
Demand is how much, or how little, your home uses the electricity network (poles and wires) at a particular time. Demand is different from consumption, which is the total amount of electricity you use over a certain time.
A demand charge on your electricity bill is typically calculated on the level of your homes demand on the electricity network (i.e. the poles and wires) during a specified time period or window eg: 3pm-9pm.
Customers on a Demand Tariff or Demand Pricing Plan will have a demand charge on their bill.
A demand tariff includes an extra charge for whatever day and time of the month they measured you using the most electricity during the demand charge time period eg 3pm-9pm at the busiest time for the grid.
Electricity grid owners say that customers’ future electricity demand during the busiest times is the main driver of future costs for Australia’s electricity networks. These costs drive up the cost of providing you with electricity.
How to Lower or Achieve Zero Demand Charges
Homes with solar and a big enough battery that provides enough energy during the peak demand window to cover your electricity use can expect a small or zero monthly demand charge and enjoy the lower per kWh electricity usage fees that Demand Charge plans usually have during the rest of the day.
What if you have solar but it doesn’t generate during a demand charge period or you’re renting and don’t have solar?
Your demand is measured in 30-minute blocks during the peak demand window.
By taking turns with some appliances, rather than running many at once, you can avoid high demand peaks during any 30 minute block.
For example, running your clothes dryer after cooking dinner rather than using both at the same time.
Another way to reduce your demand charge is to change your household routines and where possible shift your appliance use outside the peak demand window.
Some ideas are to run your electric hot water, dishwasher or pool pump during the middle of the day when there’s lots of solar power being exported from home rooftops all around you, which makes middle of the day electricity cheap.
If you have an electric car you can get a smart home charger that only charges your car when your house is generating spare solar power or during a scheduled time period when your electricity is cheap.
How to Quit Demand Charge Tariff
Good news for NSW residents it doesn’t matter whether your grid electricity owner is Ausgrid, Endeavour or Essential.
They all allow you to ask your electricity retailer to switch to a Time of Use (TOU) plan without demand charges.
Also flat rate electricity plans aren’t being phased out at a retail level – flat rate network tariffs are – they’re different things. A retailer can charge what they like.
Even if a customer is on a Time of Use network tariff, a retailer can offer a retail flat rate electricity plan and blend the ToU network rates into that.
So some flat rate electricity plans are still available for now but from fewer electricity retailers than before and they aren’t good value for everyone, especially homes with solar and battery.
Regarding all of this I asked my contact at Ausgrid (the local electricity grid owner for a large part of Sydney, the Central Coast and Hunter Valley) lots of questions to help readers:
If residential electricity customers in your area change energy retailers and are put on a demand plan, do they have a guaranteed right to request a change to a time of use plan that the retailer can’t refuse?
“Ausgrid’s tariff policy is that customers can request to be put onto a TOU network tariff. This option can be exercised after at least one full calendar month of billing. The retailer cannot refuse to change the network tariff to TOU if requested, however the retailer can package the customer’s retail offer on any basis (we don’t have any control over the final retail prices or structures).”
What About Flat Rate Tariffs, are flat rate consumption (or usage) tariffs still available??
“While your retailer can still offer you a flat energy plan, Ausgrid’s flat network tariffs are now closed to new customers to help make energy more affordable for the long term.”
Can any Ausgrid residential customers with smart meters stay on flat rate or is Ausgrid removing that option all together so only demand or TOU plans are available?
“Only customers with legacy type 5 or 6 meters will remain on the residential flat tariff.”
If flat rate is gone altogether for smart meter customers what date will customers be switched over to Demand or TOU by?
“All customers will be switched when the smart meter rollout is complete (refer to next question)”
Is Ausgrid requiring all residential customers to have smart meters by a particular date so they can be changed over to demand or TOU tariffs?
“No, the smart meter rollout is currently driven by retailers and end of life updates”.
“However, there is a policy change currently under consideration by the Australian Energy Market Commission (AEMC) which will accelerate the rollout of smart meters across all networks (except for Victoria, where a mandated rollout has already taken place) that are part of the National Electricity Market”.
“More details about this can be found at this AEMC page Accelerating smart meter deployment. The AEMC is considering customer safeguards with respect to tariff changes triggered by the installation of smart meters, however the outcome won’t be known until later this year”.
EDITOR: Interestingly AEMC has reacted to feedback and is considering these draft changes to their accelerating smart meter deployment rule change:
- 30 business days notice before any retail tariff changes
- information for customers on the new retail tariff structure and how to optimise energy usage
- historical bill estimates under the new retail tariff structure, where available
It baffles me why these kinds of rules weren’t mandatory long ago.
Giving customers at least a months notice before their electricity tariff changes and explaining how this will change their total bill are sensible polite things to do in order to give people time to consider upcoming changes properly, change their behaviour accordingly and avoid an increase in resentful feelings about electricity retailers and grid companies.
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