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What’s the Average Cost of Electricity per kWh?
What’s the Average Cost of Electricity per kWh?
Written by
Rachel Gregg
Edited by
Ellie Garran
Reviewed by
Julia PaszkaCompare Electricity & Gas Plans
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What’s a kWh and how is it used in my electricity bills?
Long story short
A kilowatt hour (kWh) is how your energy usage is measured
A kilowatt hour is how much energy you use in an hour. It’s a standard unit on your bill, used to calculate your usage charges.
Electricity prices vary by state
All states measure in kWh, but prices can differ due to wholesale prices, network fees, and retailer margins.
Your bill includes more variable than just your usage
Daily supply charges and the type of tariff you’re on can impact the end figure on your electricity bill.
What’s a kWh and how is it used in my electricity bills?
You’ve probably seen the term kWh as a constant feature on your average electricity bills, but what does it actually mean? A kWh or kilowatt hour is just a fancy way of measuring how much electricity you’ve used in an hour. Each appliance in your home that’s plugged into your wall will likely use energy, and measuring this in kWhs is how all energy providers figure out a standard way to charge bills each quarter.
A kilowatt tells you how much energy something needs, like a 10kw microwave, while a kilowatt hour measures how much electricity it uses over time. So, they sound similar, but they aren’t quite twins.
When it comes to your bills, you’ll usually see kWhs listed next to your usage charge. This tracks how much power you’ve used overall. Then there’s the supply charge, which is a daily fee for just being connected to the grid, even if you don’t use a single spark of power in a day. Together, these two figures are the bread and butter of your bill and are the main culprits contributing to your final electricity bill figure.
The type of plan you’re on can slightly change the way you get charged per kWh. In the Australian energy market, you’ve got two main flavours: market offers or standing offers.
- Market offers are the ones whipped up by energy retailers. They usually come with nice-looking discounts and other benefits.
- On the opposite end, standing offers are what you get if you want a more regulated plan. There are two of them: the Default Market Offer (DMO) applies to NSW, SA, and SE QLD, while the Victorian Default Offer (VDO) applies to – you guessed it – Victoria. They act as a benchmark price for other providers to use when setting their own plan prices, and they’re locked in once a year by regulatory bodies.
What’s the average cost of electricity per kWh around Australia?
While we’d all love it if Australia agreed on one single cost across the whole country, there’s no such luck. There are a lot of different factors that play into your electricity bill – and that’s without even thinking about retail competition. There are network costs that cover building powerlines, wholesale costs, environmental costs, and retail costs, just to name a few. They all play a part in making up those final electricity prices. Looking at the DMO and the VDO, which account for all these factors, you can see the difference in the charges per kWh across the country. Just remember these won’t necessarily be true for you, since there are other things to factor into your unique home.
The average cost of electricity in Australia
| State | Supply charge (per kWh) |
| VIC | $0.31 |
| NSW | $0.53 |
| SE QLD | $0.47 |
| SA | $0.58 |
Sources: ESC – Victorian Default Offer; AER – Default market offer prices final determination 2025, p14.
Why do electricity prices vary from one state to another?
Energy bills are made up of a range of factors, most of which are out of our hands (sadly). Things like where your power comes from, how it’s transported, your state’s market size, network area, and even renewable schemes all have a part to play.
Most of these charges and costs depend on the big players in the electricity market – your generator, distributor, and retailer. It’s a bit of a waterfall effect when looking at these three considerations. Here’s how it works:
- Generators turn products like coal and wind into power, then sell it to retailers at a wholesale price. These prices depend on the supply and demand of the energy at hand (also called the spot price). They’re set every five minutes by the AER.
- Once your retailer has bought electricity, it gets shipped to your distributor. These guys are the ones who own and maintain all the power lines and get your electricity from A (generators) to B (your home). This is where network fees come from. They cover the costs to build, operate, and maintain any infrastructure used to move all that power around.
- Retailers then add their own costs and margins on top. Depending on the competition and your state, these prices can change around.
Average electricity prices across some popular providers
Curious how electricity costs per kWh stack up across different providers? We’ve pulled together a few estimates from some of the big names in Victoria to give you a snapshot as of November 2025. Just keep in mind – your actual rate depends on things like your location, tariff type, and provider. So, while these figures won’t match every bill, they’re a handy way to see how providers compare at a glance.
Average usage rates in Victoria
| Electricity provider | Average usage rate (per kWh) |
| AGL | $0.32 |
| EnergyAustralia | $0.26 |
| LUMO | $0.25 |
| Origin | $0.33 |
| Red Energy | $0.25 |
Sources: AGL – Compare electricity and gas; EnergyAustralia – Electricity and gas; LUMO – Energy plans; Origin – Electricity and natural gas plans; Red Energy – See our plans.
Note: Data retrieved Nov 2025. When prompted, postcode used was 3000. Averages taken from single-rate tariff plans, including discounted and non-discounted rate periods.
What other costs play into my electricity bill?
Other than your usage and costs that are out of your hands (like network and wholesale costs), there are still a few more things to factor in.
Supply charges
Usage charges are always paired with a daily supply charge. How much your supply charge is can play a big role in your regular bills. Just like your usage charges, your supply charge can differ depending on your plan, discounts, and distributor. That’s why it’s so important to compare a range of offers before deciding on the one for you. Even if you find a plan with a low usage charge, a high supply charge could wipe out any potential savings.
Tariff types
Tariffs affect the way you’re charged for your electricity usage, such as being charged a different amount at different times of the day. Some are pretty complex, while others are a bit more straightforward.
- Flat rates mean you pay one simple price, all the time.
- Time-of-use tariffs have different rates depending on the time of day (peak, off-peak, shoulder), which can mean lower costs at certain times.
- Demand charges are calculated based on your highest hourly electricity usage (based on the entire month). They add an extra cost to your bill depending on how high your peak usage was.
- Controlled-load tariffs only apply to appliances on a different meter, like your pool pump or water heater. With these tariffs, a third party controls when these appliances are on, usually at a cheaper time of day.
Payment details
How often you get your electricity billed (monthly, quarterly, or annually) can also change how your bill looks. Obviously, breaking it down into a monthly bill will look smaller than one big annual one, so just make sure you’re comparing like-for-like when seeing what everyone else is paying.
Solar generation
If you’ve got solar panels hooked up, your bill could look different again. With your panels humming away and juicing up your home, you’ll have less reliance on the grid and smaller usage costs. Again, make sure that you’re only comparing your plan against other solar plans, so you can get an accurate idea of how your electricity provider stacks up.
Helpful tip
If you want to get a better handle on your usage data or stop getting estimated bills, then a smart meter could be the solution. Smart meters read your usage data every five to 30 minutes. That means more accurate usage numbers and the flexibility to change onto different tariffs (like time-of-use tariffs) so you can take advantage of lower rate periods.
Julia Paszka
General Manager – Utilities & Credit Cards
Frequently asked questions
Who sets the per kWh price of electricity?
For standing offers, prices are regulated by the Australian Energy Regulator or the Essential Services Commission. Each year, these regulatory bodies set benchmark prices – the Default Market Offer (DMO) in NSW, SA, and SE QLD, and the Victorian Default Offer (VDO) in VIC. These are usually set on July 1 and are based on how much electricity the average household uses in certain areas.
For market offers, your retailer will be the one to call the shots. But this doesn’t mean retailers can go crazy and make up the numbers however they see fit. When the benchmarks are set, retailers have to show how their offers compare. That’s why, when shopping around, you’ll see market plans that say ‘X% less than the VDO/DMO’.
How often do electricity prices change?
Standing offer prices are set by the DMO and VDO once a year in July. Since these benchmark prices are a guide to what retailers can charge their customers, it means retailers can also only increase their prices once a year, usually a month or so afterwards. Retailers are allowed to decrease their prices anytime (but that doesn’t mean they’re likely to do it). Retailers also have strict rules for following through with the contract details of the different plans they offer. So, if you’re on a fixed-term contract (a fixed rate for a certain period), your retailer won’t be able to change the rate on you during this period. And when they do decide to change your rates, they have to let you know as soon as possible.
Why are electricity prices getting more expensive?
There are a lot of factors that go into how our energy is charged, so an increase in one area could have a ripple effect on everything else.
Unlikely as it may seem, the price of gas is tied pretty closely to electricity costs. Gas is a key player in the energy mix. Even though only about 17% of electricity comes from gas, it still needs to be there in case emergency backup power supplies are needed. So, when gas prices increase, electricity costs often follow.
Gas prices have been on the rise for a good while, spiking since the global energy crisis back in 2022. Even though we produce more than enough gas within Australia, about 80% is put out into the international market, which means what we buy back depends on international market prices. In fact, gas prices drive about 50–90% of pricing in the National Electricity Market.1Climate Council – Five reasons why your power bills are so high – and how you can help bring them down So even if you have an all-electric home, gas can still sneak into your bills.
What is a reference price?
A reference price is another name for the benchmark pricing of the VDO and DMO, which regulate prices for standing offers and retailers. They’re here to make it easier for customers to compare retail provider plans and gauge where their plan sits. And since all providers have to compare the difference from these reference prices to their own plans, you’ll find a percentage figure that shows the difference. So, you don’t have to dig into the fine print.
What is a wholesale price?
Wholesale electricity prices are what your retailers pay to buy your electricity from the National Electricity Market. These wholesale prices move around as much as supply and demand do (nearly every five minutes). Wholesale costs are bundled up by your retailer with network charges, environmental costs, and their own margins to set the final rates you see on your bill.
Find an energy plan that fits your kWh use
Understanding what kWh means is the secret weapon to help you compare plans, spot sneaky charges, and make smarter choices for your home (and budget). Once you get your head around it, you’ll know what you’re paying for with every flick of the switch. If now is the time to put your newly acquired knowledge to the test and compare plans, iSelect is here to help. By jumping online or calling your energy comparison experts at 1800 644 532, you can compare from a range of providers and plans to find one that fits the bill.
Get started on comparing energy plans today!
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