What is the new energy ‘Demand Tariff’?

Learn more about the new energy demand tariff coming into effect across Australia from July 1st, including how it works and how it could impact your energy bill.
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What is the new tariff and when is it coming into effect?  

From July 1, 2021, all Energy Distribution companies have been approved for a new Tariff Structure Statement (TSS) and will introduce a new Demand Tariff.   

The Demand Tariff will calculate and record the maximum demand that is placed on the grid and obtains your own peak demand measurement within a specific period of time (often measured within a month.)  Demand Tariff rates are based on both the amount of electricity you use and your overall power demand on the network. 2 

This new Demand Tariff will impact both residential and business customers and change existing tariffs.

Why is it being introduced? 

The Australian Energy Regulator (AER) has approved these reforms proposed by all Energy Distribution companies to manage electricity in peak demand times. 1 How power is used can differ at any given time and be impacted by many variables (i.e. increase in temperature driving up air conditioning use), as a result this creates peak usage or ‘demand’ times.  

Due to guidance from the National Electricity Rules, the electrical network needs to be able to cope in times of peak demand. As our Country continues to grow and has taken on more technological devices (e.g. electric cars and home batteries), our electrical usage levels also continue to grow. As a result of this, the Demand Tariff will measure both electricity use and the peak rate of consumption and assist customers in using their power more efficiently in peak times. 2 
 
Therefore, the Demand Tariff’s goal is to reduce electrical usage in peak times by placing a cost reflective way to manage the electrical network. It will also provide a way for distributors to gain additional financing to invest in future electrical grid infrastructure. 

Could this make my energy bill more expensive?  

Well, potentially (see tips: below). 

It is important to note that Energy Distributors (NOT Energy Retailers) are required to spend on grid infrastructure. As such, a Tariff can be an easy way for them to recoup their costs in a way that reflects their cost pressures. 2 However, as a term, ‘recouping costs’ doesn’t really sound great for consumers… 

Consequently, this Tariff means that your energy costs may go up due to your bill now reflecting your energy usage in peak times.  

How can I save on my energy?  

So, what can you do to save some energy and potentially its impact on your hip-pocket? 

Choose your usage moments:  

If your demand is being measured in peak times, then it makes sense to avoid excess energy usage in those times. Try and avoid unnecessary heating and cooling, choose an off-peak time to do a load of laundry or a dishwasher cycle and turn off all unnecessary lighting (haven’t you heard… candles and mood lighting are cool now!!) 

Examine your usage:  

It’s not only important to know when peak usage times occur but also what devices and appliances are draining your power and wallet. It can be helpful to understand whether heating and cooling, hot water, lighting or home appliances are causing your bills to increase and help you make informed usage decisions in the future.  

See if you can switch providers and save: 

Has it been a while since you’ve given your energy plan or provider a bit of a refresh?  

Instead of doing all of the above-mentioned hard work, you can contact iSelect and see if you are missing out on potential savings. For more great iSelect energy saving tips click here. 

Want to know more? 

If you’re uncertain about what these changes mean for you and how/if you will be affected, it may be a good time to start shopping around to make sure you are still getting a great deal on your energy plan.  

iSelect can help you compare from a range of energy plans and providers to see if you could switch and potentially save. Give our friendly team a call on 13 19 20 or check out the link here to begin comparing yourself. * 

Sources: 
1. https://www.aer.gov.au/networks-pipelines/network-tariff-reform
2. https://www.essentialenergy.com.au/-/media/Project/EssentialEnergy/Website/Files/Our-Network/DemandTarrifBrochure.pdf

Last updated: 01/07/2021

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