Demand tariffs explained
What is a demand tariff?
Demand tariffs (or charges) have been designed (by energy distributors) to encourage households and businesses to use less electricity during peak demand times when there’s more pressure on the electricity grid.
You need a smart meter to be eligible for plans with demand tariffs.
How are demand tariff plans different to standard tariff energy plans?
Normally, energy costs are based on two types of charges:
- Supply charges – a flat daily cost charged by your distributor to get electricity to your home or business, and for the maintenance of poles and wires.
- Usage charges – the total amount of electricity you use over the billing period (often with different rates for peak, shoulder, and off-peak periods), with rates charged per kWh of energy used.
If you’re on a demand tariff, your bill will also include a third ‘demand’ or ‘capacity’ charge.
The most common types of demand tariffs are:
- Monthly Demand Reset: Residential and small business customers on this type of demand tariff have their demand charges recalculated on a monthly basis. The highest energy demand of a customer recorded within each monthly billing period determines the demand charge. At the end of the month, the demand is reset, and the process starts anew for the next billing cycle.
- Seasonal Demand Reset: In certain regions, such as Queensland, residential and small business customers may have demand tariffs that follow a seasonal reset. This demand charge is determined by the highest energy demand of a customer recorded during specific seasons, such as summer or winter. At the beginning of each season, the demand is reset, and the highest demand during that particular season influences the charges.
- Annual Demand Reset: In some areas, like New South Wales, residential and small business customers may have an annual demand reset for their demand tariffs. Here, the demand charge is calculated based on the highest level of energy demand recorded by a customer within a full year. At the end of each year, the demand is reset, and the process repeats for the following year.
Essentially, a demand tariff takes into account not only the total amount of energy you consume but also the highest level of power demand you place on the electricity network.
Saving money on demand tariffs
You can usually save money on demand tariffs if you can adjust your energy consumption to take advantage of lower demand tariffs. Here's what you need to know:
- Lower Usage Rates: Generally, electricity usage rates on demand tariffs are lower than those on single rate tariffs. This is designed to balance out the additional charges associated with demand tariffs, allowing you to save money.
- Understanding Your Electricity Usage: By gaining a better understanding of when and how your home uses electricity, you can limit high demand tariff charges and reduce your bills. Signing up to and using Tracker will help you to understand your past electricity usage patterns. Tracker uses data from your smart meter to give you insights into your past usage patterns so that you can adjust your usage behaviour.
- Lowering Electricity Demand: Once you have insights into your usage, you can save money by reducing your electricity demand during peak times in two ways:
a. Taking Turns with Appliances: Instead of running multiple appliances simultaneously, consider using them one at a time. By avoiding high demand peaks within any 30-minute block, you can minimize the impact on your bill. For instance, run your clothes dryer after cooking dinner instead of using your oven and clothes dryer simultaneously.
b. Time Shifting to Avoid Peak Times: Another effective strategy is to "time shift" your appliance usage. This means using certain appliances outside the peak demand window when the demand charge is not being measured. For example, run your dishwasher or pool pump overnight or early in the day, outside of the peak demand periods.
Demand tariff information by state
Click on your state of residence to view links to each energy distributor’s information about demand tariffs.
If you don’t know who your energy distributor is, check the Get in Touch section in the top right-hand corner of page 1 of your Simply Energy bill.
The way demand tariffs are applied is different for each of the three NSW distributors. Please check the relevant link for further information.
See Essential Energy’s Demand Tariff Brochure for more information.
In Victoria, demand tariffs for residential and small business customers are available on an opt-in basis.
The way demand tariffs are applied is different for each of the five Victorian distributors. Please check the relevant link for further information.
Residential customers and some small businesses with smart meters can opt into a demand tariff.
Please check the link below for further information on how demand tariffs are applied in South Australia.
SA Power Networks
Demand tariff FAQs
Will my bill increase on a demand pricing plan?
Whether your bill will increase or decrease on a demand pricing plan depends on your specific energy usage patterns and the rates and charges associated with the plan. However, it is worth noting that demand tariff pricing plans often have lower supply and/or usage charges than other plans. Depending on how much you are able to shift your usage from peak demand periods, the lower supply and/or usage charges can compensate for the additional demand tariff charges.
Who decides if I’m on a demand tariff?
The decision regarding whether you are placed on a demand tariff is typically made by your electricity distributor. In some cases, the distributor may choose to assign customers to a demand tariff based on factors such as their energy usage patterns or the type of premises they have (e.g., residential or small business). Customers also have the option to proactively choose a demand tariff. This means that you can opt-in or request to be placed on a demand tariff voluntarily in order to potentially save on your electricity bills.
Can I opt out of a demand tariff?
Yes, in most cases, you have the option to opt-out of a demand tariff. Opting out means you can choose to switch from a demand tariff to a different tariff structure. In some cases, small businesses cannot opt out of a demand tariff. This will depend on your location and distributor.
Can I see my demand charges on my bill?
Yes. We list all the charges for the energy you’ve used on page 2 of your bill, including demand charges. We also break down the numbers in the ‘Understand your bill’ section, so you’ll know exactly how much your demand tariff was for each month over the billing period.