There is a lot of confusion about energy plans versus tariffs. Sometimes these terms are used interchangeably, but they mean very different things.
Your tariff type is assigned to your meter by your distributor and governs the wholesale network pricing structures used to charge your retailer for your energy consumption.
Network charges account for up to 60% of your energy bill, and represent the single biggest cost element in your energy bill - even greater than the actual wholesale costs of the electricity you consume.
Because network costs are so important, retailers will usually minimise their pricing risk by aligning the cost structure of their retail plans with the underlying tariff type assigned by the distributor.
For example, if you're on a single-rate tariff, you'll most likely be offered single-rate plans by the retailers. If you're on a time-of-use tariff where the network costs change across defined peak, off-peak and shoulder time periods and days of the week, the retailers will most likely offer you retail plans that reflect that same time-based pricing structure - if they do not, they open up potential pricing risk where they're exposed to wholesale network costs that that may not be able to achieve their desired retail margin on.
However, the retailers are not strictly obliged to match your retail plan with the tariff assigned to your meter. They can offer you any retail plan they choose to
Classes of electricity tariff
There are four main classes of electricity tariff:
Single rate tariffs – The price you pay for your energy consumption does not change on the basis of time of consumption. Note that under a 'single rate' tariff, it's still possible that the price per kWh may change according to the quantity of kWh consumed – so one price might apply up to a certain kWh threshold, and then another price applies beyond that threshold. These kinds of tariffs can also be called block rate or stepped tariffs. Single-rate tariffs are still the most common tariff type in Australia. Basic consumption meters can only support Single Rate tariffs since the meter records only cumulative kWh consumption, not the time at which the energy was consumed.
Time of Use tariffs – As the name suggests, a Time of Use tariff means that the price per kWh can change according to the time of consumption. Time of Use tariffs includes 'Two Rate' tariffs, which have separate pricing for Peak and Off-Peak consumption, and Flexible tariffs which feature separate pricing for Peak, Shoulder and Off-Peak time periods. Time of Use tariffs require a smart meter to be installed since they require both kWh consumption and time of consumption to be recorded. Distributors set the times for Peak, Off-Peak, and Shoulder periods; however, it's possible for a retailer to define their own times independently of the 'official' times set by the distributor.
Controlled load tariffs – A controlled load is a separately metered energy supply that is available only at off-peak times. Controlled load is typically used for appliances such as underfloor heating or electric storage hot water systems, where the appliance runs overnight. Controlled load is common in settings where there is no smart meter installed, and this tariff type can be viewed as a quasi-time-of-use tariff since the controlled load energy supply is available only at off-peak times. Some distributors offer two classes of controlled load energy supply - CL1 and CL2. CL1 is the cheapest per kWh but is available for the most restricted time periods. CL2 costs more than CL1, although it will be less than the single rate price, and is available for a less restricted set of hours.
Demand tariffs – Demand tariffs are the newest kind of tariff and are intended to deliver a price signal to encourage energy consumers to minimise peak time consumption, either through shifting their load to shoulder and off-peak times or by avoiding consumption altogether. Demand tariffs apply an additional capacity charge to your bill that scales according to the highest intensity of demand recorded during the 'demand window' time on any day in the billing period. The 'demand window' coincides with Peak hours, and the purpose of demand tariffs is to deliver a financial disincentive for high peak time energy consumption. Demand tariffs require a smart meter to be installed.
Bill Hero determines the tariff type for your energy account from the consumption data presented in your bill, and we compare your bill against other plans available for that tariff type.
Bill Hero does not currently compare between tariff types, so it will not make recommendations to switch between tariff types.