Understanding your electricity bill, and how it’s just like catching a taxi

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Your electricity costs have soared since 1st July. Yes, yours!

If you want to understand how to reduce your electricity costs, you first need to understand how you are charged. Here’s a brief run-down of how your electricity bill works.

Let’s think about this like we’re catching a taxi.

How your electricity bill is like a taxi cab

Regardless of whether we’re heading to the local post office to pick up a parcel or visiting Aunt June down the coast, we’ll be charged a flag fall. This is the daily supply charge.

Distance is the next variable. In a taxi, we also pay per kilometre travelled. This is analogous to our electricity usage rate. It’s going to be significantly more expensive to travel 25 km to the next town to visit Aunt June, than a local trip to the post office to pick up your parcel. Our taxi may also have a tiered charge - a flat rate for the first 12km, and then an increased cost per km after that. Our electricity bill may also show a tiered tariff.

If we want to ride in style, we may order a ‘town car’ to pick you up; a much more luxurious ride. We may incur a separate call-out charge for the black BMW that turned up, or they may charge more per kilometre for usage. The same occurs if we elect to use ‘green’ electricity to offset the use of renewable energy from our provider – we will see either a fixed price or per kilometre increase for our green supply charge (which we frankly think is a disincentive for doing the right thing!)

Now, will you visit Aunt June for lunch, or for dinner? Trying to get home after dinner might clash with cabbies ferrying people to and from clubs and pubs. This is their peak hour. To compensate for this additional demand they hike up the price during busy hours, just like a time of use tariff. Better choose lunch! (Note: not everyone will be charged a Time of Use tariff; you will need a modern interval or smart meter to tell your electricity company exactly when you are using energy in your home.)

What about Uber? Uber prices vary a lot more, don’t they? The highly-variable Uber-style option may happen down the track (and a few consumers have opted for a monthly fixed-rate electricity plan), but at the moment in the electricity sector we’re still catching taxis.

Oh, and what if we have picked up the huge parcel and need to take it to Aunt June’s in a maxi taxi? Some taxi companies charge a special rate for taking a maxi taxi, and sometimes our electricity retailer might charge a special rate for our electric hot water, or under-slab heating, although this isn't as common. We’ll see an appliance charge, if we have one, listed separately on your bill.

So now we know how our electricity bill is calculated – there is a fixed charge, a usage rate, and sometimes other variable charges.

It’s important to understand that electricity rates (fixed and usage) can change at any point in time.

Your electricity retailer is not required to let you know about any price change beforehand, but they must notify you of the change on your next electricity bill. If there is a price change right after you receive your last bill, you may incur up to 3 months of electricity usage at a higher rate before you find out about you’re price increase.

We encourage you to contact your electricity retailer to find out what your new tariff fixed and variable rates are, and how they have increased from 1st July 2017. Being knowledgeable about your tariff helps you prepare for bill shock and is the first step towards energy awareness.

If you have Solar Analytics monitoring, now is a great time to change your tariff setting in your dashboard to reflect the recent increase. Then you will always know exactly how much you are spending on electricity, every day of the week.

Glossary:

Daily Supply Charge: The fixed charge is your connection charge, known as a daily supply charge (or sometimes your service to property charge).

Usage Rate: Your consumption charge - the rate that you are charged per kilowatt hour to use electricity. This charge may be:

 1. Flat Rate: The first block of electricity that you use is charged at a flat rate per kilowatt hour (kWh). Any electricity used in excess of this block is charged at a different flat rate (either higher or lower than the first block)

 2. Time of Use Rate: Your electricity is charged at a different rate depending on the time of the day. This is often split into peak (usually afternoons and evenings), off-peak (very late night and early morning) and sometimes shoulder (usually day time). Solar Choice has a table showing Time of Use periods for different regions and distributors here.

Appliance Metering: Some of your larger appliances (such as hot water or under-slab heating) may be charged separately.

Green Supply Charge: You may have an extra line item to offset your electricity retailer using renewable energy. This may also be a higher variable charge.

 

For more information on using Solar Analytics monitoring to get some control over your electricity bill, check out the How It Works page

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