There are several types of tariffs available to Australian energy users, one of which is the block rate tariff. But what exactly is a block rate tariff and how could being on one impact your energy bill?
This Canstar Blue article explains what block rate tariffs are and how to compare them.
What is a block rate tariff?
A block rate tariff is one in which customers pay a different price depending on how much electricity or gas they use each day, month or quarter.
Customers on this tariff are charged for electricity or gas in ‘blocks’, with each block being an amount of energy used measured in kilowatt hours (kWh) for electricity, or megajoules (MJ) for gas. The price you’re charged will either increase or decrease with each block of electricity or gas consumed.
The number of blocks that make up your energy charges varies across providers, with most offering between two and six. These blocks are usually described in terms of daily electricity or gas usage but may also apply to monthly or quarterly usage.
Below are three examples of how a block tariff might operate.
Gas block tariff with five daily usage blocks
| Block | Price (Incl GST) |
|---|---|
| First 27MJ per day | 3.8 cents per MJ |
| Next 20MJ per day | 3.3 cents per MJ |
| Next 41MJ per day | 2.9 cents per MJ |
| Next 83MJ per day | 2.2 cents per MJ |
| Remaining usage per day | 1.9 cents per MJ |
Electricity block tariff with three quarterly usage blocks
| Block | Price (Incl GST) |
|---|---|
| First 4000kWh per quarter | 27c/kWh |
| Next 3450kWh per quarter | 29c/kWh |
| Remaining usage per quarter | 23c/kWh |
Electricity block tariff with two daily usage blocks
| Block | Price (Incl GST) |
|---|---|
| First 11kWh per day | 34c/kWh |
| Remaining usage per day | 38c/kWh |
Examples only, with typical pricing
Natural gas suppliers frequently use block rate tariffs, and it’s most common for gas prices to fall with each subsequent block of usage. The same applies for electricity across most New South Wales networks. As for South Australia and Victoria it is more common (though not always the case) that electricity prices will rise as more electricity is consumed ‒ this is sometimes called an inclining block tariff.
For more details on what electricity tariffs are available in your state, check out our below guides.
- Victoria electricity tariffs
- New South Wales electricity tariffs
- Queensland electricity tariffs
- South Australia electricity tariffs
Compare electricity providers
Here are some sponsored deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Ausgrid energy network in Sydney but prices may vary depending on your circumstances. This comparison assumes general energy usage of 3900kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area and to see other products in our database that may be available. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.
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11% Less than reference price |
$1,614 Price/year (estimated) |
Go to Site |
Here are some sponsored deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Citipower network in Melbourne but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4000kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area and to see other products in our database that may be available. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.
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10% Less than VDO |
$1,304 Price/year (estimated) |
Go to Site |
Here are some sponsored deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from our referral partners†. These costs are based on the Energex network in Brisbane but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4600kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area and to see other products in our database that may be available. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.
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4% Less than reference price |
$1,990 Price/year (estimated) |
Go to Site |
How do I compare block rate tariffs?
Comparing energy offers that feature block rate tariffs can be complicated. While one electricity provider might offer you a low price on the first block of usage, the later blocks may be more expensive. Another retailer’s block rate tariff may be the opposite, offering higher rates on the first block of usage and lower rates on subsequent blocks.
If you’re considering a block rate tariff, you’ll need to factor in your household’s energy usage. If you live in a large household and tend to use a considerable amount of gas or electricity, then you should probably lean towards offers with low prices on the later blocks ‒ this way you’re not penalised for using more energy. In comparison, smaller households may benefit from a plan that offers lower prices on the earlier usage blocks.
Is a block rate tariff right for me?
Block rate tariffs are offered by many natural gas suppliers across most distribution networks. If you live in New South Wales, or are on the AusNet distribution network in Victoria, then you may have the option to choose between a block rate electricity tariff and a time of use/flexible pricing tariff.
Whether or not a block rate tariff will save you money depends on your energy usage. For example, since time of use tariffs impose higher rates during peak hours (usually between 3pm-9pm), a block rate tariff may be more affordable if you use most of your energy in peak periods.
Benefits of a block rate tariff will also depend on your location. A block rate tariff may not be a good option for New South Wales households using very little electricity, as providers charge higher rates for initial usage, then lower for subsequent blocks. However, Victoria’s AusNet Network usage rates tend to start low, and increase with each block. This means these tariffs are potentially more expensive for large households with high electricity usage. Ultimately, you’ll need to consider how you use electricity before deciding if a block rate tariff is right for you. For those who can’t choose their tariff type, remember to compare energy retailers to ensure you’re getting the best deal.
Image Credit: leolintang/Shutterstock
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