Types of energy plans explained

Fact Checked

Households can be eligible for different types of energy plans. This Canstar Blue guide discusses fees and charges that may be applicable for each offer.

Shortlisting the right energy deal for households can seem overwhelming, especially when hundreds of plans are on offer. Understanding what kind of contracts, tariffs, fees, charges and options are available can help identify which option offers the best value.

This guide examines different options that can help meet specific household energy needs.

What are the different types of energy plans available?

Two main plan types typically exist for customers to choose from – market offers and standard contracts.

• Market offer: Energy retailers provide this contract usually with bill credits, discounts, rewards programs and other incentives for a limited time. This timeframe is known as a ‘benefit period’ and normally lasts for 12 or 24 months, depending on the plan. Retailers set market offer base rates, which means energy prices can change once the benefit period has expired.
• Standard contract: Standard contracts (also known as standing offers) are government-regulated energy plans. Customers could be on a standard contract if they have never switched retailers or not done so for a few years. These plans usually have less competitive rates than market offers, without benefit periods or customer incentives. Standing offer plans New South Wales, South East Queensland and South Australia are commonly called Default Market Offers, while in Victoria they are known as Victorian Default Offers.

According to the Australian Energy Regulator, most bill payers are on market offers, with around 10% of Australian customers on standing offers.

What is the difference between fixed and variable rate contracts?

Energy plan base rates will either be locked in for a set period of time (i.e. the benefit period) or be variable, meaning they can change at the retailer’s discretion. Fixed rate energy plans are great for customers looking to set and forget. However, you will need to be conscious that once the benefit period lapses, rates may change. Variable rates are usually cheaper than fixed rates, but the downside is that customers will have to keep an eye on energy prices.

How do energy tariffs work and what options are available?

Different from an energy plan, an energy tariff refers to the way in which a customer is charged for electricity or natural gas. These can go from a single rate charge, meaning that customers only pay one price for power, no matter the hour, to multiple rate charges, with customers charged different costs depending on the time of day. Typically, there are four types of gas and electricity tariffs, each of which vary in the way they charge customers for power. Here’s a quick overview of tariffs available:

• Single rate tariff: A single rate tariff means customers pay the same rates for energy regardless of the time of day. Single rate tariffs have no peak or off-peak time periods, meaning electricity consumption will be charged at the same rate all day. This type of tariff is ideal for households that cannot wait until certain times to use power at cheaper rates.
• Time of use tariff: A time of use tariff is a flexible pricing tariff that lets customers take advantage of cheaper rates, depending on the time of day, if there is a smart meter installed. Time of use tariffs consist of three periods – peak, off-peak and shoulder. Peak is the most expensive time of day to use power while off-peak is the cheapest. Shoulder periods are cheaper than peak but not as affordable as off-peak. Depending on the retailer and distributor, these time periods will differ.
• Controlled load tariff: A controlled load tariff is a tariff that charges customers a different rate for large household appliances that are metered separately. Appliances such as hot water systems and pool pumps will usually be connected to a controlled load tariff. Energy distributors are responsible for electing hours of electricity supply for controlled load tariffs, which is usually during off-peak periods.
• Block rate tariff: Block rate tariffs normally apply to gas customers and businesses with large electricity usage requirements. Essentially, a block rate tariff charges one ‘block’ of energy at a certain rate, with each block thereafter typically charged at a cheaper rate. For example, the first block of 30 megajoules (MJ) will be charged at 3.5 cents per MJ (c/MJ), while the next block of 25 MJ will be charged at 3c/MJ.

Keep in mind that not all energy providers offer each tariff type, and location may also dictate whether or not a particular tariff is available to you. Some energy providers may call tariffs by different names. For example, a single rate tariff could be listed as ‘flat rate’, while time of use may be called a ‘flexible pricing’ tariff. Your tariff(s) should be listed on your energy bill.

On a single-rate tariff? Make sure you are still on a good plan and compare against cheap local offers right now.

What energy plan fees and charges could you face?

All energy plans have different fees, charges and rates embedded in them. The good news is that a breakdown of these costs can be found in the energy fact sheets, which all power companies must give customers access to. Here are the main fees and charges to look out for:

• Exit fees
• Connection, disconnection and reconnection fees
• Credit card surcharges
• Paper billing fees
• Post office payment surcharges
• Direct debit processing and dishonour fees
• Late payment fees
• Monthly or annual membership fees.

Can you switch from one type of energy plan to another?

Depending on how frequently you are wanting to change, switching from one type of energy plan to another is typically a fairly easy process. If it’s just jumping between market or standing offers, this can be done by contacting your retailer. This process takes about two business days for electricity plans if you switch to a new provider and about 90 days for natural gas offers.

If you are looking to change energy tariffs this could be a bit more challenging, depending on the type of energy meter installed at your property. If you have a smart meter, you should be able to change tariffs easily as these meters are generally more compatible with flexible pricing tariffs. However, for those with traditional meters it could require installing a new meter to access the new tariff and applicable pricing.

How does a GreenPower plan work?

Most energy providers make clean energy initiatives available to customers who choose to pay a little extra for power. GreenPower is a government program that lets eco-conscious Aussies support investment in renewable energy by paying a small additional cost that is applied to their bill. Depending on the retailer, customers will be able to select how much electricity usage should be invested in GreenPower, usually in increments of 10%, 20%, 50% or 100%. Some retailers may provide this as a unique plan offering, while others have it as opt-in market offers.

Interested in GreenPower? Check out which providers offer these clean energy initiatives with Canstar Blue’s Green Energy in Australia guide.

Can I combine my electricity and natural gas plan together?

Have you ever wondered whether it is possible to consolidate your electricity and gas with one provider? Well, you can. Dual fuel energy providers are a great option for customers wanting to receive power bills from the same company. Not only can this be convenient, dual fuel providers can also offer further discounts for bundling services together. Remember to compare both plans separately first to ensure you still get the best value from your utility services.

What is the best type of energy plan?

The best energy plan for your neighbour may not be the best fit for you. Unless both of you have identical usage habits, you are likely have different needs and budgets. This is where finding a suitable deal becomes easier. Visit the link below, type in your postcode and compare prices in your area.