With more and more smart meters being installed across the country, an interest has been piqued around the use of flexible pricing or time of use tariffs. With electricity available at a cheaper price throughout certain times of the day, it seems a no-brainer to switch over. But is jumping to a time of use tariff truly cheaper than staying on a single rate tariff?
Canstar Blue has crunched the numbers to find out whether or not a move away from single rate tariffs could help consumers save, or prove a costly mistake.
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What is the difference between a time of use and single rate electricity tariff?
The main difference between a single rate and time of use tariff is around the amount that is charged for electricity throughout certain times of the day. With a single rate tariff, households are charged the same rates for power regardless of the time of day they use it. However, time of use tariffs see customers charged different rates depending on the time of day they consume energy.
Lower rates are generally charged during off-peak hours on a time of use tariff, as these hours are typically when there is less demand on the grid. It is important to note that in order to gain access to a time of use tariff, households will need to have a smart meter installed at the property. Single rate tariffs can be used on either a traditional or smart meter.
When are peak and off-peak electricity times?
Peak and off-peak electricity times will generally differ between the states and territories, however, as a general rule of thumb, off-peak times will operate between 10pm to 7am weekdays and weekends, while peak times are from 2pm to 8pm weekdays. Households may also be also charged ‘shoulder’ rates for times in between peak and off-peak.
Some states may also offer a transitional time of use tariff too, in which case, peak and off-peak electricity times vary across the summer and winter months.
Time of use vs single rate electricity tariff: Which is cheaper?
In order to calculate time of use tariff costs, Canstar Blue has made assumptions based on average families who manage to use 30 per cent of their energy during off-peak times. The remaining usage is split between shoulder periods (30%) and peak periods (40%). These are average single rate and time of use plan costs based on five prominent energy retailers – AGL, Origin Energy, EnergyAustralia, Red Energy and Alinta Energy.
NSW Cost Comparison: Time of Use vs Single Rate
| Tariff | Average Single Rate Cost | Average Time Of Use Cost |
|---|---|---|
| Quarterly Bill | $453.43 | $520.62 |
Quarterly bill for average five person households on the Ausgrid network in NSW before any conditional discounts are applied. Calculations based on 18.8 kWh daily usage. Where only transitional peak and off-peak times were available, summer rates were assumed. A quarter billing cycle has been assumed as 90 days. Accurate as of April 2022.
Our calculations suggest that an average NSW household consuming 30 per cent of its total electricity usage during off-peak times will be around $68 worse off per quarter than if they were on a single rate tariff. This is largely due to the fact that retailers charge around 45c to 50c per kWh at peak demand periods.
It would take a considerable shift in energy usage habits for a NSW household to start seeing a change on their bills with a time of use tariff. Even by adjusting their off-peak usage up to 40 per cent and decreasing peak and shoulder usage to 35 and 25 per cent respectively, our calculations show that the difference between these tariffs would still be at least $43 a quarter, with time of use tariff remaining the more expensive option.
QLD Cost Comparison: Time of Use vs Single Rate
This cost comparison for south-east Queensland follows the same assumptions as mentioned above, however, it only uses pricing from four of the retailers; AGL, Origin, Red Energy and Alinta Energy. EnergyAustralia has been excluded from this price comparison as it does not currently offer a time of use tariff in QLD.
| Tariff | Average Single Rate Cost | Average Time Of Use Cost |
|---|---|---|
| Quarterly Bill | $403.70 | $430.46 |
Quarterly bill for average five person households on the Energex network in QLD before any conditional discounts are applied. Calculations based on 18.8 kWh daily usage. Where only transitional peak and off-peak times were available, summer rates were assumed. A quarter billing cycle has been assumed as 90 days. Accurate as of April 2022.
Similar to NSW, our calculations show that QLD households that use 30 per cent of their energy usage during off-peak times would be paying around $27 more a quarter, on average, than if they were to stay on a single rate tariff.
But can changing their energy habits help reduce this gap? According to our calculations, even by increasing their off-peak electricity usage to 40 per cent and dropping peak usage to 30 per cent, QLD households would still be paying around $16 more a quarter. A larger shift in energy usage, to say 70 or 80 per cent spread across off-peak and shoulder times, may assist Queenslanders in making the most of their time of use tariff, but whether or not a household can afford to transition their usage this drastically could prove a barrier.
SA Cost Comparison: Time of Use vs Single Rate
| Tariff | Average Single Rate Cost | Average Time of Use Cost |
|---|---|---|
| Quarterly Bill | $609.91 | $520.07 |
Quarterly bill for average five person households on the SA Power Networks network in SA before any conditional discounts are applied. Calculations based on 18.8 kWh daily usage. Where only transitional peak and off-peak times were available, summer rates were assumed. A quarter billing cycle has been assumed as 90 days. Accurate as of April 2022.
Unlike the states above, households in SA may benefit from switching to a time of use tariff, with an average saving of nearly $90 a quarter for those on this type of tariff. This is largely due to the fact that South Australia electricity usage charges are some of the highest in the country and time of use tariffs offer significantly cheaper rates during off-peak and shoulder period than those seen on single rate tariffs.
It should be noted, however, that South Australians have some of the longest peak periods available on time of use tariffs, generally running from 12am to 1am, 6am to 10am and 3pm to 12am every day. While the calculations for this comparison show that savings can be had for using just 40 per cent of your power during peak times, this means that 60 per cent of the usage will need to be done during off-peak and shoulder times, in this instance, between 1am and 6am or 10am and 3pm. These times may not be viable for all households and should be taken into consideration before signing up to this kind of tariff.
VIC Cost Comparison: Time of Use vs Single Rate
The situation in Victoria is a little different to the other states. Smart meters should now be found in all homes across Victoria, so energy retailers have had time to refine their time of use tariff structures and prices. Time of use tariffs in Victoria do not have a shoulder period (unlike flexible pricing tariffs), only peak and off-peak, with peak times running from 3pm to 9pm weekdays, and off-peak rates applying at all other times.
Assuming a Victorian household with a time of use tariff splits its total electricity usage 40 per cent/60 per cent across peak and off-peak times respectively, we’ve calculated the average costs per quarter for a time of use tariff and a single rate tariff. In this scenario, we have used the same five retailers as NSW and SA.
| Tariff | Average Single Rate Cost | Average Time of Use Cost |
|---|---|---|
| Quarterly Bill | $430.41 | $435.30 |
Quarterly bill for average five person households on the Citipower network in VIC before any conditional discounts are applied. Calculations based on 18.8 kWh daily usage. A quarter billing cycle has been assumed as 90 days. Accurate as of April 2022.
While there is only a small difference per quarter between the two tariff types in Victoria, it still appears that time of use is the more expensive of the two, by about $6 on average. If Victorian households could adjust their usage to a 30/70 ratio for peak and off-peak respectively, they may be able to cash in on some bill savings on a time of use tariff, however moving this much usage during off-peak times may not be a sustainable option for some bill-payers.
How can I get the most out of a time of use tariff?
For a time of use tariff to truly have any kind of impact to your household energy bills, you’ll need to drastically shift your energy habits. As the calculations above reflect, at least half, if not more of your energy usage will need to be throughout off-peak or shoulder periods in order to see a change in electricity costs.
This could mean utilising things such as solar panels or a battery, which allow you to generate and store your own energy for use in the home as you please. With this option on hand, you could choose to save your solar power to use in peak times, and only use power from the grid during cheaper, off-peak periods.
If you are determined to be on a time of use tariff, you may also find that a power consumption meter or energy monitor could assist you in keeping an eye on your energy usage. With one of these devices, you can detect when and where you are using the most energy, which could help you with adjusting any habits to better suit your tariff – e.g. you may find that running the washing machine in the evening is costing you miles more than if you were to use it in the early morning.
Should I sign up to a time of use tariff?
Whether a time of use tariff will suit your household depends entirely on energy usage and habits. For larger households with high energy consumption or those that are only using power during the early evening, a time of use tariff may not be best fit. But, for those who consume the majority of their power during the day or have the ability to utilise stored solar power with the help of a battery, there may be some bill savings to be had on a time of use tariff.
Keep in mind however, that simply switching to a time of use tariff unfortunately won’t help you to reduce your energy bills, especially if you are still using most of your electricity during peak times. You’ll need to keep an eye on your usage and ensure your energy habits align with the cheaper times of your tariff.
No matter the tariff you are on though, it’s always a smart move to regularly compare plans, providers and prices in your area, just to ensure you are still getting a good deal on electricity. If you haven’t had a look in a few months, head to our free comparison tool below and check out what the current hot offers are in your state. Just click the link, type in your postcode and you’re good to go!
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