What Is a Demand Tariff?

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How are demand tariffs different from regular tariffs?

How do demand tariffs work?

How is a demand tariff calculated?

Will my electricity plan come with a demand tariff?

How can I save money on a demand tariff?

Where can I find and compare electricity plans?

Long story short

Demand tariffs base charges on your peak usage

Unlike flat rate or time-of-use tariffs, demand tariffs charge you based on your highest electricity usage at a certain time of day.

You need a smart meter for a demand tariff

To get a correct reading on your peak usage, you’ll need a smart meter that can record your energy usage every half hour.

Managing your usage can help lower costs

Doing things like running appliances individually instead of all at once can help spread out your usage and reduce demand charges.

How are demand tariffs different from regular tariffs?

Regular tariffs (like flat rates or time-of-use tariffs) are pretty straightforward; you pay for the amount of electricity you use. Simple. But demand tariffs take things to the next level by looking at how hard you hit the grid at a certain time, like if you’ve got multiple appliances running at once. Put simply, it’s a charge for the demand you place on the grid, particularly at peak usage times.

The idea behind it is twofold. Help the grid handle big surges at demand times without breaking a sweat, while getting everybody using electricity more consistently outside of peak times.

Demand tariffs can take a few different shapes, though. For instance, your electricity retailer might charge you a daily rate using your highest demand in the year, month, or day. Or your demand charge might be based on your average electricity demand, rather than just the most intense day when you forgot to turn the air con off. Your energy bill tariff might even have different rates based on different seasons.

How do demand tariffs work?

On your typical electricity bill, you’ll find two types of charges: supply and usage. Supply charges are a fixed daily rate for keeping your place connected to the grid. Usage is, as you might have guessed, a rate for how much electricity you’ve used. With demand tariffs in play, you’ll also see a demand charge listed.

How you use electricity in peak demand windows, like between 5 and 9 pm for Ausgrid customers, affects your demand charge. Just picture this: you get home from work, crank on the air conditioner, fire up the oven and chuck on Netflix while you have a shower and blow-dry your hair. That’s a serious spike in your electricity use that could set your demand charge for your bill. And even if you reduce it later during that peak demand window or in off-peak periods, the damage could already be done. Which means your bill could see a spike.

This means you could be better off taking things slow and using only one or two appliances with good energy ratings at any given time. That way, you won’t risk pushing your peak usage volume higher than your BBQ’s heat at a summer barbie. 

FYI: The timing of your peak demand window is something that your distributor will make a call on. It can also shift depending on the season, like between summer and autumn, as the aircon goes off and the jumpers come out. So make sure to check in with your electricity network.

How is a demand tariff calculated?

In most cases, your demand electricity tariff charge is based on the highest peak of your energy consumption during a billing period. When it comes to the total amount on your bill, your demand charge is calculated by taking the maximum usage amount, calculated in kilowatts per hour (kWh). It’s then multiplied it by your demand rate and applied to the total days in your billing period.

To make this less like a maths exam, let’s meet our two fictional friends, Lettie and Jack. Both are with the same provider and on the same demand tariff energy plan. Lettie spreads her energy usage throughout the day, setting her dishwasher, washing machine, and other big-ticket items all at different times. Jack, on the other hand, is an all-in-one type of guy. He comes home and turns on his aircon, oven, washing machine, pool pump, and TV all at once. This is how their demand tariff charges could look.

Helpful tip

Demand tariffs generally measure your energy usage in 15- or 30-minute blocks. So, if you’ve got a list of things to do after work, like cooking dinner, setting the washing machine or the dishwasher, try spreading them out so they don’t overlap in the same 15 or 30 minutes. That way, your peak demand stays lower, and so does your bill.

Julia Paszka

General Manager – Utilities & Credit Cards

Will my electricity plan come with a demand tariff?

As you’re comparing electricity plans, you may find that some come with demand tariffs. You could also find that your distributor (not your retailer) might make the call and put you on one. There’s always the option to put your hand up and ask to join the demand tariff bandwagon.

Whichever side of the fence you sit on when it comes to these tariff types, be aware that you’ll need a smart meter to make it all work.

How can I save money on a demand tariff?

A demand tariff is never just going to pop a discount onto your electricity bill – no tariff does. But it could help you save money in a couple of different ways, like:

Where can I find and compare electricity plans?

If a demand tariff sounds right up your alley or you’d rather give them a miss, iSelect can help you compare a range of electricity plans from different providers. For an easy DIY approach, you can use our online comparison tool or, for the human touch, you can call our Australia-based Energy comparison experts on 1800 664 532.