Let’s simplify electricity tariffs so you can understand how energy is billed.

All you need to do is:

• understand how peak and off-peak periods work;
• understand the four main types of electricity tariffs and which is available to you; and
• if possible, alter your consumption of energy around your specific tariff type.

What is peak and off-peak electricity?

In the energy sector, peak, off-peak and shoulder periods refer to times of day, or days of the week, where energy consumption varies based on demand. In peak periods, retailers charge a higher rate. In off-peak periods, they charge a lower rate. The shoulder period typically sits somewhere in the middle.

• Peak. Usually during the evening and pre-work/school-run rush in the morning when nine-to-fivers are home.
• Shoulder. The times between peak and off-peak.
• Off-peak. Generally late at night and early in the morning, or on weekends, when businesses are shut and most people are asleep.

What is an electricity tariff?

Your tariff determines how you get charged for electricity usage. Generally, you don’t choose your electricity tariff, as it’s already determined by the wiring of your home and meter type.

Here are four common types of electricity tariffs in Australia:

• Single rate tariff. Also known as a peak only or standard rate, a single rate tariff is a flat rate with no off-peak periods. Typically, the most common tariff where customers are charged the same rate regardless if it’s day or night.
• Time of use tariff. This tariff is where peak, off-peak and shoulder (in most states) enters the game. Like a train ticket, you’re charged different prices at different parts of the day or day of the week. Retailers set the times that constitute these periods.
• Controlled load tariff. Often called a ‘dedicated circuit’, this tariff only applies to large electrical appliances like an electric hot water service, floor heating or running a pool pump. Controlled load tariffs are usually cheaper because the appliances can run at off-peak times.
• Demand tariffs. An extra charge on top of usage and supply charges, a demand tariff accounts for how intensely you use electricity in a given period. A tariff for heavy users, it encourages people to use their appliances during off-peak times. Retailers calculate demand charges differently. For example, some charge based on the highest usage in a period of time while others charge an average of peak usage over a set timeframe.

N.B. For solar customers, there’s the solar feed-in tariff which actually pays you for excess electricity to put back into the grid.