What you need to know about electricity prices
Congratulations! You’ve just taken the first step towards understanding electricity prices, which means you’re getting closer to your ultimate goal of slashing your energy bills.
You may have already noticed that your electricity bill is made up of two costs - the supply charges and the usage charges. Here’s a quick look at what they stand for and how you can control them.
Usage charges are easy to understand because as the name suggests, it’s the price you pay for every unit of electricity you use. It is generally mentioned on your electricity bill as cents per kilowatt hour (c/kWh). So say, you pay 24 c/kWh under your electricity price plan, and you use an average of 10kWh of electricity every day, your daily usage cost would be about $2.4.
Depending on the kind of electricity price plan you’re on, this cost could also be split under different bands. For example, if you’re on a time of use tariff, instead of one blanket usage cost, you will be charged different rates for using electricity during peak, shoulder and off peak time slots.
How to slash your usage charges:
- The most obvious way to reduce usage costs is to control your consumption. You can use our energy saving tips to find easy ways to cut down on electricity usage at home.
- You can opt for an energy plan that comes with a good discount on usage charges if you pay your electricity bill on time or set up a direct debit account.
- You can choose a flexible pricing plan that lets you pay less for using the bulk of your electricity during off peak times.
Supply charges refer to the fixed price that you have to pay for getting electricity supplied to your home, no matter how much electricity you use. Since this cost depends on the distributor that’s responsible for transferring electricity to your home, and not the energy provider, this component of electricity prices is not generally flexible.
This is charged as cents per day or dollars per billing period. So say your energy plan comes at 75 cents per day as service fee, you’ll have to pay $88 per quarter even if you’re away on a holiday and don’t use any energy at all. That’s why it makes sense to look for an electricity price plan that comes with a low supply charge, especially if you don’t use much energy.
How to control your supply charges:
- While many electricity discounts are applicable to usage charges only, there are energy providers that also extend these offers to supply charges. That’s why, when you’re comparing energy plans make sure you check what the discount exactly is - a 10% discount on usage and supply charges can be better than an 18% discount on just usage charges.
- If you can’t find a great discount deal, you can switch to an energy provider that offers low supply charges. Use Mozo’s free electricity comparison tool to look for the cheapest power plans for your home.
Electricity pricing overview
To understand the breakdown of electricity prices a little better, let’s take a quick journey through how energy travels from a power station to your home. Here are the different stages and costs that add up to the final electricity prices you pay:
|Wholesale electricity prices.||Network costs.||Service costs.||Other costs.|
|Power generation companies produce electricity at power stations. Energy retailers then buy this electricity from power generators at wholesale prices.||Energy distributors like Ausgrid and Powercor are responsible for transferring this electricity using poles and wires into your home. The cost for moving energy is added to the overall price of electricity.||Energy providers like EnergyAustralia, Red Energy and Dodo Power & Gas then sell you electricity through different energy plans and they charge retailing costs for services like billing, administration and customer service.||Electricity prices can also include other charges like an additional fee for green power.|