What is a tariff?

Tariffs are used by us to work out how to charge you for electricity. They might consider the time of day you’re using electricity or even the time of year. They can be determined by the type of meter you have and where you live.

A tariff can have several parts

Supply charges openclose

A “daily supply charge” covers the cost of sending electricity to your home or business. This is charged regardless of whether you consume any electricity.

Usage charges openclose

The amount you pay for the electricity you consume, typically billed per kilowatt hour (KWh).

  • Single-rate – Some customers will have a tariff where the rate they are billed stays the same, regardless of when they use electricity. Sometimes this is known as a “flat-rate” or “peak only” tariff.

  • Time of use – Customers with a “time of use” tariff get billed at different rates depending on the time of day that they use electricity. During a “peak” time they may pay more than at an “off peak” time. They may even be charged a “shoulder” rate in between these times. These rates and times may vary depending on the day of the week or even the time of year. The aim is to encourage customers to use electricity at times where there’s usually less demand on, and/or more supply in, the electricity grid.

Demand charges openclose

Demand charges are designed to help manage pressure on the electricity grid by encouraging customers to spread their electricity usage, rather than using a lot at a single point in time. We measure customers’ electricity usage over 30-minute intervals, within a defined time band. The interval with the highest usage is used to calculate the demand charge for the month. Some customers will have a “rolling 12-month demand” where we use the interval with the highest usage in the previous 12 months to calculate their demand. These charges often change per season.

Demand charges can be a tricky concept to wrap your head around. Here’s an example of how we do the maths.

It’s worth noting that there’s plenty of permutations in how demand is calculated, depending on your exact tariff, your demand charge might not be calculated this way. But we hope this is a useful example.

1. Look at your usage

We take a look at your usage during your designated demand period (this varies but might be something like 3pm-9pm on weekdays, find yours by looking at your tariff in the letter/email we sent you, but reach out if you’re unsure).

Looking at this designated demand period, we identify the 30-minute interval with the highest usage in the past month (for some tariffs we look back at an entire 12-month period).

As an example, let’s look at a typical energy user named Claire (possibly not her real name):

In May, Claire’s highest usage was 1.8kW (on Sunday 12 May at 6.30pm in the evening)

2. Determine your daily demand charge

We multiply the kW from your highest usage interval (per above) by the demand rate.

Claire’s demand rate is 23 cents.
So, her daily demand charge is:
1.8kW x 23 cents (demand rate) = 41.4 cents

Note: Some customers will have different demand rates set for different periods, i.e. it might change seasonally.

3. Calculate your monthly demand charge

Now we multiply your daily demand charge by the number of days in the applicable month.

In Claire’s case: 41.4 cents x 31 days = $12.83

This monthly demand charge is added to Claire’s monthly electricity bill alongside her supply charge and other usage charges.

Note: For some customers steps 2 & 3 are merged. Some customers will have a demand rate expressed as per month rather than per day, say $6.99 per kW per month. Their highest usage interval, measured within the designated demand period, in the month in kWs is multiplied by this monthly demand rate only.

So, as an example using Claire’s usage, this would be 1.8kW x $6.99 (monthly demand rate) = $12.58 (monthly demand charge).

Claire can reduce her demand charge by trying to spread her energy load more evenly and avoid spikes in any 30-minute intervals during her designated demand period.

Controlled load openclose

Some customers might have a standalone appliance that has its electricity use metered separately to the rest of their usage. This is then billed at a different rate. It’s typically for appliances that might use lots of electricity but don’t need to run all the time, for instance a hot water system or a pool pump.

Solar feed-in tariffs openclose

A feed-in tariff (FiT) is the amount you receive from your power company for the solar power you make and send to the grid. Find out more about solar here.

Why are tariffs changing?

There’s not a short or easy answer here. We hope the info below is helpful in providing you with some context for the change.

Energy distributors and network tariffs

Energy distribution networks are an important part of the system that delivers energy to your home or business. They operate and maintain the poles and wires that transport the electricity to you. The tariffs they charge make up around 36% of the average residential power bill1.

It’s worth noting that these are not always a direct pass through from networks to customers. Retailers like Momentum have control over this. However, Momentum is billed by networks using network tariffs. This means that it often makes sense for us to structure our retail tariffs similarly to networks.

Why is my tariff changing now, in 2024?

In 2024 the distribution networks in NSW reviewed their network tariffs. A process they typically undertake every five years as they prepare what’s known as a Tariff Structure Statement (TSS). Each distributor submits their TSS to the Australian Energy Regulator (AER) for approval. The National Electricity Rules require networks to adjust their tariffs to be more “cost reflective”.

The wholesale price of electricity is set every five minutes and responds to changing supply and demand in the national grid. In the evening, when there are typically lots of customers at home cooking their dinner, watching TV and using their heating, demand for electricity increases. And the price of electricity responds. Conversely, in the middle of a sunny day where rooftop solar panels are working hard, there’s an abundance of electricity being fed into the grid. At this time there’s often less demand too, as many homes and businesses are able to run off the solar electricity that they’re generating themselves.

Over recent years the typical level of demand for electricity, at different points in the day, has changed significantly. Take a look at the chart below which compares typical demand in 2020 to 2023. They look pretty different!

Typical demand for electricity over a day
Source: AEMO Aggregated Price & Demand Data, NSW

What’s changing?

As part of their TSS reviews networks are leaning more to energy tariffs that are more cost reflective, so that electricity is priced differently depending on the time of day, or perhaps the time of year, that you’re using it. This means that networks prefer to see more customers on Time of Use (TOU) tariffs and fewer on “flat rate” tariffs. They have also tweaked the timing under the TOU tariffs to optimise their effectiveness. Similarly, we’re seeing more customers being placed on “demand” tariffs which aim to encourage customers to spread their energy load and avoid spikes in their electricity usage during certain times. These changes are largely reflected in Momentum’s retail tariffs for our customers.

How to make the most of a TOU tariff

If you have a TOU tariff, there are two key things you might want to know:

1. How your tariff works

Are there peak and off-peak times? Do you also have a “shoulder” time (typically between peak and off-peak)? What times do these happen? Do the times change on weekends? Or at different times of year?

You can find a summary of how your tariff works in the letter or email we sent you, underneath the table that lists your new rates and charges.

2. What times you’re using electricity

To understand when you’re using electricity, Momentum’s Power Tool is a useful, well, tool.

It’s a helpful weekly email that shows you when you used electricity and whether your usage changed week-on-week.

Unfortunately, “Power Tool” isn’t available for customers with demand tariffs. However, you don’t miss out entirely. All customers can download their usage data through My Account (go to the Usage tab to check how much electricity you’ve used).

It can be easy to get stuck in the weeds looking at this stuff. And it’s not everyone’s cup of tea. But it’s helpful to get an idea of when you’re typically using electricity. And think about how you might be able to shift your usage to make the most of your off-peak rates or minimise your usage at peak times. We recognise it’s not possible for everyone to shift their usage and that some people have more flexibility than others.

1 36% represents AusGrid Residential Flat tariff without controlled load DMO 2024-25