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What is a demand tariff?

A demand tariff is a combination of your standard electricity usage charges and a ‘demand charge’ which is charged based on how much load you place on the network during specific peak hours. These peak hours are set by your distributor and represent the times the electricity network is most stressed.

On your monthly bill for this tariff you will see:

  • a demand charge based on your electricity demand (kilowatt or kW) on the network
  • an energy charge for the total amount of electricity used (kilowatt hour or kWh)
  • a daily supply charge

Your meter will take reads every 30 minutes between these peak periods to determine the maximum usage.  The maximum demand for a month is the highest 30 minute demand period in that month. This value is then multiplied by the daily demand charge rate.

We encourage our customers to be aware of the peak demand periods that are applicable to them and know how they can actively lower their energy consumption during these periods to minimise their demand charges.

How is a demand tariff calculated?

Demand tariffs vary dependant on who your local distributor is, with some having varying rates for Summer (December to March) and Winter (April to November).

Your distributor can be found either on the reverse of your bill or accompanying your rates on your demand tariff letter.

As an example, a factories normal operating usage throughout the day is 10kWh. However, when starting up the machinery during peak demand hours, this causes a spike in energy consumption to 15kWh in the 30 minute period. This is the peak demand period of the day and assumed to be the highest half hour peak of the entire month.

To work out the total kW usage in an hour, you multiply your half hourly usage by 2 e.g. 15kWh x 2 = 30kW this is then multiplied by demand charge for each day of the month. E.g. 53.900 cents x 30kW x 30 days in the month will be your total demand charge.

Remember demand tariffs are in addition to your regular consumption and daily supply charges.

What are the benefits of being on a demand tariff?

Demand tariffs are designed to optimise the best use of electricity networks during peak demand times therefore requiring less investment in network infrastructure. Over the long-term, demand tariffs are designed to benefit those customers who do not contribute peak network stress. Conversely businesses consuming high volumes of energy during peak hours contribute to peak network stress will pay more. This is cost reflective tariff pricing was mandated by the Australian Energy Regulator.

What are the disadvantages of being on a demand tariff?

As the demand charge is based on the single highest hourly consumption in a given month, a brief spike in electricity demand can be all it takes to result in a high demand charge to the customer. Demand tariffs are designed to curb electricity usage by overloading the grid at any one time.

Can I opt out of a demand tariff?

Customers consuming >20MWh pa in United Energy, >40MWh pa in Jemena and Ausnet Services,  and >60MWh pa in Citipower and Powercor are mandatorily classified as a demand tariff customer.

Over a 12 month period if you lower your total annual usage below for example 40MWh for AusNet Services you may be eligible to opt-out of a demand tariff. If you believe over the past 12 months you have stayed below your distributors set limit you will need to contact Sumo to request an opt-out.