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Time of use energy tariffs: do they really stack up?

26 May 2017

New South Wales households looking to reduce their energy bills by using power at off-peak times may want to think again, as research from Canstar Blue suggests that time of use electricity tariffs could prove a costly mistake.

With more and more households across the state able to access time of use pricing tariffs amid the continued rollout of smart meters, Canstar Blue decided to crunch the numbers to find out whether or not a move away from single rate tariffs could help consumes save.

With a single rate tariff, households are charged the same rates for power regardless of the time of day they use it. However, time of use tariffs see customers charged different rates depending on the time of day they consume energy. In NSW, lower prices are charged at off-peak times (i.e. from 10pm to 7am weekdays and at weekends), while higher prices are charged during peak times (i.e. from 2pm to 8pm weekdays). Households are also charged ‘shoulder’ rates for times in between peak and off-peak.

The idea is that, if consumers switch their energy consumption habits to off-peak times, they stand to reduce their overall energy costs. However, with peak time prices up to four times more expensive than off-peak rates, even consumers who manage to significantly change their usage habits may still be worse off, Canstar Blue has found.

Calculating average single rate and time of use tariff costs on the Ausgrid network in NSW, the research found that households could be left paying close to $400 a year more with the flexible pricing option. This would come as a huge shock to customers if they switched to a time of use tariff with the aim of lowering energy costs.

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