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The way we pay for electricity is changing - Demand Tariffs

The way we pay for electricity is changing. Now more than ever before, your behavior when using appliances in the home could have you paying a higher price for electricity.  Not to worry, LPE is here to help by explaining how these new changes work and how you can avoid higher bills with this change.

What’s happening?  

Demand Tariffs are being introduced to those homes with smart meters. This is happening across all electricity providers, not just LPE.   

What is a Demand Tariff?  

A demand tariff is a pricing structure that includes a ‘demand’ charge for your use of the electricity network.   

Demand tariffs have been designed (by electricity distributors) to encourage households and businesses to use less electricity during peak demand times when there’s more pressure on the electricity grid.   

 You need a smart meter to be eligible for plans with demand charges.  

How Demand Tariffs work and how are they different to standard tariff electricity plans?  

Normally, electricity costs are based on the following charges:  

Supply charges – a flat daily cost charged by your distributor to get electricity to your home or business, and for the maintenance of poles and wires.  

Usage charges – the total amount of electricity you use over the billing period (often with different rates for peak, shoulder, and off-peak periods), with rates charged per kWh of electricity used.  


If you’re on a demand tariff, your bill will also include an additional ‘demand’ or ‘capacity’ charge. This demand charge is based on your maximum highest electricity usage between the peak times 4 pm-9 pm weekdays (measured in 30-minute blocks).  The peak usage resets each month, meaning you only need to hit your peak once for that demand rate to apply every day for the entire month.  


This means that your bill charges are influenced not only by how much electricity you use overall but also by the highest power ‘demand’ you put on the electricity network during these peak times.   



Basically, if you turn on lots of devices - (the TV, washing machine, dryer and dishwasher) within a 30-minute period during 4pm to 9pm, your ‘demand’ will be high. And if you’re on a demand tariff electricity plan, so will your charges.  

In short, the key is to spread your electricity usage over time, rather than all at once especially between the hours of 4pm and 9pm.  


Saving money on Demand Tariffs 

You can avoid high demand tariff charges and save money on your bills by understanding when and how your home uses electricity.   

The easiest and quickest way to do this is to ensure that you aren't using all your appliances between 4pm and 9pm.   

You can save money by lowering your electricity demand during the busiest times in two ways:  

1. Taking turns with appliances   

By taking turns with some appliances, rather than running lots of appliances at once, you can avoid high demand peaks during any 30-minute block. For example, running your clothes dryer outside peak times or after cooking dinner rather than using your cooktop and clothes dryer at the same time. 


2.Change the time you use appliances to avoid peak times   

Another way to avoid high peaks in demand is to change the time you use your appliances. Use your appliances outside the peak demand window when the demand charge isn’t being measured. For example, running your dishwasher, clothes dryer or pool pump overnight or during the morning.   



Demand tariffs can save you money if you don’t use much electricity between the hours of 4pm and 9pm on weekday when the demand charge is measured.  


For more information see our FAQs.