how is electricity cost calculated

How Is Electricity Cost Calculated And Various Terms Associated With?

Electricity is the driving force that runs economies and our lives, Irrespective of the size. Each economy needs electricity as the catalyst to thrive. We use electricity all the time, from watching TV to charging our smartphones and laptops, lighting our home, and almost everything.

The cost of electricity is bound to increase as the energy demand grows every day with the rapid rise in the population. So, try your best to choose the best electricity provider that offers the best price in your locality.

The energy we use is measured in kilowatt-hours (kWh), with most providers charging between 25 and 40 cents per kWh (Australia), depending on your locality and the best electricity provider.

However, the electricity charges are calculated depending on your country. We will discuss the tariffs and terms used by the best electricity provider in Australia in this context.

When it comes to the cost per unit, the rates vary all across Australia, and the hardest-hit area is South Australians, where the rates are the highest. And adding to the misery, South Australians often miss out on big discounts and bonus perks compared to other parts. The lowest rate of electricity is in Queensland and Victoria.

Also, how you are charged depends on how your meter is set up. Most residential meters are on a single rate tariff, meaning that they pay a single rate for power no matter the time of day that energy is consumed. However, different types of meters also measure your consumption differently.

One thing to note here is that the price that you pay per kWh is only a fraction of your electricity bill. The other biggest contributor to your electricity bill is the supply charge, a daily fee that applies regardless of how much electricity you use daily (Usage Charge). This is because there are several different ways to charge for power.

What do you need to know?

Electricity companies cannot set any rate. They must follow the Electricity Retail Code (the Code). The Code provides retailers with a way by which they can set electricity prices using the ‘reference price’. This makes it easier for the consumer to compare prices and get the best deal.

Off-Peak: It is a type of charge that is low and is charged when the consumption is quite common in the network (Generally Night).

Peak: This is charged when the network has high usage, mainly evening or on weekdays, such as evening or on weekdays.

Controlled Load: Tariffs are earmarked to extensive energy usage devices metered separately to the rest of the property. The most common uses are in hot water systems; however, the customer can add multiple devices depending on the providers.

Shoulder: These rates sit between peak and controlled times. Shoulder rates are usually cheaper than peak rates and are available in most states. For example, in most states, shoulder times are 7.00 am to 3.00 pm and 9.00 pm to 10.00 pm on weekdays, and 7.00 am to 10.00 pm on weekends.

Single Rate: This rate stays the same throughout the day or the year. A single tariff is usually lower than the peak rate but higher than the peak and shoulder hours.

Time of Use (TOU): This is also known as “Peak/ Off-Peak” and is one of the most cost-effective tariffs in most of the Aussie household. This tariff has now been closed to new entrants.


As you can see, many factors are involved in finalizing your total bills. As a consumer, you must understand all the technical terms involved in your electricity bill.

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