Understanding demand charges
Some energy companies have introduced plans with new types of charges, called demand charges.
A plan with demand charges will have regular consumption and daily supply charges, but with the demand charges added on top of these.
Demand (which is usually measured in kilowatts, kW) is a measure of how intensely you use electricity at a point in time, instead of your usage over time (measured in kilowatt hours, kWh). Your demand will be high when you have many appliances on at the same time.
Plans with demand charges aim to encourage customers to use less electricity in peak times.
You will need a ‘smart meter’ to be eligible for a plan with demand charges.
Different retailers have different ways of applying demand charges. You can be charged:
- for your highest demand in a period of time
- an average of peak demand over a period of time
- different demand rates in different seasons
Plans with demand charges generally have lower usage rates so they may appear cheaper than plans that don’t, as the annual estimate does not include the cost of the demand component. Keep this is mind when comparing plans on EME - it helps that these plans usually have 'demand' in the name.
While there are a few offers with demand charges available in the market right now, this will grow with the broader roll-out of smart meters in the market.
If you are interested in getting a price estimate for a plan with demand charges, or you have questions on how your retailer will apply these charges – contact the provider for further information.