Electricity tariff transition picks up pace

electricity meters

The impacts of a 2014 change to the electricity rules intensified from 1 July 2020, with SA Power Networks now applying new Time of Use network tariffs to residential customers with smart meters.

Those customers won’t necessarily see this on their bills, as retailers don’t have to format their retail tariffs the same as the network tariffs. However, the retailers do have to collect the money to pay the bill from the network operator, and the simplest way to do this is to pass the network tariff straight through to the customer.

Several retailers are now offering Time of Use retail contracts to customers, and this may become more common as Time of Use network tariffs become the default for more and more customers. Increasingly, householders will need to understand whether to choose a Time of Use electricity contract, and how to make it work for them.

A new electricity rule requires SA Power Networks (SAPN) to charge for their service in a new way. SAPN bills the electricity retailers for the network tariffs that apply to individual customers. Retailers, in turn, bill the customers, but as they also collect money for wholesale electricity and other costs, the network tariffs are just one component of the retail price, though a significant component.

In South Australia, more than 80 percent of residential electricity connections still have old accumulation meters that are read each quarter, and these remain on the familiar “Residential Single Rate” network tariff. The other 18 to 20 percent of South Australian residential electricity connections now have new “smart” interval meters, which can record the amount of electricity used in each half hour period around the clock. As the meter upgrade project progresses, by 2025 smart meters will be installed in about half of all SA homes.

From 1 July 2021, this type of meter will have “Residential Time of Use” (RToU) network tariffs applied as the default.

SAPN’s Residential Single Rate tariff features a daily supply charge, plus a price per kilowatt hour of electricity delivered to the household. The Residential Time of Use tariff includes a daily supply charge, plus different prices for usage at different times of day.[1]

Both of these residential tariffs can be paired with a Controlled Load tariff, which has previously been called “off-peak” or “J-tariff”, usually for a hot water service on a circuit that can be turned on and off by a timer. This timer-controlled usage has previously been charged at a flat rate (Off-Peak Controlled Load – OPCL), but since 1 July 2020, SAPN has placed all controlled load connections with a smart meter on a new “Controlled Load – Time of Use” network tariff (CL-ToU).

This means that the price of controlled load will vary throughout the day. If their retailer chooses to pass this tariff on to customers, householders may need to ensure that their hot water system heats during the cheapest time of day, to take best advantage of the CL-ToU tariff.

The Time of Use tariff for non-controlled loads will be applied over the next year. During 2020-21, any new (eg new build) or upgraded (eg solar installation) connections will be put on the RToU tariff, though customers will have some options to opt out. SAPN plans to switch all remaining smart meter connections to the RToU tariff from 1 July 2021.

SAPN has a third residential tariff option, the Prosumer tariff. This features a daily supply charge, and time-of-use prices for kilowatt hours used, which are cheaper than those for the regular Time of Use tariff. The Prosumer tariff also features a charge calculated on the maximum flow of electricity, in kilowatts, that the customer uses during peak times.[2] Customers who feel that this tariff will suit them can request it through their retailer; some retailers may use it as the base for innovative market contract offers.

This tariff innovation is a policy response to the trend of households using less and less electricity during the day (partly due to solar panels on so many roofs), but still needing to use lots of power at peak times, such as hot summer afternoons. From an electricity system point of view, this is inefficient, expensive, and makes the system vulnerable to blackout. The aim of the new tariffs is to send price signals to customers so that we will either pay more to use power at peak times, or change our electricity use behaviour and use less when the system is under most strain.

[1] From 6am to 10am and from 3pm to 1am (Peak), SAPN charges for usage at 125% of the single rate price; from 1am to 6am (Off-peak), the price is 50% of the single rate tariff price; and from 10am to 3pm (Solar Sponge), usage costs just 25% of the single rate price.
[2] The maximum flow, or kilowatt demand, is measured between 5pm and 9pm, November to March.

Image: Creative Commons

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