Reduce your electricity costs

by David Hogg
11th December 2014

NOTICED the hike in electricity bills and the confusing world of solar? The Diary’s DAVID HOGG offers a comprehensive analysis of the current state of play and proves there are ways you can save and reduce your bills.

A COUPLE of years ago, WarrandyteCAN conducted a major initiative to attempt to get an electricity retailer to provide competitive pricing for Warrandyte residents.

Alas, the task was too difficult and has become even more so since then, with new retailers springing up and a price war that is centred around how big a discount they’ll give you rather than on the bottom-line price you’ll pay.

The discount means nothing unless you know the price. The newer retailers tend to come in with low prices to corner the market, then raise them considerably during or after the first year.

At that same time they introduce a new product that is still competitive, but leaving their existing customers stuck on the old and now-expensive product. So, last year’s bargain is not necessarily this year’s continuing good price.

As with car and house insurance, it really pays to shop around every year. Few can be bothered to do this.

Perhaps the biggest killer in your electricity bill is the so-called service or supply charge which can vary between retailers from $1 to $1.50 per day, which means you can be paying over $500 a year before you’ve consumed any electricity at all. The other charges relate to the electricity you actually use.

Most Warrandyte residents will by now have smart meters. These are now read online and are available for you to read online through the portal at myhomeenergy.com.au.

The best tariff, which hopefully most readers are on, is the “Time of Use” also known as “Peak/Off-Peak” tariff.

This provides for peak time electricity at anywhere between 25 and 45 cents per kilowatt hour, and offpeak rates from 12 to 20 cents. The peak tariff applies between 7am and 11pm AEST weekdays only, so your weekend electricity is at a much cheaper rate. Note, however, that your meter does not know Daylight Saving, so currently the cheap rate runs from midnight to 8am.

Nearly all retailers offer a discount, but again beware: with some retailers the discount applies only to the consumption but not to the service charge, whereas with others it applies to the whole bill. Most retailers give the discount off the bill in question, but a few treat it as a discount for prompt payment and apply it to the next bill. With the latter, you’ll find it difficult to get the last discount back if you change retailers. I have developed a spreadsheet with the latest tariffs, discounts and billing methods for each supplier and it is interesting to note the differences in prices.

The government website energymadeeasy.gov.au suggests that the average yearly consumption of electricity by a family of four people in postcode 3113 is 6617kWh per year. Using this, and making various assumptions… that you have no solar panels, you are on the peak/ off-peak tariff, no concession, have overnight electric hot water heating, maximum discounts and consume 2558 kWh per year peak, and 4059 kWh off-peak, then as at December 2014 your annual total electricity bill would be with each retailer as
indicated in the table below left.

Looking at this table, you may consider changing retailers; but there are pitfalls. Even though our meters are no longer “read” by a meter reader, Ausnet Services (previously SP-Ausnet) still use a notional “date of next meter reading” at three-monthly intervals, and your change of retailer does not take effect until the next quarterly date.

Add to this a couple of weeks for paperwork to progress through the system, and a further 10-day cooling-off period, and it can be anything from one to four months before you will actually change. By then, the prices may have changed again.

This is a volatile market. It may also be worth researching whether your prospective new supplier’s customer service desk speaks a language you understand.

Some retailers may lock you into a two or three year contract. This is not a problem as the fees for breaking the contract are small, usually in the range of $20 to $40.

Tips for non-solar users:

If your retailer is one of those in the bottom half of the table, or if your bill is considerably higher than in the table, ring them and tell them you’re considering changing supplier. Ask if you’re on their best plan and suggest that they offer you a better deal. They may well do this.

Your retailer may give you a slightly bigger discount if you elect to pay automatically by credit card or direct debit, or if you elect to receive your bills by email, or if you are an RACV member.

If you are a concession card holder, tell your retailer and you’ll get a useful government rebate.

If your washing machine, clothes dryer or dishwasher has a “delayed start” function, consider running it after midnight or before 7am during the week.

If you have a pool pump, put it on a timer and operate it at night for filtering.

Do not be persuaded to change to a “Flexible Pricing” tariff in which you have three rates – Peak, Shoulder and Off-peak – with some seasonal variations and differences at the weekend, unless you have really researched your usage. I have yet found an instance where “Flexible Pricing” would be cheaper than “Peak/Off- Peak” in a residential situation.

Think very carefully before you consider putting in solar panels; you’ve missed the boat. They’re paying you 6.2 cents for the electricity you sell them and charging you 18c at night and 30c or more during the day to buy it. It will cost you $6000 to $10,000 for a 4kW system installed, and you’ll be saving some $400 to $600 per year in bills at current rates with no guarantee of future pricing, making a 10 to 18-year payback period.

For concession card holders, there are two Victorian government concessions that apply. These have both been quietly watered down in the past 18 months. The “Annual Electricity Concession” now gives you 17.5% discount off the consumption and service components of your bill after discounts have been applied and any solar credits deducted, and excluding the first $171.60 (the Carbon Price Threshold) of billing in any year. The “Service to Property Concession” is only good for grey nomads or those who are away from their property for most of a billing period, and pegs the service charge for that bill to be no more than the consumption charge.

Now we’ll look at the rates for those with solar panels, and here is a right old muddle. Those people with foresight who installed their panels before 2012 receive the premium feed-in tariff (PFIT) for electricity they export to the grid at the rate of 60c per kWh guaranteed until November 1, 2024. Those who installed panels in 2012 receive the transitional feed-in tariff (TFIT) at 25c per kWh until the end of 2016.

Those who installed after 2012 would have benefitted from the falling price of purchase and installation, but get bugger all for their electricity export, currently 8c per kWh (FIT) dropping to 6.2c from January 1 next year.

Some retailers claim that they “top up” the government rates by an extra 6 to 10 cents, but often this is a smokescreen. The catch used to be that you get the promised discount off the whole bill, “not just the consumption like other retailers but with us, madam, it’s off the whole bill so it includes the service charge as well”.

Yes, but what he fails to tell you is that the “whole bill” also includes your solar credit which they’ll deduct before they apply the discount, so you’re not getting the implied benefits at all. Recently they’ve changed tack. The latest scam is that the discount plan offered by some retailers (three at the current count) in advertisements does not apply to customers with solar power; they get a very reduced discount on their consumption or none at all.

I have run the spreadsheet again for those with solar export. Again it makes various assumptions – that you own a 4kW solar system, it generates 5300kWh per year of which 1800 is used in the home and 3500 exported to the grid, you purchase 1817 kWh peak and 3000 off-peak from your retailer, and other assumptions as before. Then at January 2015 your annual total electricity bill would be with each retailer in the table below right.

Tips for solar users:

Most of the tips for non-solar users above apply.

If you are on the PFIT or TFIT, try to run as much as possible at night or weekends. It’s better to export during the day and get paid 60c or 25c and then buy it back at night at 18c. The reverse will apply when your tariff expires at the end of 2024 or 2016 respectively; then you’ll be better using your solar to power the house during the day If it’s not in the fine print, check whether they are giving you the promised discount on everything you buy from them, or whether they are deducting your export refund first.

Check that the discount you expected actually applies if you have solar.

Finally, remember that this is a rapidly changing market, and that prices and tips quoted here can be out of date very soon. It pays to compare prices annually.