From the latter half of 2013, more electricity customers will start to be offered a choice between flat tariffs and new flexible pricing. Flexible pricing means different rates for electricity at different times of the day. You don’t have to switch to flexible pricing – the choice is yours.
How flexible pricing works
If you choose a flexible pricing offer, different rates will apply at different times throughout the day. The higher rates will be during peak times and the lower rates will be during shoulder and off-peak times. You can pay less for your electricity by using power outside of the peak hours.
The diagram following is an example of a flexible pricing plan. Energy retailers will be able to offer a range of flexible pricing plans.
Facts about flexible pricing
- Changing to flexible pricing will be voluntary
- It will start to be offered from the latter half of 2013
- You can move back to your previous rate structure without incurring an administration fee until March 2015
- You can only change to a flexible pricing plan if you provide your consent
- More details will be provided in the lead up to flexible pricing at www.switchon.vic.gov.au
An example of a flexible pricing plan
Peak: The price of electricity is higher during the ‘peak’, typically on weekday afternoons and evenings, when the demand for electricity is the highest.
Shoulder: The price of electricity is lower than the peak rate and higher than the off-peak rate, when there is a reduced demand for electricity.
Off-peak: The price of electricity is lowest, when the demand for electricity is the lowest.
Flexible pricing is voluntary
You can remain on a flat rate or choose to switch to flexible pricing. You can only change to a flexible pricing plan if you provide your consent.
Deciding whether flexible pricing is right for you
Flexible pricing has the potential to save people money, but will not be right for everyone. Be aware of your energy use patterns. If you use a lot of electricity at peak times and can’t change the times you use your power, flexible pricing may not be right for you.
Changing your mind
Households that switch to flexible pricing can switch back to their previous rate structure with the same retailer without incurring an administration fee until 31 March 2015.
Why flexible pricing is being introduced
To provide you with more choice and control over your power bill. More broadly, flexible pricing provides an incentive to use power at times when there is less demand for electricity, reducing the need for expensive energy infrastructure upgrades – a cost that would be passed on to all consumers.
Research on consumer impacts
A recent study on the customer impacts of flexible pricing found that a majority of Victorians, including single-income households and the elderly, could benefit from flexible pricing without changing their usage patterns. The research also found that many households and businesses stand to save money if they are able to shift some electricity usage to cheaper, non-peak times.
Access to flexible pricing
You will need a Smart Meter to access flexible pricing through a participating energy retailer.
Contact your energy retailer to find out what plans are available to you.
Frequently asked questions
Is flexible pricing voluntary?
Yes. Flexible pricing is voluntary. The choice to switch is yours. Your energy retailer will not move you to flexible rates without your consent.
Can I change my mind?
Yes. Households that switch to flexible pricing can switch back to their previous rate structure without incurring an administration fee until March 2015.
How will I know if flexible pricing is right for me?
Flexible pricing plans have the potential to save people money, but will not be right for everyone – especially those who have high usage at peak times.
You should carefully consider whether you will save money before switching.
Are the new flexible rates higher than the current flat rates?
There will be a mix of low and high rates for different times of the day.
The highest rate - the peak rate - will apply when the cost of delivering power is the highest.
The lowest rate - the off-peak rate - will generally apply overnight.
There will also be a shoulder rate, between peak and off-peak.
This will give consumers the opportunity to save money by shifting the time they use their electricity.
What will the rates be?
This will be a decision for the energy retailers. The energy market in Victoria is deregulated, so the Government does not set prices. Contact your energy retailer to find out the rates and what times they are available to you.
Can you give me some examples of potential savings?
Below are some examples of potential savings if you can switch your major appliance use from a flat rate to an off peak rate.
- Running a typical dishwasher at off peak instead of a typical flat rate could reduce your running costs by $20-$40 a year (assumes daily use, 2-3.5 star appliance).
- Running your washing machine at off peak instead of a typical flat rate could reduce your running costs by $30-$60 a year (assumes daily use, 7 kg, warm wash, 1.5-3.5 star appliance).
- Running your clothes dryer at off peak instead of a typical flat rate could reduce your running costs by over $50 a year (assumes 1.5 uses a week, 8 kg, 1.5 star appliance).
- If all of these appliances were consistently operated at off peak times instead of on a typical flat rate, a household could reduce the cost of using these appliances by up to $100-$150 a year.
I already access peak and off-peak rates: how does it affect me?
Approximately 12 per cent of residential consumers and 20 per cent of small business customers already have some form of flexible rates for their electricity usage. This is in addition to the 20 per cent of Victorian consumers who have peak and off-peak rates for specific appliances such as electric hot water and space heating.
New flexible pricing options will offer more choice to consumers with Smart Meters.
Once flexible pricing is available, it can apply to all electricity usage, not just specific appliances as commonly occurs with peak and off-peak pricing today.
How do smart meters work with flexible pricing?
Smart Meters generate a lot more information for consumers. Electricity consumption readings are taken every half hour instead of 4 times a year and are typically transmitted to your provider around 4 to 6 times a day.
A Smart Meter enables flexible pricing rates. You will be billed based on when and how much electricity you are using.
How do interactive devices work with flexible pricing?
Interactive devices such as web portals and in-home displays will become increasingly available to energy customers.
These tools will provide you with more detailed information about your energy consumption throughout the day, helping you make more informed decisions when considering flexible pricing plans.