We joined Red Energy because of its “green” reputation. We have solar battery and EV.
On each bill there is a charge called “Demand”. I called them to ask what it was and was told that it isn’t exactly for anything - it’s a tariff applied because they can. I asked if it was to make extra money by taking a bit extra from customers and was told “yes”.
This is not just unfair - paying money to a company for no service or reason - but it must contravene consumer laws.
Can anyone help?
Welcome to the community @LindaShields.
It is lawful and such fees have been approved by the Australian Energy Regulator.
This website explains what Demand Charges are:
https://www.energy.gov.au/solar/financial-benefits-solar/electricity-pricing-plans-and-tariffs
namely:
Demand charge tariff
Some pricing plans include a demand charge added to a flat or time of use tariff. A demand charge is based on the highest amount of power drawn from the grid at any time (called the peak demand) – for example, when you are running many appliances at once.
This type of pricing reflects the additional cost of building and maintaining a larger grid that can supply customers that use a large amount of electricity at any time.
Demand tariffs take different forms. For example, you may be charged a daily rate based on your highest demand in the year or in the month, or for your highest demand during peak periods only.
Demand charges are included in some residential plans and are common in small business plans.
With a demand charge, your bill can be kept lower if you keep your usage fairly consistent, without big spikes.
Demand charges should have been outlined in PDS/Critical Information provided in information about the electricity plan you have agreed to take on.
Welcome to the Community @LindaShields,
In addition to @phb’s post, the demand tariff has been discussed in a topic started by Choice.
Red’s ‘explanation’ is in this page.
So, in summary, you should be looking to see whether there is a better plan to move onto (one that is not subject to a demand charge and which overall will give you a better result) or, failing that, move on to a different electricity retailer.
If you find out the peak times for your supplier (they will have times somewhere in your contract), you can use your solar panels and battery to lower your usage during those peak periods. Lowering your usage during these peak periods will lower the demand pricing you pay.
While I am not on a demand tariff, I work with my battery settings to reduce my peak usage to the lowest possible amount. My washing, dishwasher, cooking times are all made to try and fit in with my solar generation. Then in the peak period, I use the stored battery power to reduce the demand on the grid to a minimal amount. This doesn’t always work out, my battery tends to keep the period from around 4pm to 9pm to about 2.0kW per hour. During solar generation we are using about 6 to 7 kW per hour (almost everything is met by panels during this time unless cloudy or raining).
I think in the future most if not all suppliers will move to demand tariffs. Getting our household used to this now, helps prepare for that future. Using timers to heat water during sunlight hours, using delay timers on washing (and dryers if necessary), setting the dishwasher to wash during daylight hours, ironing during the day, all these things help to reduce peak hours usage.
“Peak demand” is different from “demand during peak period” though.
You can juggle things around, if your lifestyle allows it, to manage either one of those but you have to know which one you are trying to optimise for.
I am not sure how successful that will be. Demand Charge Tariffs are set by the network distribution operator and not the retailer:
This means that the demand charge tariff will apply to electricity usage, irrespective of the electricity retailer.
The only avenue is if the distribution network operator allows some plans where the demand charge tariff isn’t applied. If these exist, it is likely the network charges for each unit of electricity consumed is higher than outside periods when demand charge tariffs apply for plans containing demand charge tariffs. Depending on one’s electricity use profile, one could be worse off for switching plans to avoid demand charge tariffs.
Indeed. Hence one needs to get a “better result overall”, with either changing plans or changing provider. But if you don’t even look then you are allowing yourself to be subject to the “loyalty tax” (more like laziness tax).
So between juggling your own times of use and potentially reducing your usage and looking at all the plans of all the providers … it’s a right confusopoly.
A poor response from Red Energy if that is all that was offered. We’ve an electricity plan (Cost Reflective Tariff) which includes a demand charge, urban Brisbane. Energex is the Distributor and AGL the retailer, NEM regulated. There are two major differences between the tariffs for the Demand based tariff plan and the alternatives.
The first is the cost or base rate tariff for the measured consumption/usage as metered. For a demand based plan to be worthwhile the rate applied must be at a substantial discount to the alternative tariffs available. Hence one has the possibility of paying less than on any other plan.
The second difference as noted in the previous posts is the demand charge. It’s a seperate premium added to the cost of electricity supplied (typically) in the evening peak period. Hence if one can manage and minimise electricity purchase from the grid in that evening peak period it can save the customer compared to any other alternative, due to the lower rate used for the total metered use/consumption. It is however similar to “snakes and ladders” in that the added cost of the demand charge can exceed any savings from the lower cost in the base rate tariff.
For anyone with solar and a battery the opportunity as previously suggested is to time shift when one uses solar PV. There is also the ability to top up the battery at the lower rate during the day when solar PV output is not adequate to minimise the need to purchase electricity during the evening peak period.
The current tariff with peak demand charges works for us because we have good solar PV most days and minimal demand in the evenings. We use the AC to cool the home during the day, turning it down - low power/idle (Inverter Technology) in the evening once the sun is gone. The HWS, oven and stove are NG. In most all electric homes these account for a significant portion of the evening peak demand. Our primary electrical demand in the evenings are for TV, fridge and short periods of use of the microwave, hence power demand is low.
There is a caution if one does not understand how the tariffs apply. Currently the NEM and distributors mostly follow the historical determination of peak demand. It’s applied based on the highest measured demand on any one day in each month. The charge is subsequently calculated as applying to every day in the month. One needs to manage every day with the same attention.
Agree - as in a recent review of our electricity supply agreements the retailed recommended moving off our current plan. This was based on advice of the annual savings of changing to the alternative of $100’s. Unfortunately the advice was based on a comparison based on the default consumption and demand used by the NEM for our region. Hence the savings were not reflective of our actual consumption over the previous 12 months or knowledge of solar PV export and peak usage patterns. A caution when dealing with any retailers advice and estimates. To be reliable any assessment of savings must be determined from one’s actual consumption from recent billing. This needs to include a correct assessment of consumption by time of day if one is looking at a cost reflective ToU (time of use) or Demand based tariff plan.
Red uses peak hours for determining the demand pricing, it just isn’t clear from what I read on their site when those peak times are. The user’s contract should explain when those peak times are.
Origin Energy for Qld uses 4pm to 9pm and 5pm to 9 pm in the other States, for peak hours as an example. If on a demand tariff, those hours are the ones to watch to ensure usage from the grid is kept to a minimum if using Origin as the retail supplier.
Other Energy companies may use the same or different time periods, all I would guess use similar afternoon/evening time brackets. Though I have seen some where it is between 2pm and 7pm. It is important to read the contract to get the information as to when demand tariff is calculated.
For the HWS, we have found that using a timer to ensure our storage heater only works during daylight hours when panels should be providing power works to limit the cost of heating water. These days with tempering valves, even if the water isn’t super hot, temperatures during the evening don’t vary from the normal daylight hours. Our HWS system is set to a maximum 80 C, our tempering valve uses the maximum 50 C. While 50 C is the maximum allowed by legislation, the tempering can be set between 35 C and the maximum of 50 C by a plumber.
Another way to limit the cost is to get a controlled supply for things like HWS or pool pumps, this does need another meter to measure that controlled supply and to allow the energy supplier to control the supply. Controlled load supply has a lower rate for each kWh used. Some Smart meters may allow various supply chains at the same time e.g., normal supply and controlled load 2, or normal supply and controlled load 1.
An example explanation from an Energy retailer:
OK, fair enough. (It’s still two separate concepts even though they have chosen to combine them.)
An attempt to optimise for that then would have to take into account that specific rule that Red Energy is applying.
I just turn the storage heater off for the summer. The solar hot water system provides enough heating not to require the electric booster at all over a period of many months. (YMMV of course dependent on size of solar HWS, size of tank, latitude, number of residents, how grotty they are 
, …)
We don’t use a solar HWS, we calculated the benefits/costs and decided that the extra panels we could fit on the roof was a better payoff than installing a solar water heater. Our choice may not fit everyone’s needs/requirements.
Most demand tariffs I have seen are based on peak usage measurements, there may be a few others around that might be based on some other time and period e.g., total daily usage, yearly usage…
Among some other energy retailers that are offering demand tariffs that base their calculations on peak usage are Origin Energy, Momentum Energy, Energy Australia.
AGL no longer offer demand tariffs to homes that are currently not on a demand tariff.
Some others that are based on peak usage demand and the times that apply for the measurement.
Ausgrid
1 June to 31 August: 5.00pm to 9.00pm (excluding public holidays and weekends)
All other months: 2.00pm to 8.00pm (excluding public holidays and weekends)
Endeavour Energy
4.00pm to 8.00pm Monday to Friday (excluding public holidays and weekends)
Energex (this applies for all their retailers)
4.00pm to 9.00pm Monday to Sunday (including public holidays)
Evoenergy
5.00pm to 8.00pm Monday to Sunday (including public holidays)
This is quite a complicated calculation to do rigorously because you also need to consider “efficiency”. There are lots of losses in a PV system and those have to be calculated against the losses in a solar HWS, theoretically speaking.
In my case, also, more panels would have pushed me over to a bigger inverter. So in practice it also depends on the orientation of the panels e.g. 100% north facing v. east/west split v. other combinations.
A post was merged into an existing topic: Experts sound alarm on electricity demand tariffs
