Most electricity charges bill you for how much power you use. A demand tariff bills you for how fast you use it: your single greediest half hour can set an extra charge for the entire month. Demand tariffs are appearing on more Australian plans as smart meters spread, they are the least understood tariff type on the market, and some households are on one without realising. Here is how they work and how to decide if one belongs anywhere near your bill.
How a demand charge works
A plan with a demand tariff has the usual parts (a daily supply charge and usage rates) plus a demand charge. The typical mechanics:
- The meter watches your usage in half-hour blocks, usually only during a defined window such as weekday late afternoons and evenings.
- Your highest half-hour of average power draw (in kilowatts) during that window becomes your demand figure for the period.
- You pay the demand rate, usually quoted in cents per kW per day, multiplied by that peak figure, for every day of the month.
Read that last point again, because it is the whole story: one evening of oven plus air conditioner plus dryer running together can set a peak that you pay for thirty times over. A household that uses modest total energy but uses it all at once can pay more demand charge than a bigger, smoother household.
A concrete example
Suppose the demand window is 4pm to 9pm weekdays, the demand rate is 15 cents per kW per day, and one Tuesday evening your home draws an average of 6 kW for one half hour (dinner on the induction cooktop, air conditioner working, dryer spinning). That 6 kW peak at 15 c/kW/day costs 90 cents a day, roughly $27 for the month, on top of your normal usage charges. Halve the peak by staggering those appliances and you halve that charge.
Exact windows, rates and reset rules (monthly or seasonal) vary by network and plan, so the plan's fact sheet is the source of truth. The mechanics above are the common shape.
Who should be wary, and who can win
Be wary if your household is evening-concentrated by nature: everyone home at six, cooking electric, heating or cooling hard, no flexibility to stagger. You would be paying a premium for a pattern you cannot change. The safer home for a demand tariff is one that can flatten its peaks: appliances on timers, an EV charging overnight, cooking staggered from laundry, or simply few people home during the demand window.
The win condition is that demand plans often pair the demand charge with cheaper usage rates. A flat-profile household can come out ahead. A spiky one funds the discount.
How to check where you stand
- Check if you are already on one. Look for a "demand" line on your bill (our bill reading guide helps). If you were moved to a demand tariff after a meter change and it does not suit you, ask your retailer what else is available; our smart meter guide covers the protections around that.
- Find your peak. Your smart meter data (retailer app or a data request) shows your worst half hours. That number, times the demand rate, times the days in the month, is what the tariff would cost you on top of usage.
- Compare like-for-like first. Before adding demand complexity, make sure your baseline is right: our calculator ranks flat-rate plans with your usage (plus controlled load) across every retailer; pick your State to run it. If a demand plan's usage rates beat your best flat-rate result by more than your calculated demand charge, it deserves consideration; the same interval-data thinking as our time-of-use guide applies, with a sharper penalty for getting it wrong.
The rule of thumb
Demand tariffs reward homes that know their own usage pattern and punish homes that do not. If you have never looked at your interval data, the default answer is a well-chosen single rate or time-of-use plan, and the demand plan can wait until you can see your peaks. Complexity should earn its place on your bill, not arrive by default.