For most people, the price they have to pay for electricity usage is a critical factor in choosing an energy retailer and an energy plan. Luckily, a few easy calculations can help you estimate how much you may have to pay for the energy used in your home.
But you’ll first need to know your retailer’s usage charge, which is the per kilowatt-hour (kWh) energy price or the price per unit of electricity consumed. The average per kWh energy price varies across Australian states and territories. You may need to ask your energy provider about the rate for your postcode when first buying a connection.
Why is the energy price in Australia measured per kWh?
Most Aussie families use a range of electrical appliances, from televisions and refrigerators to mobile phones and space or water heaters. Most of these appliances come with either an energy rating or product information label that mentions the amount of electrical power consumed.
For instance, a two-slice bread toaster may have an 800W rating, meaning that if you use the toaster for one hour, you’ll have consumed 800 Wh or 0.8 kWh of electrical energy. Multiplying this number by the per kWh energy price, usually mentioned on the second page of your energy bill, gives you an estimate of your household’s energy expense.
The appliances you use and the time you use them would naturally vary depending on the climate in your area. In places with colder winters, using electric heat pumps may not be the most cost-effective option, with some folks preferring gas space heaters.
The Australian Energy Regulator says that in 2019-2020 average annual household electricity consumption was highest in Tasmania, at over 8,000 kWh used per year. Families in Tasmania are more dependent on electricity, as the gas distribution network does not cover the entire island. In contrast, Victorian households have access to both electricity and a historic reliance on gas and, as a result, consume the least electrical power. The usage charge can be as much as 50 cents per kWh in some parts of the country, but that’s not the only cost added to your energy bill.
Is finding the energy provider offering the cheapest per kWh energy prices sufficient?
While your household energy consumption determines the usage charge reflected on your energy bill, you should remember that the bill also accounts for fixed charges for supplying electricity to your home. These supply costs can often exceed usage charges, especially in areas like South Australia with fewer and more expensive distribution networks.
For this reason, you should compare not just the per kWh energy prices but also the supply charges offered by different energy retailers before deciding on a provider. There are also other factors to consider, such as discounts, bargain rates for buying electricity and gas from the same provider and solar feed-in tariffs.
You should remember that retailers offer two types of energy plans - standing contracts and market retail contracts. In a standing contract, the per kWh energy price may be determined by the state or federal government, while market retail contract prices are fixed by the retailer.
You may get a market retail contract offering a cheaper per kWh energy price, but the retailer can change that price at their discretion at any time. You will get a notice that the energy price is about to change and you can then decide if you want to switch to another energy retailer or continue with the same provider. You’ll also have to account for disconnection and reconnection charges, which can water down the savings you expect to realise by getting a connection from a new retailer.
