Energy bills are a fact of life, but they don’t have to be expensive. There are plenty of quick and easy things you can do to cut your utility bills without spending much time or money.
The first thing to look for is the electricity cost per kWh. This varies by supplier and can change seasonally.
Ad hoc charges
During the energy crisis, households faced record high energy bills. However, long-term contracts and financial hedging prevented price spikes on wholesale markets from fully cascading to household energy bills. Affordability measures, which mobilised USD 900 billion in 2022, also played a significant role in protecting households. These support measures could be strengthened by extending them to all consumers, rather than just low-income ones.
The average electricity bill depends on many factors, including the size of a household, its daily lifestyle, and how much it uses. Generally, the higher the household’s energy usage, the more its electricity bill will be. However, if the house is well-insulated, it will use less electricity.
The amount of money a household pays for electricity is determined by its rate per kilowatt-hour (kWh). Utility companies use different methods to calculate these charges, which are known as ad hoc charges. One example is a tiered rate, where the more kWhs used, the higher the charge. Another method is a flat fee, which is charged regardless of consumption. A permanent excess profit tax that targets economic rents is preferable to ad-hoc tax surcharges.
Tiered rates
Tiered rates are a common way for electric utilities to bill customers. They organize electricity rates in tiers, with higher rates for high energy consumption. The goal is to encourage energy conservation and ensure fair pricing. However, there are some concerns about the system, especially for low income families and individuals.
The first step to saving money with a tiered rate plan is monitoring your energy usage. Then, you can shift your activities to off-peak periods when rates are lower. This may require a change in your lifestyle, but it can save you hundreds of dollars each month. You can also upgrade your appliances to energy-efficient models, which will help you stay within the lowest tiers of your plan.
Many electricity providers offer a three-tier rate structure that is hard to understand. This is because they game the Electricity Facts Label by hiding prices with a complex formula. This makes it difficult to compare electricity plans and find the best deal. However, there are other, simpler options. Time of use (TOU) plans have proven to be more effective in encouraging energy conservation.
Demand charges
Demand charges are a component of your energy utility bill that are charged based on the amount of power used during a 15-minute interval. They are typically billed at a dollar per kilowatt (kW) rate. For example, two locations that use the same amount of electricity in a month can have dramatically different utility bills due to demand charges.
Depending on the structure of your energy provider, demand charges can be either flat or tierd. They are also typically escalating. While escalating demand charges may seem like a good way to recover fixed costs, they do not reflect incremental utility costs. In fact, these increases are likely to shift energy usage to other customers.
The best way to avoid demand charges is by shifting power-intensive processes to non-peak hours. This can be done by adjusting the timing of appliances, switching to higher-efficiency equipment, or using energy storage to lower energy demand. The latter can even provide savings for facilities with a poor power factor. This is why it’s important to monitor your power factor and correct it when necessary.
Standing charges
Standing charges are the fixed daily costs that you have to pay for having gas and electricity connected at your property. They cover the cost of keeping your property connected to the energy network, service administration fees and meter reading visits. They also include the cost of building pylons and fitting cables. They can also cover supplier of last resort payments, which are used to recover the costs of providing energy to customers whose providers go bust.
It is possible to find a tariff that does not charge any standing charges, but this usually comes at the expense of higher unit rates. These tariffs are usually better suited to low usage properties such as holiday homes or ones that will be empty for substantial periods of time.
However, it is important to remember that the costs of connecting a property to the energy grid cannot be avoided entirely. The network needs to be maintained, and meter readings have to be carried out regardless of energy usage. In addition, the money required for network upgrades will still need to be recovered.
Discounts
Many energy plans offer a variety of discounts to help customers save money. These can include usage charge and whole-bill discounts. The former is based on the amount of electricity consumed, while the latter applies to the non-energy components of the bill. In addition, there are several ways to reduce your energy costs, including making home improvements and using a power-efficient appliance. You can also apply for a low-income energy discount if you’re receiving public assistance or unemployment benefits.
While energy prices are still high, it’s worth shopping around and looking at the new deals that may be available. Consumer experts recommend asking for a personalised price plan to find the best deal for your situation.
If you’re on a fixed-rate contract, it’s also important to consider when the benefit period expires. Suppliers may contact you near the end of your discount to renew it or offer a new one. However, it’s important to note that some discounts are conditional and may not be worthwhile if you can’t meet the conditions. For example, a dual fuel discount only applies if you use both gas and electricity with the same supplier.