How Time of Use Tariffs Are Affecting Your Energy Costs

As energy prices soar during the cost-of-living crisis, many Australians are looking for ways to cut down their electricity bills. Time of Use (TOU) tariffs are being promoted as a solution, with the idea that shifting energy usage to off-peak times will help households save money.

But the reality for most consumers is different. GoSwitch, a trusted energy advisor simplifying energy options for Australians, has found that many households end up paying more on TOU tariffs than they would on simpler, flat-rate (peak) plans.

The Hidden Costs of Time of Use Tariffs

TOU tariffs aim to lower costs by shifting electricity use to off-peak hours, but many families struggle to change their habits due to their demanding schedules. This creates a challenge for those who cannot easily adjust their energy use.

As Clint Robinson, GoSwitch CEO, explains, “Many consumers find it difficult to change their energy consumption patterns with work and school commitments during off-peak periods. Therefore, for families already struggling to pay their energy bills, this is a very unfair and unjust move by the energy regulators.”

Here’s where the internal data from GoSwitch becomes critical:

From January 2023 to September 2024, data collected by GoSwitch shows a growing gap between TOU and Peak tariffs across states, with TOU consistently leading to higher costs:

  • New South Wales: On average, households on TOU tariffs in New South Wales are paying 35% more than those on single-rate Peak tariffs.
  • Victoria: Households on TOU tariffs in Victoria have consistently experienced higher quarterly energy bills compared to those on single-rate Peak tariffs.
  • South Australia: The gap is even larger in South Australia, with TOU customers paying 39% more than their single-rate counterparts.
 

Why Are More Australians Being Moved to Time of Use Tariffs?

In the last 12-24 months, energy retailers and regulators have been driving a switch to TOU tariffs, supported by the rollout of smart meters. The Australian Energy Market Operator (AEMO) has also been promoting the use of electricity during off-peak times to balance the energy load, especially with the increase in solar power generation.

The idea is that by tracking usage with smart meters, consumers can adjust their habits to use electricity during cheaper, off-peak periods. In addition to this, these meters were introduced to help consumers change providers more easily.

But for many families, shifting energy use is challenging, particularly during the day when most people are at work or school. This shift to TOU plans has often been done without clear explanations of how these tariffs work. Because of this, many households often face higher rates during peak times, which leads to increased bills.

 

Rising Consumer Interest in Time of Use Tariffs

According to the Average Seasonal Search Volume report from GoSwitch, search volumes for TOU tariffs have consistently exceeded those for single-rate tariffs from Spring 2020 to Winter 2024.

This shows a growing curiosity among Australians about TOU plans. Despite the rising interest, many consumers are still unsure whether these plans actually lead to savings.

What Can Consumers Do?

If you have been switched to a TOU plan, it’s important to take action. Energy retailers often don’t provide enough guidance on how to optimise electricity use for these tariffs, which is why it’s up to consumers to stay informed.

Here are a few tips to help you get started:

  • Review your energy bill: Look at your energy usage to determine when you consume the most electricity. If your peak usage is during high-cost times, you may want to reconsider your plan.
  • Shift usage where possible: If your household can shift appliance use to off-peak periods, like running washing machines or dishwashers during the day, you may be able to see some savings.
  • Consider your options: Not all consumers benefit from TOU tariffs. If you find that your usage patterns don’t align with the off-peak hours, it may be time to switch back to a flat-rate plan or explore other options.

Is Time of Use Tariffs Worth It?

TOU tariffs and smart meters were introduced to help people manage energy use and reduce costs. For some, these plans do result in savings, especially if they can shift energy-intensive activities to off-peak times. But for many, this isn’t practical, and they end up paying more.

Without a clear understanding of how to adjust energy habits, the expected benefits of TOU tariffs often don’t materialise. Consumers need better education and support from energy providers to make sure these plans work effectively for them.