ToU Energy Tariffs for Businesses: Benefits, Downsides and Alternatives
A recent report revealed that businesses operating in Western Australia are facing hurdles due to rising electricity costs. However, this is not only the story of Western Australia. There has been an overall rise in electricity costs throughout the country in recent times. Such a scenario resulted in hardship for the small and medium enterprises operating in the country.
While switching to solar is a prominent way to escape hefty electricity bills, the installation cost of solar is a concern. Small business owners and entrepreneurs have to think twice before making such hefty expenses. According to a report published by ABC News, energy companies have shifted many businesses to complex time-of-use tariffs without notice. As a result, it escalated the utility expenses for the businesses significantly.
So, are you on the right tariff plan for your energy usage? Learn about off-peak and time-of-use tariffs to lower your energy bills to some extent.
An Introduction to Time-of-Use (ToU) Tariffs
Time-of-Use (ToU) tariffs are electricity pricing plans where the rate you pay per kilowatt-hour (kWh) varies according to the time of the day. In some cases, the tariff could also vary according to the seasons.
Businesses that have chosen this place do not need to pay a flat rate for 24/7 electricity. In peak hours, the electricity charge per unit will be high. On the other hand, it will be low during off-peak hours. The ToU pricing structure encourages businesses to utilise off-peak hours for their business productivity. However, it may not be possible for all businesses. But a few businesses can strategise their production time according to the off-peak hours to reduce utility expenses.
- Smart Meters: If you want to switch to the ToU tariff, a smart meter installation is a must. Besides calculating the amount of electricity consumed, smart meters can also calculate when electricity has been used.
- Big Savings: Businesses that shift operations to the off-peak hours can significantly reduce their electricity bills. The per-unit electricity charge during the off-peak hours is low, and businesses can utilise this to reduce their electricity expenditure.
- Ideal for Night Shifts: Businesses operating in non-peak hours or night shifts can embrace the time-of-use plan tariffs instead of the regular tariffs. This will help the businesses save money significantly to a large extent.
Typical Time Periods in ToU Tariffs (Example – NSW/QLD)
Other Electricity Tariffs for Businesses in Australia
Businesses operating in Australia have many options for choosing their electricity plans. Let’s discuss some of the popular options in the following section of this article.
1. Flat Rate Tariff (Anytime Tariff)
Instead of the Time-of-Use (ToU) tariff, businesses can embrace the flat rate tariff. In this tariff mode, you will get the same rate of electricity throughout the day. There are no rate fluctuations, depending on the peak or non-peak hours. The cost of electricity usage could be high in this case, though businesses will have steady and predictable billings.
2. Demand Tariff
Your maximum demand for electricity supply during a billing cycle will determine the cost of consumption. This tariff plan is ideal for medium to large businesses, which potentially have high or spiky loads. The benefit of this tariff is that you pay a lower per-kWh rate if the demand has been managed well. On the other hand, a high charge is the downside if your energy usage exceeds demand.
3. Controlled Load Tariff
This is a separate tariff for the specific appliances that operate during the off-peak hours. This plan is suitable for the factories that operate during off-peak hours. You will pay a low per-unit charge for your energy consumption. However, the downside is that the tariff plan supports specific equipment. Therefore, the plan does not apply to all business appliances or equipment.
4. Block Tariff
Block tariff is another popular electricity tariff plan for businesses in Australia. In this case, you pay different electricity rates for different slabs. Businesses that have a more or less predictable energy consumption can choose this plan.
5. Business Solar Feed-in Tariff
Business solar feed-in tariff is another interesting electricity plan for businesses. It refers to a credit or payment for the surplus solar energy that your solar system exports to the grid. Businesses that have dedicated solar systems can enjoy this tariff plan. A varying surplus credit rate is the biggest concern. In most cases, the credit electricity companies offer is lower than the purchase rates.
Conclusion
A rising electricity cost is a challenge for businesses in Australia. Apart from adopting solar and embracing multiple energy-saving strategies, businesses should find the right electricity plans to reduce their expenditure. While a time-of-use tariff plan seems the best option for a reduced electricity cost, there are a few alternatives too. Hope this article helped readers to understand the benefits and limitations of the ToU tariff and its alternatives.
Connect Business Energy helps small and large enterprises in Australia to enjoy reduced electricity costs by choosing the right electricity plans and providers. Businesses that are concerned about rising electricity costs can consult our experts and find the best plans according to the nature of their business operations.