What actually is a tariff?
You'll see the word 'tariff' on your bill, in plan comparisons, and on energy forums. It sounds official, but it's simpler than you think.
The short answer
A tariff is just the pricing structure your retailer uses to turn your electricity usage into a dollar amount on your bill.
Think of it like a mobile phone plan. Some plans charge the same rate per minute all day. Others have cheaper calls at night. Some have a flat monthly fee plus usage. The phone service is the same either way — the pricing structure is what changes. Electricity tariffs work exactly the same way.
What a tariff is not
Not a tax
Despite the word “tariff” being used in trade and customs contexts, an electricity tariff has nothing to do with government taxes or import duties. It’s purely the pricing model your retailer applies.
Not a government charge
Your bill does include government-related costs (like network charges set by regulators), but the tariff itself is the structure your retailer chooses for pricing your plan. You pick a plan with a tariff structure that suits you — the retailer doesn’t impose one unilaterally.
Every tariff has two parts
Regardless of which tariff type you’re on, your electricity charges always break down into two components:
1. Supply charge (daily fixed fee)
A flat daily fee for being connected to the grid. You pay this every day regardless of whether you use any electricity at all. Typically around 80c to $1.50 per day depending on your distributor area and plan.
2. Usage charges (per kWh)
A charge for every kilowatt-hour of electricity you actually consume. The structure of this charge is what makes tariff types different from each other.
The key insight
The supply charge is basically the same across tariff types. It’s the usage charge structure that defines your tariff type. A flat tariff charges one rate per kWh all day. A time-of-use tariff charges different rates at different times. Same electricity, different maths.
What makes tariff types different
Every tariff type is really just a different answer to the question: “How do we calculate the usage charge?”
- Flat rate: One price per kWh, all day, every day. Simple.
- Time-of-use (TOU): The price per kWh changes depending on the time of day — cheap overnight, expensive during evening peak.
- Controlled load: A separate circuit (usually hot water) gets its own cheaper rate because the distributor controls when it runs.
- Demand: Normal usage charges plus an extra charge based on the highest kW you draw at any one time.
For a visual comparison of all four, see the Tariffs overview with its at-a-glance cards.
Why your tariff matters
Two households using the exact same amount of electricity can pay very different amounts depending on their tariff. If you use most of your power during off-peak hours (overnight, weekends), a time-of-use tariff will reward you. If you can’t shift your usage, a flat rate might be cheaper overall.
Understanding your tariff is the first step toward comparing plans properly. Without knowing the pricing structure, a “cheap” advertised rate might not actually save you money if it comes with a structure that penalises your usage pattern.
Next step
Now that you know what a tariff is, dive into each type to see how they work in practice. Start with Flat Rate for the simplest option, or jump to Time-of-Use if you already know you want to take advantage of off-peak pricing.