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How to save money on your electricity bill

Want to save money on your electricity bill? We show you how to make sense of your electricity bill jargon to get a better deal.
Want to save money on your electricity bill? We show you how to make sense of your electricity bill jargon to get a better deal.

Bite-Size Read:

  • If you’re asking the question of which energy provider you should go with or who is the cheapest, this is the article you need to read.
  • To save money on your electricity bill, you need to know what you’re paying for, how to read your bill and compare energy providers.
  • Know that percentage discounts are rubbish and you can always look for a better deal via independent comparison websites and a negotiation phone call to your current provider.

 

What electricity provider should I go with and who is the cheapest?

That’s one of the most common questions I find on family finance forums and Facebook groups. Enter 50 comments from people stating the name of the provider they happen to be with.

That won’t help you save money on your electricity bill. But this will.

It’s possible to save money on your electricity bill by understanding how to get the best rates for your usage of electricity. Most of this process can also save money on your gas bills if you substitute out c/kWh (cents per kilowatt-hour) for c/MJ (cents per megajoule).

 

Here’s how to save money on your electricity bill:

 

1. Know what your electricity provider does

Most of the time you can’t choose your electricity provider. Your number of options is heavily dependent on where you happen to live. Within Australia for example, in VIC you have a choice of 5 providers whereas if you live in NSW or QLD you have a choice of only 3 providers. Check your provider options where you live by typing in your search engine, ‘Electricity distributors’ followed by your state and country if you’re based outside Australia.

The geographical region in which you live determines which distributor is responsible for the electricity infrastructure. They maintain the poles and wires and are the people you call in times of a blackout.

The only difference you really get with retailers is which logo appears on top of your bill. Changing your retailer does not affect the reliability or quality of your electricity service. With that in mind, let’s look at the bill itself.

 

2. How to read your electricity bill

If you haven’t read your electricity bill in detail, there’s a few items you need to pay attention to.  

  • The amount due: This is the main bit retailers love: how much you have to give them, and by when. They might offer you a discount for paying early.
  • The due date: This is crucial, make sure you pay your bill on time so your electricity isn’t turned off.
  • Usage over time: Knowing how much electricity you use can be really helpful. It’s an opportunity to study how much you spend on electricity. This includes whether there is a big spike in usage in winter and summer and whether you could benefit from switching to more energy-efficient appliances.

 

3. How to compare energy retailers

Now we get to the nitty-gritty and how to compare energy retailers. Firstly, you should know that electricity is priced at cents per kilowatt-hour (substitute this for pence or the currency you use in your country). It’s also important to know that usage at different times of the day is charged at a different rate. You’ll also need to read the short-hand terminology featured on your bill.

Common terminology on electricity bills:
  • Controlled load, means that one of your appliances, such as a hot water service, is on a different rate again.
  • (A) stands for ‘actual’, and means that the actual figures on your meter were recorded.
  • (E) means “estimate”, and for whatever reason, your meter could not be read and so your usage has been estimated. If this is the case, contact your retailer and get it sorted. It is rare that retailers are conservative on estimated readings!
  • Service to property charge or the daily supply charge is an amount you pay each day without fail. Even if you turn everything off for the duration of your bill, this won’t change.
  • Solar feed-in tariffs will appear if you’ve got solar panels. If your solar panels produce excess power, this gets fed back into the electric grid, which is how you get compensated.

 

4. Don’t be fooled by percentage discounts

All the retailers spend most of their advertising dollars, generously provided by you, to spruik their percentage discounts. In practice, the discount means very little.

Example of the percentage discount:
  • You were browsing at the shops and found a wonderful *insert thing you really like here*
  • It was $100, but had a 20% discount, bringing it to $80
  • Then you go to a competitor’s shop and find the exact same product.
  • They have it for $70, but it was marked down from $80, so it was a discount of only 15%.
  • The discount was bigger at the first store was bigger BUT you’ll pay $10 more for the exact same product.

That’s how retailers fool you. Instead, to save money on your electricity bill, don’t look just at the percentages. Go to the electricity retailer’s website, key in your postcode, and work out how much you’re actually being charged.

 

5. Alright, so how do I get a better deal?

There are a few methods to do this. Independent comparison websites are a great place to start. Watch out for retail comparison websites that might recommend providers who advertise with them, rather than the best value for money providers.

To take action if you’re based in Victoria, going to the website, compare.energy.vic.gov.au gives you a great resource to find the best provider. You could also go to the national Australian website, energymadeeasy.gov.au, to find the best logo to put on your bill. Simply have a previous bill on hand, fill in the details, and you’re good to go.

And then, it’s time to exercise your best negotiation skills.

Once you’ve found a better price online, it’s time to pick up the phone. Give your current retailer a call, and tell the poor soul on the end of the line just how clever you’ve been in finding a better price for your electricity usage. This will generally result in some panicked sounds. Revel in it. Enjoy it!

Then in your sweetest voice, let them know that if they can provide a better option on the spot, you’d be more than happy to stay. Before they offer to up your discount percentage (that’s a gimmick, remember!), ask them what the average rate is you’ll be paying in c/kwH. Ask about the supply charge. If you have solar panels, see if they can increase your feed-in tariff. Be firm, without being too mean to them, and you might not have to change at all!

If your current retailer can’t beat your best offer in front of you, give your new best friends a call.

Your power is unaffected during the changeover, and you’ve saved yourself some very helpful bucks on your budget! You’ll save money on your electricity bill and be able to answer that question: what electricity provider should I go with and who is the cheapest?

Written by Stephen Treloar

Stephen Treloar has been investing for a few years now, and longs for the day when financial literacy is taught successfully to all Australians. He loves sports, sports statistics, choral music, and helping people develop their financial skills.

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