Time-of-Use vs Flat Rate Electricity Tariffs
The electricity tariff you choose can have a significant impact on your household energy bills. Understanding how flat rate and time-of-use tariffs work can help you make a more informed decision based on when and how your home uses electricity. […]
Time-of-Use vs Flat Rate Electricity Tariffs
When looking for ways to reduce your electricity bill, most advice focuses on using less energy. But when you use electricity can also affect how much you pay.
That’s because not all electricity plans charge the same way.
Some households pay a flat rate for electricity, regardless of the time of day. Others have a time-of-use tariff, where electricity costs more during busy periods and less when demand is lower.
Understanding the difference can help you choose a plan that suits your household and potentially reduce your electricity costs without necessarily changing how much energy you use.
What Is an Electricity Tariff?
An electricity tariff is the pricing structure your energy retailer uses to charge you for electricity.
Most household electricity plans include two main charges:
Usage charge: The amount you pay for electricity consumed, measured in kilowatt-hours (kWh).
Daily supply charge: A fixed daily fee for having electricity connected to your property.
For example, if your electricity usage rate is 30 cents per kWh and you use 10 kWh, your usage charge is $3, excluding the daily supply charge.
Different tariff structures determine how that usage rate applies.
Two common options in Australia are flat rate tariffs and time-of-use tariffs.
What Is a Flat Rate Electricity Tariff?
A flat rate electricity tariff, also called a single rate or anytime tariff, charges the same rate per kWh regardless of when you use electricity.
Whether you turn on your air conditioner at 2pm or run your dishwasher at 9pm, your electricity usage rate remains the same.
For example, if your plan charges 30 cents per kWh, you’ll pay that rate throughout the day.
This makes flat rate tariffs straightforward to understand and easier to budget for.
Flat rate tariffs can suit households that want simple pricing or need to use electricity at particular times, especially during the evening.
What Is a Time-of-Use Electricity Tariff?
A time-of-use tariff (TOU) charges different electricity rates depending on when you use power.
Electricity generally costs more during periods of high demand and less when demand is lower.
Most time-of-use plans divide the day into two or three pricing periods.
Pricing period | What it means |
Peak | The most expensive period, often during busy evening hours |
Shoulder | A mid-priced period between peak and off-peak |
Off-peak | The cheapest period, often overnight or during selected daytime or weekend hours |
For example, a time-of-use plan might charge 45 cents per kWh during peak times, 28 cents during shoulder periods and 18 cents during off-peak hours.
These are illustrative rates only. Actual prices and time periods vary by electricity retailer, location and plan.
Some tariffs also change their pricing periods depending on the season or day of the week.
You can learn more from the Australian Government’s guide to electricity pricing plans and tariffs.
Time-of-Use vs Flat Rate: Which Is Cheaper?
Neither tariff is always cheaper. The better option depends on your electricity rates and when your household uses power.
Consider two households using the same amount of electricity each day.
Both consume 12 kWh daily, but their usage patterns are different.
For this example, assume the following rates:
Tariff | Example rate |
Flat rate | 30c/kWh at all times |
Time-of-use peak | 45c/kWh |
Time-of-use shoulder | 28c/kWh |
Time-of-use off-peak | 18c/kWh |
Household A: Uses more electricity in the evening
This household uses 6 kWh during peak hours, 3 kWh during shoulder hours and 3 kWh off-peak.
Flat rate usage cost: $3.60 per day
Time-of-use usage cost: $4.08 per day
In this example, the flat rate is cheaper.
Household B: Uses more electricity off-peak
This household uses 2 kWh during peak hours, 4 kWh during shoulder hours and 6 kWh off-peak.
Flat rate usage cost: $3.60 per day
Time-of-use usage cost: $3.10 per day
In this example, time-of-use pricing is cheaper.
Both households use exactly the same amount of electricity. The difference is when they use it.
These examples exclude daily supply charges and any other plan fees. They illustrate how pricing works, not the savings you should expect from an actual electricity plan.
How Do Solar Panels and Home Batteries Affect Your Choice?
If your home has rooftop solar panels or a battery, your electricity usage pattern may be different from a household that relies entirely on grid power.
Homes with rooftop solar
Solar panels generate electricity during daylight hours, reducing the amount of electricity you may need to buy from the grid.
However, if your household uses most of its grid electricity in the evening, a time-of-use plan with expensive peak rates could increase your costs.
A flat rate may be more suitable in that situation.
On the other hand, households that can avoid peak electricity purchases may benefit from a time-of-use plan.
Your solar feed-in tariff also matters, so compare both electricity purchase rates and any credits you receive for exporting excess solar power.
Homes with batteries
A home battery can store electricity for use later.
For example, a household may charge its battery using solar energy during the day and discharge it during expensive evening peak periods.
This can reduce the amount of electricity purchased at peak rates.
Some compatible systems may also support charging from cheaper grid electricity.
However, battery capacity, efficiency, operating settings and electricity tariffs all affect the financial benefit.
Having solar panels or a battery doesn’t automatically make one tariff structure the best choice.
How Can You Reduce Costs on a Time-of-Use Tariff?
If you’re on a time-of-use plan, the simplest approach is to identify which activities you can safely shift away from peak periods.
For example:
Run suitable washing machine or dishwasher cycles during lower-cost hours.
Schedule EV charging overnight if your plan offers cheaper rates.
Use appliance timers and smart controls where appropriate.
Avoid unnecessary electricity use during expensive peak periods.
Review how heating and cooling contribute to your evening electricity consumption.
Heating and cooling can be especially important because air conditioners may use significant amounts of electricity during hot or cold weather.
In some homes, pre-cooling or pre-heating during a lower-cost period may reduce the amount of electricity needed later, depending on insulation, weather and the system.
For more practical advice, see our guide to efficient air conditioner temperature settings.
The aim isn’t to stop using electricity when you need it. It’s to identify opportunities to move flexible usage into less expensive periods.
Are Time-of-Use Tariffs the Same as Free Electricity Offers?
A standard time-of-use tariff charges different electricity rates at different times of the day.
Some newer electricity offers go further by providing a free electricity window, often during periods of high daytime solar generation.
For example, the Australian Government’s Solar Sharer Offer gives eligible households in NSW, South East Queensland and South Australia three hours of free electricity each day, subject to specific conditions and usage limits.
Like any electricity plan, these offers need to be assessed as a whole. Free electricity during one period doesn’t guarantee a cheaper total bill.
For more information, read the Australian Government’s Solar Sharer Offer guide.
Do You Need a Smart Meter for Time-of-Use Pricing?
A smart meter records when your home uses electricity, allowing your retailer to charge different rates at different times.
Traditional meters usually record total electricity consumption without the detailed timing information needed for time-of-use pricing.
However, having a smart meter doesn’t necessarily mean you must be on a time-of-use tariff.
You may still be able to choose a flat rate plan, depending on your retailer, location and available offers.
How to Choose the Right Electricity Tariff for Your Home
Before changing your electricity plan, consider these five questions:
When do you use the most electricity? Review your smart meter data or electricity bill to identify your main usage periods.
Can you shift energy use? Consider whether major appliances can run outside peak hours.
Do you have solar panels or a battery? Understand how these change your grid electricity use.
What are the actual rates? Compare peak, shoulder and off-peak prices, along with daily supply charges.
What would each plan cost over a year? Use your actual usage data wherever possible, rather than choosing based on an advertised low rate.
You can compare electricity offers through the Australian Government’s Energy Made Easy tariff guide and comparison service. In Victoria, households can also use Victorian Energy Compare.
Frequently Asked Questions About Electricity Tariffs
What is the difference between a flat rate and a time-of-use tariff?
A flat rate tariff charges the same electricity usage rate throughout the day. A time-of-use tariff has different rates depending on when electricity is consumed, typically with peak, shoulder and off-peak periods.
Are time-of-use tariffs cheaper?
They can be, particularly if you use more electricity during off-peak periods. However, households with high peak-hour consumption may pay more than they would on a flat rate plan.
What are peak and off-peak electricity hours in Australia?
Peak and off-peak hours vary by electricity retailer, location and plan. Peak rates often apply during busy evening periods, while off-peak rates may apply overnight or on weekends.
Is a flat rate tariff better if I have solar panels?
A flat rate may suit solar households that still buy significant amounts of electricity during evening peak periods. Other households may benefit from time-of-use pricing. Compare both structures using your actual grid consumption.
Can I have a smart meter and stay on a flat rate tariff?
A smart meter enables time-based electricity measurement, but it doesn’t automatically mean a time-of-use plan is the only option available.