Average Cost of Electricity in Melbourne

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Are you looking for the best electricity rates in the Melbourne area? Well, here is everything you need to know about finding the best price for your home or business. Luckily for Melburnians, Victorian electricity rates aren’t regulated by the government which means you can find cheaper plans and switch. In this blog, we’ve included the average cost of electricity in Victoria so you can see how your usage and bill compares. 


What is the Average Electricity Usage in Victoria?

According to the Australian Energy Market Commission’s (AEMC) Residential Electricity Price Trends 2021 report, the average consumption for a Victorian household of 2-3 people is 4,727 kWh. The average electricity bill in Victoria for a 2-3 person household is $1290, with an average cost per kWh of 27.29. The monthly bill amounts to $108.

*The AEMC calculated the cost above by using the lowest rate from each energy company to get the average price (the higher the number of customers that a company had, the more their price contributed to the average). This average price was then multiplied by the average usage in each household to get the yearly cost. Keep in mind that figures will change based on the seasons and other factors. 


Other Costs to Consider in Your Electricity Plan 

When doing your research into which Melbourne companies offer the best electricity, usage rates aren’t the only thing you need to consider. You should add up all the extra costs which can include:

  • Connection costs 
  • Exit costs
  • Peak and off-peak usage costs 
  • Payment surcharges
  • Paper bill costs

How Much Can You Save On Your Electricity Bill By Switching To A Cheaper Provider? 

Depending on where you live, you could save anywhere between $236 and $330 by changing from the Victorian Default Offer (VDO) to the cheapest electricity provider, according to the Australian Energy Market Commission (2020). That is a significant amount so it’s worth it to check out all your options before settling on a provider.  


How to Get the Best Deal on Your Electricity Plan

There are a few ways you can compare electricity costs for Melbourne home or business. Online, there are a few comparison websites that you can use to enter in your personal details and get an estimate. Or you could also get the help of experts like HOOD to find the most cost effective plan for you. 


Speak to HOOD to Connect With the Most Suitable Electricity Provider 

If you’d like to check whether you’re paying the lowest price possible for your electricity, get in touch with the HOOD team and we can find out whether you’ve got the most cost effective plan. We can also assist you if you need urgent energy connection. Learn more about our services today. 



How do I find out if my energy rates are changing?

When energy rates change, you will find out through usual communications such as emails or letters.

Why do energy rates change?

To get the energy that powers your home or business, there are 4 stages which combine to create the journey in which energy reaches you. Price changes usually occur when there are changes in these stages. 

  1. Wholesale costs - the expenses associated with getting electricity from generators  
  2. Network costs - distributors charge transmitting energy and maintaining poles, wires and pipes that allow you to power your house or business 
  3. Retail costs - charges related to billing and servicing your energy account (affected by inflation)
  4. Additional costs - in order to comply with government schemes (e.g. Renewable Energy Target) 

What is the Victorian Default Offer (VDO)?

While Victorian energy providers have the freedom to set their own electricity rates, the government has set the Victorian Default Offer (VDO). This protects consumers from paying exorbitant prices for those who don’t compare electricity plans. The VDO is a cap on the amount that Victorians can be charged, with prices reviewed on a yearly basis on the 1st of January. Your location’s standard usage and supply charges are also factored into the VDO. Although the VDO keeps electricity costs low for those who don’t compare plans, there are cheaper alternatives that you could be missing out by not comparing. 

How is electricity charged in Victoria?

The way electricity charges are calculated in Victoria is similar to most other Australian states. Consumers pay a supply charge (daily fee) which covers the distributor’s transmission charges and cost for power generation. There is also a usage charge which applies to each kilowatt per hour (kWh). Distributors are those who offer power supply to the grid and take care of energy infrastructure (power lines). 

There are also certain discounts that can be applied to reduce your energy bill such as payment method, bundling, concession and by paying on time. 

The area in which you live in and who your distributor is can also impact your electricity prices. 

(supply charge x number of days on billing cycle) + (usage charge x usage amount) – discount(s), concession(s), rebate(s) = bill amount.


What are the types of tariffs that affect the cost of energy? 

Tariffs affect how you are charged for your energy usage. Your tariff depends on your location and what kind of meter you have. Here are the Victorian tariffs:

  • Single rate tariffs (peak/flat rate/anytime) - this is the most common type of tariff which charges you at the same cost no matter what time of day you use your electricity. 
  • Block rate tariffs - this type of tariff charges you in block rates so you have to pay a certain amount for the first block and then a different amount after the initial block (cheaper or more expensive). 
  • Flexible pricing tariff (peak, off-peak and shoulder) - this tariff requires you to have a smart meter that allows remote readings. You will pay more to use power during peak periods compared to off-peak. The peak periods are generally afternoons and evenings on weekdays (3pm-9pm). Off peak times are usually when most people are asleep or not at home (10pm-7am on weekdays and weekends). Shoulder times which are any other time between peak and off-peak allows providers to charge for high or low demand of power. 
  • Time-of-use tariffs - this tariff is similar to flexible pricing in that it charges you higher rates during peak hours and lower rates during off-peak, however, there are no shoulder periods in between. There will usually be a larger peak window and also different schedules to flexible tariffs. 
  • Controlled load tariffs (two-rate or dedicated circuit) - providers can charge you different costs for certain appliances you use in your home (differently to other appliances). They normally apply electric hot water systems or under floor heating that is used only in off-peak periods. 
  • Demand tariffs - this also requires a smart meter. You will be charged based on how much energy you’re using at a single point in time as opposed to usage over time. This tariff is designed to encourage people to avoid using high amounts of electricity at once. 
  • Solar feed-in tariffs - those who have solar panels can also receive this tariff which is a certain amount of credit on their bills for the energy that your solar panels produce and supply back to the grid. 

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