A demand tariff charges you not just for the energy you use, but for the peak rate at which you pull it from the grid. It's increasingly the default for new smart-meter connections across Australia, and it punishes households that run the air conditioner, oven and hot water boost at the same moment in the evening. For some households it saves hundreds of dollars a year; for others it quietly adds $300–$500 to the annual bill. Here's how demand tariffs work, the state-by-state numbers, and how to decide whether to switch on or off one.
How Demand Tariffs Actually Work
A standard flat or time-of-use tariff bills you in cents per kilowatt-hour — a volume charge. A demand tariff keeps the volume charge (usually at a lower rate) and adds a separate demand charge measured in dollars per kilowatt per month ($/kW/month).
The demand charge is based on your single highest 30-minute average power draw during a defined peak window, across the billing month. Every 30-minute interval your smart meter records is averaged; the highest one sets your demand figure for the month. It doesn't matter if the rest of the month is low — that one worst interval is what you pay on.
Peak windows vary by network but typically run 3 pm to 9 pm on weekdays in summer, and sometimes 5 pm to 9 pm in winter. Outside those hours, demand is not measured.
Why Networks Use Demand Tariffs
Around 40–50% of a typical retail bill is the network tariff — the cost of the poles, wires and substations. Network infrastructure is sized for peak load, not average load. A street of houses that collectively hit 8 MW for one hour on a hot February evening needs a transformer and feeders sized for 8 MW, even if the average load is 1 MW.
By charging households for their individual contribution to peak demand, networks send a price signal to spread load more evenly. In theory, households that flatten their demand profile save money, and the network defers expensive upgrades. That's the case for demand tariffs. In practice, most households don't know they're on one and don't change behaviour.
Typical Demand Charges by State
Demand charges vary widely by network, season, and whether the tariff is a "capacity" demand (the biggest half hour ever) or a "monthly" demand (reset each month). Indicative 2025 residential figures:
| Network | State | Demand Charge (peak) | Peak Window |
|---|---|---|---|
| Ausgrid | NSW (Sydney, Hunter) | $11–$16/kW/month | 3–9 pm weekdays, summer |
| Endeavour Energy | NSW (SW Sydney) | $10–$14/kW/month | 3–9 pm weekdays, summer |
| Essential Energy | Regional NSW | $8–$12/kW/month | 5–8 pm weekdays |
| Energex | SE Queensland | $9–$13/kW/month | 4–8 pm daily |
| SA Power Networks | South Australia | $12–$18/kW/month | 5–9 pm weekdays, summer |
| Citipower / Powercor | Victoria | $10–$15/kW/month | 3–9 pm weekdays |
| AusNet | Eastern Victoria | $11–$16/kW/month | 3–9 pm weekdays |
| Evoenergy | ACT | $9–$13/kW/month | 4–9 pm weekdays |
These are network demand charges; retailers pass them through, sometimes with a small margin added. The specific number on your bill depends on whether your retailer has rebundled the tariff.
A Worked Example
Consider a household in Sydney on Ausgrid's residential demand tariff. In a hot February month, the family cooks dinner at 6 pm while the ducted air conditioner is running and the electric hot water boost has kicked in. For one 30-minute interval, average draw hits 7.5 kW. The rest of the month they never exceed 4 kW in the peak window.
At $14/kW/month demand, that single half hour costs 7.5 × $14 = $105 in demand charges alone. Across a year of similar behaviour, the demand component could add $600–$900 on top of the volume charge.
If that same household staggers appliances — hot water boost at 2 pm on solar, dishwasher after 9 pm, air conditioner pre-cooled to 22°C at 2 pm so it only has to hold temperature in the evening — the peak 30-minute draw might fall to 3.5 kW. At $14/kW, that's $49/month in demand. Same total energy use, roughly $700/year saved.
Who Benefits From a Demand Tariff
- Steady, low-peak users. Small households without ducted AC or electric cooking rarely exceed 3 kW in the peak window, so demand charges stay low while the volume rate is lower than a flat tariff.
- Solar + battery households. A battery discharging across the peak window can reliably hold grid import to under 2 kW, making demand tariffs extremely cheap.
- Controlled-load customers. Electric hot water and pool pumps on a dedicated controlled-load circuit don't count toward the demand measurement, which flattens the main circuit's profile.
- EV owners charging overnight. EV charging at 1 am doesn't hit peak windows, so the EV adds energy volume but zero demand.
Who Loses on a Demand Tariff
- Households with big morning-and-evening spikes. School mornings with hair dryers, toasters and the oven, then evenings with AC and cooking, consistently push peak 30-minute averages above 6 kW.
- Electric hot water on the main circuit with peak boosts. A 3.6 kW element kicking in during the peak window almost guarantees an elevated demand reading.
- All-electric homes without demand management. Induction cooking + heat-pump hot water + reverse-cycle AC all running at 6 pm is the classic demand-tariff trap.
- Pool heat pumps scheduled at the wrong time. A 4 kW pool heater running in peak will dominate the demand reading.
Behaviour Changes That Move the Needle
If you're on a demand tariff, every dollar you save comes from flattening your peak 30 minutes. Practical changes:
- Move the dishwasher and washing machine to after 9 pm or before 3 pm.
- Pre-cool or pre-heat the house with AC before the peak window starts, then run at a maintenance setpoint.
- Shift hot water boost to a solar-run time via a Catch Power Solar Relay, Paladin diverter or heat-pump timer.
- If you have a pool pump, lock it out of the peak window entirely.
- Avoid the oven + AC + kettle combo during peak. Stagger.
- Charge the EV overnight or from midday solar, never during the peak window at 7 kW.
Interaction With Solar and Batteries
Rooftop solar alone does little for demand charges, because the peak window often extends past sunset. Solar helps volume, not demand. A home battery is what actually flattens the grid-import curve across 3–9 pm. Even a modest 5 kWh battery (Sungrow SBR, BYD HVM, Tesla Powerwall 3 at the top end) can hold grid import under 1–2 kW across the evening peak, cutting the demand charge to near zero.
This is a significant part of the battery payback case that gets ignored when people only compare volume savings. On an Adelaide or Sydney demand tariff, a battery can save $400–$900/year in demand charges alone, separate from the usual solar arbitrage savings.
How to Check Whether You're Already on One
Two signals on your bill:
- There's a line item labelled "Demand" or "Maximum demand" measured in kW and priced per kW per month.
- Your usage rate (c/kWh) is lower than typical flat rates for your zone — often 15–25 c/kWh rather than 30–40 c/kWh — because some of the cost has been shifted to the demand component.
You also need a smart meter (Type 4) to be on a demand tariff. If your meter is an old accumulation meter you physically cannot be on one.
How to Opt In or Out
The tariff assignment is a network-level decision, but your retailer chooses which network tariff to pass through to you. Call your retailer, ask what network tariff your meter is on, and ask what alternative tariffs are available for your NMI. In most cases you can request a switch to a flat or time-of-use tariff once every 12 months. Some networks restrict this — SA Power Networks in particular has tightened eligibility for opting out of demand.
Model Your Bill Before You Switch
Whether a demand tariff saves or costs you money depends entirely on your own 30-minute peak profile. Our Bill Analyser lets you upload a recent bill, see your demand charge broken out separately from usage and supply, and model what your bill would look like on a flat or time-of-use tariff instead — so you can make the decision on real numbers, not a hunch.