Energy, in the form of electricity, is used in our homes to power heating and cooling systems, hot water systems, lighting, appliances, and devices like televisions, computers and pool pumps. Some homes may also be connected to natural gas, an energy source often used as an alternative to electricity for hot water systems, stovetops/ovens or general room heating.
Water is used in almost everything we do, from drinking to showering and washing the car. Water is an essential resource. In order to conserve water, we must be able to calculate how much we need, how much it costs, and how we can save more for the future.
Water and energy have become more expensive due to increasing population, the cost of supply network upgrades and global trade prices.
Interpreting our water and energy bills correctly can ensure that we are:
- Paying the right amount and not being overcharged
- Using an energy plan that best matches our energy usage and lifestyle
- Able to make informed decisions about ways to reduce our consumption and make savings on our bill
How water and energy usage is measured
Water, electricity and natural gas are connected to our homes through separate meters that measure usage over a period of time called the billing period. Usually this is three months and consumers receive their bills every quarter.
At the end of each billing period, a representative from the supply company will take a meter reading at each property. To determine a consumer's 'actual' usage, the reading on their previous bill is subtracted from their current meter reading. That is,
$\text{usage }=\text{current meter reading }-\text{previous meter reading }$usage =current meter reading −previous meter reading
If a meter cannot be read due to access problems, the supply company will provide an 'estimated' usage amount. The bill will indicate that either an actual (A) or estimated (E) reading has been used.
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| Various electricity meter types |
Every home will have a separate meter for water, electricity and gas. Each meter is identified by a unique number that is displayed on the corresponding bill next to the meter readings.
Another unique number on the bill identifies the location of the home on the energy supply network. For electricity bills it is called the National Metering Identifier (NMI). For gas bills it is known as a Delivery Point Identifier (DPI) or Meter Installation Registration Number (MIRN).
Understanding the bill
All bills consist of two main charges - a supply charge and a usage charge. The supply charge (or service charge) is fixed and determined by the company. The usage charge is variable and determined by the consumer.
Practice question
Question 1
Examine this quarterly water bill and answer the questions below:
What is the total amount due?
What was the amount due on the previous water bill?
How much water was consumed during this quarterly billing period?
What is the water usage charge?
What is the price of water per kilolitre?
How many litres of water were used on average per day?
Round your answer to the nearest litre.
If the price of water rises by $10%$10% next quarter, calculate the new price per kilolitre.
As an exercise we could research the price of water in different countries around the world and compare it to the price of water in Sydney NSW (around $\$2.08$$2.08 per kL in 2019).
We might consider some of the factors that impact the cost of water, both now and in the future?
Practice question
Question 2
The following table appears on Angela's gas bill. It contains her gas meter readings and a calculation of her gas usage over the billing period.
Use the table to answer the following questions:
What is the billing period for this bill?
Name the energy plan that Angela is on.
What is the unique number identifying Angela's address as a gas connection point?
Determine the amount of gas, in cubic metres (m3), consumed during the billing period.
Determine the amount of gas, in megajoules (MJ), consumed during the billing period.
Round your answer to the nearest megajoule.What word on the bill might indicate that the bill is inaccurate?
Energy plans and tariffs
The price per unit of energy is called a tariff.
Depending on where we live, we may have a choice of energy retailers. Most will sell electricity or gas through a choice of plans, each with a different tariff (pricing) structure. Some plans include contracts over a fixed period, like two years, and have penalties for ending the contract early. As consumers we must make careful decisions about which plan best suits our needs.
Tariffs are often quoted on energy bills in dollars per unit of energy, while on energy plans they are quoted in cents per unit of energy. This can be a point of confusion for consumers. In calculations, always convert a tariff in cents to a value in dollars.
The two most common energy tariffs are a fixed rate and a variable rate.
A fixed rate (or single rate or flat rate), charges the same rate regardless of the time of day energy is being used.
As an example, electricity might be charged at a flat rate of $22.35c$22.35c per kilowatt hour (kWh). Note that gas will be charged in cents per megajoule (MJ).
Flat rate tariffs are available to everyone and are the most common way energy is charged. No special meter is required.
A variable rate charges different rates depending on either the amount of usage (block tariff) or the time of usage (time of use tariff).
With a block tariff the first block of energy used is charged at one rate. The next block is charged at a different rate, and so on.
Example:
| Amount used | Rate |
|---|---|
| First $20500$20500 MJ per day | $2.63c$2.63c cents per MJ |
| Next $20000$20000 MJ per day | $2.45c$2.45c cents per MJ |
| Thereafter | $2.36c$2.36c cents per MJ |
With a time of use tariff, the cheapest rate is charged during off peak times (at night typically between 10pm and 7am). The most expensive rate is charged during peak times (typically between 2pm and 8pm, Monday to Friday) and all other times are charged at a shoulder rate. Time of use tariffs are only available for consumers with 'smart meters' installed. Smart meters send usage data directly to the energy company, eliminating the need for regular readings at the meter.
Example:
| Time of use | Rate |
|---|---|
| Peak (2pm to 8pm) | $34.5c$34.5c cents per kWh |
| Off peak (10pm to 7am) | $12.5c$12.5c cents per kWh |
| Shoulder (other) | $27.5c$27.5c cents per kWh |
Some homes have high energy-use appliances, such as hot water systems, connected to a separate electricity meter through a dedicated circuit. These are called controlled loads.
Most energy companies will offer a cheaper tariff for controlled loads, as they operate only during off-peak hours. Running a hot water system as a controlled load can help reduce overall energy costs.
Australian households have the highest uptake of solar energy systems globally. Most homes use solar or photovoltaic (PV) systems to supplement the electricity supplied to their home from the regular network (the grid).
Besides having lower electricity bills, solar users may be paid a small amount by their energy company for any unused solar-generated electricity that is fed back into the grid. This will appear as a credit on their bill called a solar feed-in tariff.
Worked example
On average, James uses $9.5$9.5 kWh of electricity in his home each day. He is currently on a fixed rate electricity plan that has the following charges.
| Charges | Rate |
|---|---|
| Usage | $31.32c$31.32c per kWh |
| Supply | $89.76c$89.76c per day |
James is considering switching to a flexible plan where his electricity usage is charged at different rates depending on the time of day.
| Charges | Rate |
|---|---|
| Peak usage (2pm to 8pm) | $58.58c$58.58c per kWh |
| Shoulder usage (7am to 2pm and 8pm to 10pm) | $26.63c$26.63c per kWh |
| Off peak usage (10pm to 7am) | $16.26c$16.26c per kWh |
| Supply | $89.76c$89.76c per day |
James estimates that during an average day he would use $2.5$2.5 kWh of electricity during peak time, $2$2 kWh during off peak time and $5$5 kWh through the remaining shoulder periods.
- If James stays on the fixed rate plan, calculate his total electricity costs for a $92$92 day period.
Think: We want to convert the rate from cents per kWh to dollars per kWh (i.e. $31.32c$31.32c per kWh $=$= $\$0.3132$$0.3132 per kWh). Then we want to find the usage cost and supply cost over the $92$92 day period, and then add the results.
Do:
| Daily usage cost | $=$= | $\text{rate per kWh }$rate per kWh $\times$×$\text{daily usage in kWh }$daily usage in kWh | (Formula for daily usage cost) |
| $=$= | $0.3132\times9.5$0.3132×9.5 | (Substituting) | |
| $=$= | $\$2.9754$$2.9754 | (Simplifying) | |
| Usage cost for 92 days | $=$= | $2.9754\times92$2.9754×92 | (Multiplying daily usage cost by the number of days) |
| $=$= | $\$273.7368$$273.7368 | (Simplifying) | |
| Supply cost for 92 days | $=$= | $0.8976\times92$0.8976×92 | (Multiplying the daily supply cost by the number of days) |
| $=$= | $\$82.5792$$82.5792 | (Simplifying) | |
| Total cost (fixed plan) | $=$= | $273.7368+82.5792$273.7368+82.5792 | (Adding the usage and supply costs) |
| $=$= | $\$356.32$$356.32 (2 d.p.) | (Simplifying) |
- Calculate his total electricity costs for a $92$92 day period if he switches to the flexible plan.
Think: We want to find the costs associated to each usage type and the supply costs, and then sum the results.
Do:
| Peak usage cost for 92 days | $=$= | $0.5858\times2.5\times92$0.5858×2.5×92 |
| $=$= | $\$134.734$$134.734 | |
| Off-peak usage cost for 92 days | $=$= | $0.1626\times2\times92$0.1626×2×92 |
| $=$= | $\$29.9184$$29.9184 | |
| Shoulder usage cost for 92 days | $=$= | $0.2663\times5\times92$0.2663×5×92 |
| $=$= | $\$122.498$$122.498 | |
| Supply cost for 92 days | $=$= | $0.8976\times92$0.8976×92 |
| $=$= | $\$82.5792$$82.5792 | |
| Total cost (flexible plan) | $=$= | $134.734+29.9184+122.498+82.5792$134.734+29.9184+122.498+82.5792 |
| $=$= | $369.7296$369.7296 | |
| $=$= | $\$369.73$$369.73 (2 d.p.) |
- Which plan will give James the most savings and how much would he save?
Think: We want to find the difference between the fixed rate plan and the flexible rate plan.
| Savings | $=$= | $369.7296-356.316$369.7296−356.316 |
| $=$= | $13.4136$13.4136 | |
| $=$= | $\$13.41$$13.41 |
Most electricity generated in Australia and supplied to the grid is still produced from non-renewable fossil fuels such as coal and natural gas.
Green power is a voluntary government initiative whereby consumers can choose to support Australia's renewable energy industry through payments on their electricity bills. Although the cost of 'green power' electricity is slightly more expensive for the consumer, the additional cost over a week may be less than the price of a cup of coffee.