If your electricity bill has a line item you don’t recognise, it might be a demand charge. A demand tariff is a different way of pricing your power: instead of charging you only for how much electricity you use, it also charges you for your biggest burst of power use in a set window of time. Here’s what that means in plain English, what it can cost you, and how to keep the charge down.
A demand tariff charges you in two ways: for the total electricity you use, and for the highest rate at which you draw power from the grid during a peak window. You can check how tariffs work and compare plans on the government’s free comparison site, Energy Made Easy.
What is a demand tariff?
A demand tariff is an electricity pricing structure with three parts on your bill:
- Supply charge: a fixed daily fee for being connected to the grid, no matter how much power you use.
- Usage charge: what you pay for the total electricity you use, measured in kilowatt-hours (kWh).
- Demand charge: a separate charge based on your highest electricity demand, measured in kilowatts (kW), during the peak demand window in a billing period.
The difference between the two measures is the whole point. Consumption (kWh) is the total amount of electricity you use over time. Demand (kW) is how fast you draw power at a single moment. Run the air conditioner, oven and washing machine at the same time and your demand is high, even if your total usage for the month is modest. Spread those appliances out and your demand drops, even though you used the same amount of electricity overall.
Demand tariffs were introduced because networks have to build and maintain enough capacity to handle everyone’s worst-case simultaneous draw, not just the average. Charging for peak demand means households that put the most strain on the grid at peak times pay more of the cost of that capacity.
How does a demand tariff work?
Your smart meter records your usage in short intervals, usually every 30 minutes. Your retailer or distributor looks at the highest 30-minute interval inside the peak demand window and uses that figure to set your demand charge for the billing period.
That means one short spike can set the charge for the whole month. If you run several big appliances together on one hot evening, that single half-hour of high draw can be the number you pay on, even if every other day was light. Some tariffs reset the peak each month, while others only reset each season or once a year, so check the rules on your own plan.
Here is a simple example of how the maths works. If your highest demand in the month was 6 kW and the demand rate is $12 per kW per month, your demand charge is 6 × $12 = $72 for the month, on top of your usage and supply charges.
When are demand charges measured?
The peak demand window depends on your distributor and where you live. It is usually in the late afternoon and evening, when household use is highest. Some examples:
| Distributor | Demand window |
|---|---|
| Ausgrid (NSW) | 3pm to 9pm daily, in the high-demand months of June to August and November to March |
| Energex (Queensland) | 4pm to 9pm |
| Endeavour Energy (NSW) | 4pm to 8pm on weekdays |
| Ergon Energy (regional Queensland) | 4pm to 9pm daily |
Always confirm the exact window with your retailer, because the window is what decides which spike counts.
How much does a demand tariff cost?
Demand rates vary by distributor and plan. As a guide, typical residential demand charges run from around $5 to $15 per kW per month. Two published examples show the range: Energex lists a residential demand charge of $7.00 per kW per month, based on the highest half-hourly demand between 4pm and 9pm, while Ergon Energy lists a peak demand rate of $8.53490 per kW per month from 1 July 2025.
At $7 per kW, a household whose peak hits 5 kW would pay $35 a month in demand charges. At $12 per kW, the same 5 kW peak costs $60 a month. It adds up: the ACCC reported in December 2024 that demand charges made up about 13% of a customer’s total annual calculated price on average across the National Electricity Market.
Demand tariffs often come with lower usage rates than a standard plan, so they can work out cheaper if you manage your peak well. If you don’t, the demand charge can wipe out the saving.
Demand tariff vs time-of-use tariff
These two are easy to confuse, but they charge for different things:
| Demand tariff | Time-of-use tariff | |
|---|---|---|
| What you pay for | Your highest burst of power use (kW) in a set window, plus your total usage | Your total usage (kWh), with a different price per unit depending on the time of day |
| What drives the cost | One peak half-hour can set the charge for the month | How much power you use during expensive peak hours |
| Best for | Households that can spread big appliances out, or use a battery during the peak window | Households that can shift most usage to off-peak times |
A demand charge is usually layered on top of a flat or time-of-use usage rate rather than replacing it. If you want to understand the cheaper times of day first, read our guide to when off-peak electricity applies in each state.
Who is a demand tariff good for?
Most residential customers are not on a demand tariff. They are more common for businesses, though some networks now offer them to households, especially as smart meters roll out. You need a smart meter to be on one, because the retailer needs interval data to measure your peak. Under the national rollout, smart meters are being installed for new and replacement meters, with the goal of full uptake by 2030.
A demand tariff can suit you if:
- You can stagger big appliances instead of running them all at once.
- You have a home battery that can cover your evening peak.
- You use most of your power outside the peak window anyway.
It can work against you if your household regularly runs the air conditioner, oven, dryer and pool pump together in the evening, or if you charge an electric vehicle during the peak window. In that case, a flat-rate or time-of-use plan may be simpler and cheaper. If you are comparing plans, our guide to the best electricity plans for families shows what is currently on offer, and our fixed vs variable rate electricity guide explains the other big pricing choice.
How to keep your demand charges down
You don’t need to use less electricity overall. You need to stop several large loads pulling from the grid at the same time, especially inside the demand window.
1. Stagger your big appliances. Run the dishwasher, dryer, pool pump and oven at different times where you can. This is the single most effective change, and it costs nothing.
2. Shift usage outside the window. Use timers on the washing machine or dishwasher to start after the peak hours end, or run them in the morning.
3. Make the battery available before the peak. If you have a home battery, it only helps if it is discharging with enough power during the exact interval that sets your peak. A battery that is empty, held in reserve or following a different schedule will not stop the grid from supplying the spike. Check that your battery settings cover the demand window.
4. Watch your real-time draw. Most retailer apps and inverter apps show live power use. Look for recurring spikes rather than your monthly kWh total, and note what was running when they happened.
5. Ask about switching. If a demand tariff doesn’t suit how your household actually uses power, ask your retailer about moving to a flat-rate or time-of-use plan instead. Compare plans before you switch, because the best tariff depends on your usage pattern, not the headline rate.
How to check if you are on a demand tariff
Start with the bill, not the battery app. Look for line items labelled “demand”, “peak demand” or “maximum demand”. The wording differs between retailers, so compare the bill with the tariff sheet for your plan, or ask your retailer to confirm whether your account has a demand component, what the measurement interval is, what the demand window is and what rate applies.
Track your demand figure separately from your kWh total across billing periods. A falling kWh total does not necessarily mean your demand charge has fallen, because the two are measured independently.
Frequently asked questions
Do I need a smart meter for a demand tariff?
Yes. A demand tariff needs interval data to measure your peak, and only a smart meter records it. If your home still has an old accumulation meter, you cannot switch to a demand tariff until a smart meter is installed.
Can I switch off a demand tariff?
Usually yes. Ask your retailer about moving to a flat-rate or time-of-use plan. Some retailers only offer demand tariffs on certain plans, so compare what is available for your meter and distributor before you decide.
Does having solar panels help with demand charges?
Solar helps with your total usage, but it does not directly fix an evening peak, because solar generation falls just as evening demand rises. A battery can help, but only if it is discharging during the demand window with enough power to cover the load.
Will one spike really affect my whole bill?
On a maximum-demand tariff, yes. One high half-hour inside the demand window can set the demand charge for the entire billing period, which is why staggering appliances matters more than using slightly less power overall.
A demand tariff rewards households that spread their power use out and penalises one big evening spike. If that sounds like your home, it may be worth comparing. If your evenings are always busy with several big appliances running at once, a simpler flat-rate or time-of-use plan is probably the better fit.
