The full rollout of the Open Electricity Market (OEM) is almost complete, leaving just areas with postal codes starting with 01 – 33, which will experience it by May 2019.
The OEM is an initiative by the Energy Market Authority (EMA) to create more competition in the electricity market, which will inevitably diversify and innovate the types of products and offerings in the industry. By extension, consumers will have more choice and control over who they purchase their electricity plans from.
Currently, there are 13 different retailers all vying for a share in the market, by providing mainly two standard price plans: Fixed Price plans and Discount-Off-the-Regulated-Tariff plans.
A liberalised energy market is most likely a new and confusing concept for some. So, let’s explore exactly what these two price plans are and what they could mean for you and your electricity bill.
Fixed Price Plan
This plan allows a business or household to pay a fixed rate throughout the duration of their contract, meaning they will pay the same price for electricity every month. Examples of such plans are Sembcorp Power 24M Fixed Price plan and Geneco’s Get it Fixed 24 plan, where electricity rate is set at 17.78 cents/kWh. Therefore, changes in bills are mainly due to changing consumptions rather than extraneous reasons.
SP Group sets tariffs with the approval of the EMA every quarter, meaning that it changes every three months.
The benefit of this plan is that one will not be affected by the regular fluctuations in electricity tariffs. Consumers who opt for this plan can expect consistency and predictability in their monthly bills, with no shocks – assuming that the unit’s electricity consumption does not change dramatically.
The downside of this plan is that if the prevailing tariff dips lower than the fixed rate, due to reasons such as decreased fuel cost, subscribers of this plan will pay a higher rate for that quarter.
Discount-Off-the-Regulated-Tariff Plan
This plan does not fix a rate but instead cuts away a consistent percentage off the quarterly electricity tariff. You will pay the remaining cost of the electricity after the discount is applied. So, as the regulated tariff continues to fluctuate, you will consistently enjoy a discount on it. For example Best Electricity Supply’s BEST Home Saver (24 Months) ensures 22.00% off the regulated tariff. So people who opt for that plan would expect to pay 17.76 cents/kWh for this quarter, where the tariff is set at 22.79 cents/kWh.
This plan ensures you are always paying less than the regulated tariff. If you aren’t concerned with paying an electricity bill that changes quarter-on-quarter, then this plan can offer you some serious savings.
The potential problem with this plan is that if the tariff rises, your electricity bill will still be expensive, despite your contracted discount. If you are on a tight budget, this could mean you have to have a stronger hold on your money to keep up with the bills, instead of making the savings you hoped.
It is important for you to do your research on electricity providers, tariffs and offers before you decide to switch. While some offers will seem wildly cheap, the nature of electricity tariffs may mean that its benefits are not sustainable.
Start working towards a more cost-efficient bill today by comparing electricity plans from a trusted provider today.
