Time-of-Use, Flat and Demand Tariffs Explained

Flat tariffs

A flat tariff charges one rate per kWh regardless of when you use it. It is the simplest structure to reason about: total cost is the total energy multiplied by a single rate, plus the daily supply charge.

Flat tariffs tend to suit sites with steady, round-the-clock load where there is little opportunity to shift consumption, and where predictability of cost is more valuable than chasing a lower rate in a specific window.

Time-of-use tariffs

A time-of-use (TOU) tariff splits the day into bands — commonly peak, off-peak and sometimes shoulder — and charges a different rate in each. The peak band typically covers the part of the day when demand on the network is highest, with off-peak covering overnight and sometimes the middle of the day.

TOU can be advantageous for a business that can genuinely shift flexible load out of the peak band, such as moving hot water heating, refrigeration cycles or vehicle charging to cheaper hours. It can be disadvantageous if your load is fixed and happens to sit mostly in peak periods.

The important question is not whether a TOU plan looks cheaper in general, but whether your usage shape fits it. That requires a bill that shows the breakdown by band, not just a total.

Demand tariffs

A demand tariff includes a charge based on your maximum demand (in kW) alongside or instead of a large energy component. It prices capacity rather than only consumption: you pay for the ability to draw power at your busiest moment.

This structure can reward sites that manage their peak carefully — for example by sequencing equipment so that large loads do not run simultaneously — and can penalise sites whose demand is driven by equipment that cannot easily be staggered.

Because demand charges are frequently set by the network rather than the retailer, they are often not something a retailer can discount. A comparison that ignores them can therefore rank plans in an order that does not survive contact with your actual bill.

How the three interact with a plan comparison

A retailer offer may combine structures: a TOU energy rate together with a demand-based network component, for example. The plan is not a single number but a set of rates applied to the shape of your usage.

That is why a comparison built on an annual kWh total is only as good as the assumption that your usage is evenly spread — an assumption that flat tariffs honour and TOU and demand tariffs do not.