Demystifying Your Electricity Costs
Looking to better understand what goes into your electricity bill? You’ve come to the right place!


The journey of electricity

There are several components to the electricity supply chain. The four main buckets are electricity generation, transmission, and distribution, before arriving at your home ready for you to use when you need it.

Power stations generate electricity using fossil fuels, solar and other sources. The electricity is transformed to high-voltage for transport.
High-voltage lines carry the electricity long distances. The electricity is transformed to low-voltage for distribution.
Distribution lines send the electricity towards houses. In some communities, large batteries store surplus energy.
Electricity passes through a switchboard into your home. Retailers track your usage through a meter attached to your home.




What does your electricity bill pay for?

Your electricity bill covers several different parts of our energy system. Each part represents an essential link in the supply chain providing electricity to your home, and the development of more sustainable, reliable and affordable electricity.

The cost of generating electricity.
The cost of transferring electricity from the point of generation to your distribution network.
The cost for distributing electricity from distribution networks to homes and businesses, as well as maintenance and development of the network.
The cost of establishing and maintaining your electricity account and billing.
The cost of government environmental schemes which are added to your bill.
Climate Change Fund
Some of the cost of the NSW Climate Change Fund is passed on to customers. Find more information here.
Infrastructure Roadmap
Some of the costs incurred in relation to the Electricity Infrastructure Roadmap scheme are passed on to customers. Learn about the scheme here.



Bill charges and terminology explained

Your electricity bill includes a cost breakdown, and while they don’t all look exactly the same, here are examples of the common charges you see on your bill.

Example pricing based on AGL’s standing offer (including GST). Retail rates from 1 July 2024.

What is a kWh?

kWh = A unit of energy equivalent to one kilowatt (1 kW) of power expended for one hour. It is the standard unit of measurement for electricity consumption.

Usage Charges

Your bill will typically show one of two energy usage charge types:

Flat rate


Peak/Off Peak 

Flat Rate
Your electricity use is charged at a flat rate per unit of electricity used.

Charge  Units  Rate per Unit   Amount 
Flat Rate                200kWh   $0.37  $74.00

Peak Usage

You pay a higher rate for using electricity in ‘peak’ hours. Your retailer may also include a demand charge that is based on the highest amount of electricity drawn from the grid at any one time, such as using a lot of appliances all at once.

 Charge  Units  Rate per Unit   Amount 
 Peak Usage          100kWh   $0.27    $27.00

Off Peak Usage

You pay a lower rate for using electricity in ‘off-peak’ hours.

 Charge  Units  Rate per Unit   Amount 
 Off Peak Usage    100kWh   $0.59  $59.00

Supply Charge

This is a daily fixed charge that applies to the number of days in the billing period.
 Charge   Units   Rate per Unit   Amount 
Supply                   31 days   $1.03/per day  $31.93    

Solar Feed-In

Any unused electricity that your solar power system generates is credited to your bill.

 Charge  Units  Rate per Unit   Amount 
 Solar Feed-in       25kWh   -$0.07  -$1.75

Is this my actual usage, or an estimate?

A smart meter will always provide an actual read. However for non-smart meters, if the meter reader is unable to access your meter, your bill will be based on an estimated read. Your retailer may base this on historical metering data, or if this is not available, on the average usage of a comparable customer. This will be clearly marked on your bill. 


What is within your control to influence?

Looking at your electricity bill and knowing how to read it is the first step. Next is knowing how to effectively influence the price you are paying. The simplest way to do this is to change how and when you are using electricity. The below graph is a representation of the average household energy use - how do you think you line up? Are there areas you could look to optimise your electricity usage?

Average Household energy use 

How can you start saving energy today?

There are some simple things you can do today to make your home more energy efficient;

  • Unplug unused electronics like extra fridges

  • Turn off any unused lights

  • Use natural lighting during the day

  • Choose the cold setting on your washing machine

  • Change your usage pattern.

For more tips on optimising your energy usage, check out Part 2 - Optimising your electricity usage.