Retailers advertise discounts as a percentage, and the percentage is easy to compare. What it applies to is not.

Two questions for every discount

What is it taken off? Some discounts apply to the usage charges only. Some apply to the whole bill, including the supply charge. Some apply to the bill after other charges. The same percentage can mean very different dollars.

What do you have to do to get it? Discounts come in two kinds:

  • Guaranteed: you get it as long as you are on the plan, with no conditions.
  • Conditional: you get it only if you do something, most often pay the bill by the due date, sometimes also sign up for direct debit or paperless billing.

A conditional discount you will reliably earn is worth taking. One you will miss every second bill is not.

The reference price

The Australian Government sets a ceiling on standing offers, the Default Market Offer (DMO), and Victoria sets its own, the Victorian Default Offer (VDO). Retailers often show a discount against that reference price, which tells you how far below the ceiling the plan sits, not how it compares with other plans. Compare plan against plan on what you would pay for your own usage.

What happens when the discount ends

Some plans carry a discount only for a set benefit period, often a year. After that, the rates may rise. This is one reason to put a reminder in your calendar for the month before the period ends. If the retailer has sent you a notice, it will say when.

A simple test

Take two plans and your annual usage in kWh. For each plan, add the supply charge for the year, add the usage charges, then apply the discount only to the part it covers and only if you would meet the condition. The lower total is the cheaper plan for you. A comparison tool does the same arithmetic; the point is knowing which assumptions it is making.

A discount is a rate cut on one part of the bill. Ask which part.

Do not skip the exit terms

Most energy plans in Australia have no exit fee, but some do. The plan's fact sheet states it, so check before you sign up and not after.

See today's offers, with the discount terms each retailer publishes: compare electricity offers.