Why Is My Electricity Bill So High?
If you've received a high electricity bill or gas bill, you can end up feeling pretty helpless.
I've spoken to many people over the years who think their high electricity bill was caused by:
- an electricity leak,
- a faulty appliance,
- an incorrect utility meter,
- or even a neighbour stealing power.
While these things are technically possible, they're extremely rare. So rare that they don't even rate a mention in my 'top ten' list.
When it boils down to it, high power bills are the result of three main things:
- Actual high energy usage (points 1 to 7 in my list below),
- Billing issues (8 and 9),
- A problem with solar PV panels (item 10).
How do I know this? Over several years I conducted over 1,000 energy audits all around Australia. These energy audits ranged from small apartments to large office buildings, restaurants, and sporting facilities. I've seen first hand, again and again, that what people think causes high power bills is not what actually causes high bills.
In Summary, the Main Causes of High Electricity Bills Are:
- Ducted air conditioning
- Electric water heaters
- Other electric heaters
- Ventilation fans
- Water pumps
- Estimated bills
- Bad rates
- Solar panels (with issues)
Important! A combination of factors can often cause a high electricity bill. For most high power bills, a few of the issues below will apply, not just one of them.
This guide covers both high electricity bills and high gas bills. However, my main focus is on electricity usage as complaints about these bills are the most common.
1. Air Conditioning
Ducted air conditioning would have to be the most frequent cause of high power bills that I have seen. That's for both households and workplaces. As a guide, in most businesses I have assessed, air conditioning makes up over 50% of their electricity bill.
The reason for this is that ducted air conditioners have a high input power rating. Every extra hour you leave them on, your bill will go up.
Here's an example. A domestic ducted air conditioning system consumes about 5kW of electricity. Use it for 5 hours per day, 180 days per year, and you've already got over $1,000 of electricity usage. And that's from just one appliance.
5kW (input) x 5 hours/day x 180 days/year x $0.25 per kWh = $1,125
Note: your input power may be higher, usage longer, and tariffs more expensive. Use our electricity cost calculator to make your own calculations for any appliance.
On the 'outdoor unit' of your Air Conditioner, find the compliance plate. In the example pictured above, the unit has an input of 5700W (5.7kW) when cooling and 4700W (4.7kW) when heating.
A noteworthy related mention is ducted gas heating. Most popular in Victoria, they're also used in cold climates in other states. These monsters really chew through natural gas or LPG. Not to mention the fact they also need electricity to power their large air circulation fans.
You know how I just said a domestic air conditioner might use 4.5kW? Well, ducted gas systems have an input rating of about 90MJ/h. This is equivalent to 25kW. Yup, you read that right. No wonder the gas industry loves extolling the 'virtues' of gas heating!
What can be done about high electricity bills caused by air conditioning?
- Keep the heat (or cold) out of your building in the first place. Use shading, draft proofing, and thorough insulation to use less air conditioning.
- Preference the use of quality ceiling fans, portable fans, and efficient heaters instead of air conditioning.
- Set the thermostat higher in summer and lower in winter. Every 1˚C adjustment can reduce heating or cooling costs by 5-10%. To automate your energy savings, see our Bill Buster air conditioning remote and Sensibo smart AC controller.
- If possible, use small, high-efficiency split system air conditioners instead of ducted systems.
2. Water Heaters
Hot water systems typically account for about 30% of energy usage in households. Regardless of whether your system is a tank or instantaneous ('continuous flow'), it will use a lot of energy.
Hot water already starts from a high base in terms of energy usage. But things can go from bad to worse, very quickly.
Reasons for a high electricity bill from hot water include:
- A water leak (dripping tap, or leak at the tank).
- Inefficient water fixtures and shower-heads.
- A resident teenager (or another long-shower-taker or two!)
In almost every office across the country, you'll find at least one electric hot water tank. They're usually stuck somewhere out of sight - like in a cupboard or in the roof cavity. Just about every kitchenette and bathroom will have one, somewhere. And then you need to add to the mix those instant hot/cold taps that are all the rage.
Instant boiling (or chilled) water isn't needed after hours. So switch the unit off (as in this photo), or place it on a timer.
Pool & spa water heaters, although less common, are massive consumers of energy. They are fuelled by natural gas, electricity (including heat pump), or solar (black pipes on the roof). Even solar water heaters for pools use plenty of electricity. This is thanks to the circulation pump, which may need to run 8 to 10 hours per day.
Here's how to reduce high energy bills caused by hot water usage:
- Check for leaking taps, or leaks on or around your hot water unit. Get them fixed as needed.
- Install tap aerator inserts and efficient shower heads to reduce hot water consumption.
- Reduce the set-point temperature and make sure the pipework is insulated, particularly near the tank.
- Preference the use of high-efficiency heat pump hot water where practical. If you're stuck on gas (eg. a restaurant or other high user) choose the highest star rated continuous flow unit you can find.
- At work, get all those hot water devices to switch off after hours. The Zip or Billi under-sink units often have programmable timers. Electric tanks can have a timer fitted at your board by an electrician.
- Heated pools and spas should have the set-point as low as possible. Deploy a pool cover whenever they're not in use - as the highest energy losses are from evaporation.
3. Other Heaters
Plug-in electric heaters might look innocent, but they can consume a large amount of power. The classic example is an oil column heater used to heat a bedroom overnight. You might think the heater doesn't use much… Until you get your next electricity bill.
For example, a single 2 kW electric heater running 8 hours per day consumes about $360 of electricity during one quarterly power bill.
Cheap to buy, but very expensive to operate. Be careful when using high power plug-in heaters.
At least you can see a portable electric heater. Some of the worst heating culprits remain invisible to the user.
Examples include underfloor electric or hydronic heating and heated towel rails. Heating circuits like these can rack up high bills as they're often left running all day. Some in-slab or underfloor heating can be left on without the occupants even noticing. I've been in several homes where heating was unintentionally left on in a seldom-used bathroom.
Clothes dryers are another heater that often contributes to high electricity bills. Each full load in a clothes dryer can use up to 5kWh of electricity.
Related appliances are electric (or gas) ovens and any form of kiln. These are heaters too, just used for cooking or other processes. These are a big deal in any commercial kitchen (where they can use up to 40kW each). Even in households, if used often, they can contribute substantially to your electricity or gas bills.
Here's what can be done about it:
- Use timers or other controllers to restrict the operation of electric heaters. Particularly underfloor heating and heated towel rails which are left on all the time.
- Use thermostats, where available, and set them to a sensible temperature. Say 18˚C to 20˚C for general heating, or much lower if overnight. You can use a HeaterMate on any plug-in electric heater to achieve this.
- Use effective low-power radiant and conductive heaters as a preference. Things like a heated foot mat, heated throw blanket, or electric blanket.
- Minimise the use of clothes dryers. If you're a heavy clothes dryer user, switch to a 'heat pump' dryer.
Did You Know? Kettles, toasters, and hair dryers are also 'electric heaters', but you won't find them mentioned above. They have a high input power rating (around 2kW) but are only used for minutes per day, not hours. As such, their total contribution to a high electricity bill tends to be small.
4. Ventilation Systems
Ventilation or extractor fans are yet another significant but somewhat 'invisible' energy user. They often sit in roof cavities, on the roof, below the sub-floor, or in the car park.
There's often a fleet of ventilation fans on the roof of commercial buildings or unit blocks. What's more alarming is that these fans usually operate 24/7 at full speed. And that's even if the building is only occupied during business hours.
Extractor fans for bathrooms, kitchens and car parks are found everywhere. You'll see them dotted around the roof on most buildings (as pictured).
This is not a problem confined to large buildings. I've been to many homes with large electricity bills thanks to sub-floor or other 'always on' ventilation. These are often installed as a quick fix to prevent damp, mould, or other issues.
The problem with all this ventilation is not only its direct energy usage. All the air extraction works against other energy-using systems. For example, you may be trying to heat or cool a room, but at the same time, an extractor fan is removing this air. This can indirectly also drive up your heating and air conditioning costs.
Don't get me wrong, fresh air is required, particularly in office buildings. But there are often much more sensible ways to do it.
Here are my top tips for reducing ventilation electricity usage:
- Use controls to only operate ventilation fans when they're actually needed. By 'actual need' I mean things like removing moisture from a bathroom, or fumes from a carpark. At the most basic level, you can use a timer. More advanced options include occupancy, temperature, humidity, or carbon monoxide (CO) sensors.
- To retain 'some' ventilation at all times, install a variable speed drive. This can be programmed to reduce power draw at all times outside of the peak.
- Where 'conditioned air' is involved, use a heat exchanger (also known as 'heat recovery ventilation' or 'energy recovery ventilation'). That way not all the energy from inside is lost to the hot or cold outside air.
5. Water Pumps
13% of Australians now live in a home with a swimming pool. I can also say that, as a rule, these households have the highest electricity bills. The main culprit is the pool filter pump which circulates the water and may also run the pool cleaner.
Pool shops and swimming pool installers are notorious for exacerbating this problem. Despite improvements in pool pump efficiency, they still (generally) install over-spec filter pumps. Also, as they don't have to pay your electricity bill, they recommend the pump runs for 8 hours or more per day. Running a pump for this long is not necessary in most cases.
Irrigation pumps are also significant users of energy. Water pumps are used on rural properties, farms, golf courses, and sports fields. As with most energy guzzlers, they're usually not installed with energy efficiency in mind. Pumps are often oversized and the pipes undersized.
Incorrectly sized and operated pumps can really sting on your electricity bills. In energy terms, the motor speed is critically important. This is because power is proportional to the cube of speed. In other words: halving the pump speed reduces its power requirement by over 85%.
Irrigation pumps can be massive in size. But even small pumps can cost you big time. I'm thinking in particular of hot water circulation pumps.
Hot water reticulation pumps are found in apartment buildings and large homes. They circulate hot water through a network of pipes so that you don't have to wait several minutes to get hot water. The problem with this is not so much their direct energy usage (as the pumps are small). It's more the fact they are continuously sapping energy from your hot water system. And as I explained in point 2 above, hot water tanks use a lot of energy.
Noteworthy related mentions include fish tanks, pond pumps and water features. All of these need circulation pumps of varying sizes. In the case of fish tanks, they may even have an electric heater.
Here are some of my top recommendations for water pumps:
- Reduce your pool pumps operating time and/or use a variable speed drive to run it more efficiently.
- For irrigation or transfer pumps, use a smaller pump for a longer time, to move the same volume of water. Even better, install a standalone solar-powered pump if suitable.
- Hot water reticulation pumps should be turned off, set to their slowest speed, and/or placed on a timer.
Did You Know? You can use a Power Meter to check the energy usage of any plug-in appliance.
Refrigeration gets a bad rap in terms of energy consumption. When asked about key energy users at home, people often nominate refrigeration. I guess they're right in the sense it's switching on and off all day. But refrigerators are actually now quite energy efficient. So for households, it's more a case of how many you have.
Households with big electricity bills often have two or more refrigerators. A fridge/freezer, chest freezer, plus a drinks fridge, and all of a sudden you have a considerable electricity bill.
For cafes, restaurants and clubs, refrigeration can be their single biggest energy user. I'm talking about cool rooms, freezer rooms, display fridges & freezers, under bench fridges, and ice machines. Unfortunately, these items do not carry star ratings to encourage energy savings.
A practically empty commercial display fridge costing over $1,000 per year to operate. Measured with a Power Mate Lite.
The sheer volume of refrigerators can also be a problem. I've been to many sports fields with well in excess of 20 refrigeration systems. The site might be shared by ten different local clubs, and each seems to have acquired at least two fridges. The fact they don't pay the electric bill (the local council does!) also contributes to the proliferation of energy-guzzling old refrigerators.
Actions to combat high electricity bills from refrigeration:
- Most importantly, consolidate the number of devices in use. Instead of using two or more partially full fridges, use one close to full capacity.
- Anything that does not contain perishables (e.g. most drinks fridges), place them on a plug-in timer.
- For households a set-point of 4˚C in the fridge and -15˚C for the freezer is sufficient. For businesses, lower settings may need to be used to ensure safe food handling and rapid chilling of stock.
- For cool rooms, maximise the insulation and minimise air changes. For example, ensure the door is well sealed and use a PVC door curtain. This will prevent all the cold air from rushing out each time the sliding door is opened.
Generally speaking, lighting contributes more to high business electricity bills than residential ones. Regardless, lighting is an area where some of the most significant energy-saving opportunities are available.
Key problem areas for lighting include:
- Use of old technology.
- Inappropriate control.
- Over-spec installations.
Incandescent, halogen, fluorescent, and other lamps can now all be replaced with LED for up to 90% energy savings. Old lights not only use a lot of energy, they also have higher maintenance costs. Not to mention the fact that most old lights should be called 'heats' not 'lights'.
Inappropriate control can simply mean leaving the lights on when they're not needed. Like office lighting left on from when the first person arrives at 7 am to when the cleaner leaves at 9 pm. Or maybe outdoor lights left on over-night when they're only needed for a few hours. An even worse example of this can be found in fire escape stairwells. They're almost never occupied, but they've got lights running at full brightness 24/7.
Efficient LED lights won't necessarily solve a high electricity bill if you use too many of them. Many buildings are lit with the same intensity throughout. They make no real consideration of the task being performed in each area. A jeweller needs much better lighting than a forklift driver. In the same way, you probably want brighter lighting in your kitchen than in your bedroom.
Actions to reduce lighting's contribution to high electricity bills:
- Upgrade all lights and fitting to energy efficient LED. There's now an LED solution for just about all situations. From bulbs in every shape, to factory lights, and everything in between.
- In low occupancy spaces install LED lights with sensors. I mean that mostly for commercial premises, like the fire-escape example above. At home, you can usually just politely ask the other occupants to switch off the lights. Although that's not always the case!
- Use an appropriate amount of lighting for a given task. Consider the appropriateness of lighting and use a lux meter to assess lighting levels. Light levels can be much lower in corridors and storage areas than work areas, for example.
8. Estimated Electricity Bills
When gas or electricity bills have been estimated for a few periods, the final 'correction' bill can be unexpectedly high.
The problem starts when your utility company sends you an estimated bill instead of an actual bill. This, in itself, is not a problem. Energy companies are allowed to estimate your usage, but they must read your meter at least once a year.
The problem is that you may not even realise this is happening. Then, when the 'correction' bill finally arrives, it can include a catch-up amount, making it unusually high.
Don't think for a minute that they're any good at making these estimates. You'd think they would be, as after all, this is what they do (send bills). But almost all 'estimated' bills I have seen are poor estimates. They don't even seasonally adjust the estimate, in my experience.
E is for Estimated. And it means you have an essentially meaningless energy bill.
What you can do about this:
- Be alert to this possibility and check your bills for the word ‘estimated’, or the letter ‘E’ beside the meter readings. If you keep getting estimates you can usually take a reading yourself and phone it in. If your bill says 'Actual' or has the letter 'A' next to the reading, there's no need to worry.
- Use an energy monitor to track your energy usage between bills. This way a bill (estimated, or not) will never come as a shock.
- Take your own meter readings. I particularly recommend this on the first day you move into a property, and on the day you leave. If you do not have this 'hard evidence' you could end up paying for some of the previous or next occupant's usage.
9. Bad Electricity Bill Rates
The lazy tax does not only apply to the deals you get from your bank and on insurance. It most certainly also applies to the tariffs you are charged by electricity and gas retailers. And it can often be very confusing as to what constitutes a 'good deal.'
More important than the best deal is to understand your bills. If you don't understand your electricity bills, it's a little hard to shop around and get better rates. And more to the point, there may be better ways for you to save than merely getting a better deal. Two examples of this are time of use tariffs and peak demand charges.
A 'time of use tariff' is one that varies by the time of day, day of week, and/or time of year. Sound confusing? Well it is, in a way, which is why you need to know the times that the different rates apply. Many households and businesses pay five times more during peak periods (e.g. a weekday evening vs overnight on a weekend).
Another example found on most commercial power bills is the peak demand charge. Rather than a 'volume' of electricity, these tariffs hit you for the highest 'capacity' you require from the network. This rate applies to the whole month for the peak power you may draw for only 30 minutes on one day a year. This is shown on your bill as 'demand kVA' or 'peak kW'.
How to address high energy bills from poor rates:
- First and foremost learn how to read your electricity and gas bills. Work out where most of your cost is coming from to better inform your energy-saving actions.
- There are government websites and private companies that compare rates. In general, I recommend reviewing your rates once every two years. Larger properties should put their bills out to tender. For households, it's often as easy as phoning your current provider and asking for a better deal.
WARNING: Electricity and gas tariffs are fraught with hidden details. Make sure you compare apples with apples. Who cares about the percentage discount offered. Rather ask:
- What is the final rate you will pay per kWh?
- Are you being quoted an "inc GST" or "ex GST" rate?
- Is your daily service charge staying the same, or going up?
10. Solar Panels
Solar PV panels are an excellent way to create power and reduce your bills. But if you don't understand how they work, they can inadvertently cause high electricity bills. That's not the sales pitch that the installer gave you, was it?
Properties with high power bills and solar, may encounter one of these three issues:
- Lack of knowledge about the capability of their solar panels.
- Reduced performance due to a maintenance issue.
- A billing or metering problem.
The first point relates to how much (and when) your panels produce power. Sometimes people will make assumptions like "now that I have solar, I can run my ducted air con for free". But as I outlined in point 1, air conditioners can use a lot of power. So this actually depends on the weather, time of year, time of day, size of air conditioner, and size of the PV array. Not so simple!
Secondly, if you don't know how your solar is meant to perform, you won't know when it's faulty. Solar PV panels are incredibly low-maintenance and reliable. I don't know of any other consumer product that carries a 25-year performance warranty. Even so, the lower-spec and cheaper your system was, the more likely you are to face some sort of problem. These include faulty inverters, faulty panels, shading, water-logged connections, and so on.
Thirdly, you may have a billing or metering error - both of which can be tricky to identify. Customers who don't check their system periodically can end up going months, or years, with no benefit from their solar panels.
Solar panels are awesome. But make sure you keep an eye on your system, and understand your usage, to get maximum benefit.
Here's how to prevent solar panels from leading to high power bills:
- Install a solar energy monitor. This shows your energy usage, solar production, and how they relate to each other. You can then make adjustments to maximise your utilisation of solar power.
- Check that a 'feed-in tariff' is appearing on your power bills. Understand the difference between 'self-consumption' and 'exported power'. See our blog post point 5 for details.
- Check your inverter at least once every few months and write down the 'total' figure. Once you have a yearly total, compare it to an online calculator like this to make sure that all is in order.
Ready to Crush Your High Electricity Bills?
Follow the detailed advice above, or in summary:
- Understand your energy usage in more detail. Review our related guide on how to make sense of confusing power bills. Then, buy yourself a power meter and electricity monitor to track your usage. You'll never receive a surprise power bill again.
- Next, start taking action by changing how you use power. Most importantly: upgrade to energy efficient heating & cooling, LED lighting, and other appliances.