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.
Generation
Typically, power stations generate electricity using fossil fuels, solar and other sources.
The electricity is transformed to high-voltage for transport.
Transmission
High-voltage lines carry the electricity long distances.
The electricity is transformed to low-voltage for distribution.
Distribution
Distribution lines send the electricity towards houses.
In some communities, large batteries store surplus energy.
Consumption
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.
Average annual residential energy bill
42%
Generation
The cost of generating electricity.
6%
Transmission
The cost of transferring electricity from the point of generation to your distribution network.
26%
Distribution
The cost for distributing electricity from distribution networks to homes and businesses, as well as maintenance and development of the network.
19%
Retail
The cost of establishing and maintaining your electricity account and billing.
4%
Environment
The cost of government environmental schemes which are added to your bill.
2%
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.
1%
Climate Change Fund
Some of the cost of the NSW Climate Change Fund is passed on to customers. Find more information here.
Bill charges and terminology explained
The above costs are covered in your energy bill through different charges. While electricity bills 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 2025.
Usage charges
The most common types of usage charge are:
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 | $0.40 | $80 |
Peak/off-peak You pay a higher rate for using electricity in ‘peak’ hours. These are hours when there is high demand for electricity. You pay a lower rate for using electricity in ‘off-peak’ hours. This is also sometimes referred to as ‘time of use’.
| Charge | Units | Rate per Unit | Amount |
|---|---|---|---|
| Peak Usage | 100kWh | $0.65 | $65 |
| Off Peak Usage | 100kWh | $0.30 | $30 |
The usage charge that applies to you will depend on the electricity plan you have selected and the retailer you are with.
What is a kWh?
kWh (kiloWatt hour) = a unit of energy consumption. It measures the total amount of energy used in an hour.
Supply Charge
This is a daily fixed charge, meaning that it does not vary with the amount of electricity used.
The charge applies to every day in the billing period.
| Charge | Units | Rate per Unit | Amount |
|---|---|---|---|
| Supply | 31 days | $1.09/per day | $33.79 |
For information on solar pricing visit 'Getting the most out of your solar'.
Is this my actual usage, or an estimate?
Your bill should indicate if your bill is based on an actual read 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.
Additional resources
If you are looking for some extra information about energy, checkout these resources.
