Step Rates Explained
What is step pricing?
Put simply, step (or block) pricing is different unit prices for various quantities of an item. Many energy plans use step pricing. It means that the price you’re charged for energy is done so in blocks (quantity of energy usage). The price you’re charged is different depending on each block you consume. Steps are quoted using daily allowances.
How is step pricing calculated?
GloBird calculates an average price over the billing period. For example, if step one is allocated at 20kWh per day, and there are 30 days in the billing period, your step one allowance would be 600kWh for that billing period (20kWh per day x 30 days = 600kWh). That means you would be charged the step one rate for the first 600kWh in the billing period.
Here’s a two-step price example:
Imagine you use a total of 700kWh during your billing period. Step one is charged at the step one rate of $0.20 for the first 600kWh, and step two is charged at $0.25 for anything above 600kWh. In this scenario you would pay $0.20 for 600kWh of energy and $0.25 for the remaining 100kWh.
Why are steps quoted daily, but worked out based on an average?
The answer is because billing periods vary. Let’s say step one is allocated at the first 20kWh per day. Then imagine your billing period is just two days. If you use 35kWh one day but only 3kWh the next, that’s an average of 19 kWh per day over the two days. So you’d only pay the step one rate because on average you used less than the allocated daily step allowance.