No matter the size of your operation, energy costs can take up a large portion of business costs.
The tariff that underpins your energy supply is governed by an energy contract. One way to save on your energy costs is reviewing the current contract to make sure it’s working for your business.
It’s possible to make savings on your energy bill by simply renegotiating the contract. Many retailers offer competitive rates to gain your business so look around regularly.
Various energy contract types are available depending on the size and location of the business. There are 2 main types of energy plans.
Standard retail contracts
Standard retail contracts are basic with terms and conditions set by law that can’t be changed by the retailer.
You are most likely to be on this type of contract if you have never changed retailers or contacted a retailer about an energy contract.
Market retail contracts
Market retail contracts include minimum terms and conditions set by law but can also be more flexible than standard retail contracts.
A market contract is usually based on market prices which means greater exposure to price changes, but it can save you money if usage is actively managed. Market contracts can also be negotiated.
Market contracts may cost less than standard retail contracts, offer renewable energy or discounts, and often have fixed term durations where exit may be charged if you leave early.
5 steps before changing contracts
1. Look at the contract carefully
For smaller businesses on market retail contracts, ask the retailer about terms and conditions. Pay attention to details on pricing and any discounts with an offer, such as pay-on-time discounts. Contracts and clauses vary among energy retailers, so it’s worth doing some research and talking to an energy broker to discuss available options.
2. Shop around to find a better deal
Search online to compare energy contracts offered by different retailers in your area. Consider using an energy broker or third party to get a better deal, but be aware of all fees involved before committing, or limitations on the offers they have available.
Check out the Energy Made Easy website to compare gas and electricity plans including details like solar feed-in tariffs, discounts, incentives, and key terms and conditions. This should make it much simpler to find a plan tailored to your business. A range of energy-related publications are also available on the Australian Energy Regulator website.
Small businesses in NSW, South Australia and south-east Queensland can use the reference price set by the Default Market Offer (DMO) to compare electricity contracts. The DMO sets the maximum price that electricity retailers can charge consumers on standard retail contracts. See the DMO fact sheets and case studies to find out more.
3. Go to market at the right time
There’s no need to wait until the end of your current contract to get a better deal. Energy prices can change throughout the year, so consider negotiating during a low-priced period or when market prices are going down. If contracts have a fixed term, make sure to consider any cancellation or exit fees in calculations.
4. Choose the best contract period
Understanding the energy market can help you choose the right market contract period. In a rising market, where current prices are cheaper than future prices, it may be better to choose a longer contract. In a decreasing market it may be better to select a short period with the aim of buying cheaper in the future.
5. Plan for the future
When negotiating the market contract, factor in any major changes being planned for the business. If the business is planning to expand its operations a shorter contract should be considered until a better understanding of its new energy requirements is available.
Pricing information is available from the following sources:
- the Australian Energy Market Operator (AEMO) displays electricity and gas price and demand information
- the ASX publishes pricing for electricity futures
- the Australian Energy Regulator (AER) publishes daily, weekly and longer-term reports on the performance of wholesale markets and retail markets.
Energy Made Easy has more about changing contracts including a switching checklist for when you've found a plan you like and are ready to switch.
Demand management, or managing when energy is used, can help in negotiating a better energy contract and reducing energy costs.
For businesses, demand charges are often calculated using the highest half hour interval of demand over a period, usually a month. Active demand management can reduce these charges.
You can reduce energy use during peak periods by:
- switching off unnecessary equipment
- installing automatic timers
- using alternative energy.
This allows you to spread energy use to cheaper periods and reduce energy charges.
Monitor site demand to ensure you do not exceed the monthly demand thresholds outlined in your energy contract. Ramping down energy use for an hour or so when electricity demand is nearing the threshold is one way to avoid this.
Consult an energy management expert to find out your demand management options.
To read more, see the Energy Efficiency Council's Demand response 101 factsheet.
See the Demand side opportunities page for more on load shifting and other demand management practices.
Whether your energy use is large or small, consider other energy options such as:
- switching to a green energy provider
- using alternative fuels
- installing solar PV systems to generate your own electricity for use during the day
- installing heat pumps or solar hot water systems to reduce your electricity consumption.
There are many electricity options. Businesses who install an alternate electricity system, for example solar PV, may receive money from retailers for the electricity they feed back into the network (a feed-in tariff).
If you're planning to sell electricity generated from an alternative electricity system, be sure to follow the Australian Energy Regulator’s guidelines. In particular, a retailer authorisation or a retail exemption is required if planning to sell to other sites within the area.
GreenPower is a government scheme that can provide businesses with support and incentives to replace electricity use with certified renewable energy.
See the Renewables guide for more information on alternative energy sources.
Energy Made Easy Australian Government