No matter the size of operation, energy costs can take up a large portion of its finances. One way to save is to review the current contract and make sure it’s working for the business. It’s possible to make savings on your energy bill by simply renegotiating the energy contract.
Various energy contract types are available depending on the size and location of the business, including:
Standing offer contracts
Standing offer contracts are basic with minimum terms and conditions set by law.
Market retail contracts
Market retail contracts are between the business and energy retailer. They include minimum terms and conditions set by law but are more flexible than standing offer contracts.
Market contract (negotiated) is usually based on market prices which means greater exposure to price changes. It can save money if usage is actively managed.
Five 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
Search online to compare energy contracts to similar businesses. Consider using an energy broker or third party to get a better deal, but be aware of all fees involved before committing. Energy offers can be compared on Energy Made Easy and a range of energy-related publications are available on the Australian Energy Regulator website.
3. Go to market at the right time
There’s no need to wait until the end of the current contract to get a better deal. Energy prices can change throughout the year, so consider negotiating on a low-priced day 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 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 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
Shift energy use to cheaper periods
Reducing energy use is not always an option, however, managing how and when energy is used can go a long way towards helping negotiate a better energy contract and reducing energy bills.
It can especially pay to reduce energy use during peak periods by switching off unnecessary equipment, installing automatic timers or using alternative energy. This allows for spreading out energy use to cheaper periods and may help reduce network charges. Shifting energy use may also allow you to negotiate a better contract.
See the Demand side opportunities page for more information on load shifting and other demand side practices to save energy.
Consider the switch to alternative energy
Whether 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
- 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 are 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 provides businesses with support and incentives to replace electricity use with certified renewable energy.
See the Renewables for business page for more information on alternative energy sources.