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11 July 2018

Small businesses are feeling the pain on energy

By Kate Carnell

I was particularly impressed to see a new area of focus - small business energy struggles and dissatisfaction - in the Australian Energy Market Commission’s (AEMC) recent annual report on retail energy competition.

The review took a deeper dive into how well the energy sector is meeting small businesses’ expectations and it makes compelling reading, particularly in light of the recent call for a royal commission into retail electricity pricing.

As consumers, we keep a close eye on our power bills each month; particularly during high summer and winter when we might have the air conditioner or heater on most days. Electricity bill shock is real and most of us don’t really know how to navigate alternative pricing plans to get a better deal.

Small businesses also feel the pain, except worse. They pay more per unit of energy and consume it at higher levels than residential consumers, and they don’t have the same hardship or payment plan protections available to them.

AEMC research has revealed that businesses with more employees (generally above 100) are more aware of their energy consumption and management options, and are more confident in finding the right information to choose plans.

Smaller businesses are less confident in finding the right information, have lower levels of trust in retail markets and are less likely to invest in new technology.

Of course the consumption level varies considerably by business type. For example, the average dairy farm has an annual electricity bill of around $26,000, compared to a newsagents’ annual electricity bill of $3,700.

The AEMC research showed that 36% of small businesses were surprised by the increase in their energy bill over the past year. Most either absorbed the price rise or made efforts to reduce their consumption.

What they should be doing is shopping around for a better deal, but only 17% looked to changing retailers. Those that did switch in the last five years reported they were generally satisfied with the outcome and process.

With significant increases in retail electricity prices in July 2017 and January 2018, the annual bills for small businesses increased by between 5% (Tasmania and SE Queensland) and 28% (ACT). Little wonder small business customer satisfaction with current electricity providers decreased from 70% to 53% – the lowest level since the survey was first conducted in 2014.

While the report showed retailers had been more active in approaching businesses, they are not providing targeted information to the different types and sizes of small business that might help them choose the best plan for their circumstances. The information is complex and small business owners really don’t have the time and resources to investigate the all alternatives.

Although the responsibility for regulating the electricity and gas supply industries is shared between the Australian and state and territory governments, we will continue to advocate for more comparable and transparent information from energy retailers, more contact by the retailers with small businesses and a fairer deal for SMEs.