Small businesses reaping the rewards of cheaper energy costs

Smarter energy solutions

A new report indicates that majority of Australian small businesses have benefitted from cheaper energy costs during the past 12 months. According to Energy Consumers Australia’s latest Retail Tariff Tracker Report, the average annual electricity bills for SMEs, who use an average of 20000 kWh per annum, decreased by approximately $270, four per cent, between April 2020 and April 2021.

The latest edition of the report, compiled by research firm Alviss Consulting for Energy Consumers Australia, is published twice a year, is based on retail offers available to small businesses during April 2021.

“This is great news for the 1 million Australian small businesses and the people who own and operate them,” Energy Consumers Australia Chief Executive Officer, Lynne Gallagher, said.

“We’ve seen decreases in the wholesale electricity price as a result of multiple factors including the influx of renewable energy into the grid and the impact of price monitoring and default offers. We are really encouraged to see retailers passing those savings on to small business consumers in the form of lower tariffs.”

The report noted that the largest decreases in annual electricity bills for small businesses were recorded in Victoria ($8750, while Western Australia experienced an increase in electricity bills in the past year ($230), though remains lower than the levels the state reached in 2017. South Australian small businesses continue to incur the highest average annual electricity bills ($7,215) while Queensland businesses continue to have the lowest ($5,190).

A factor in South Australian prices is that the state’s electricity consumers still face the highest level of network charges in the nation. Network charges are levied by network operators to cover the cost of building and maintaining electrical infrastructure, including the poles and wires.

“Encouragingly, we are also seeing falling network costs during the past year being passed through to small-business customers in South Australia, Victoria and Tasmania,” Gallagher said.

Another factor contributing to lower energy costs according to the report are lower gas prices. The report noted that average annual gas bills decreased by two per cent between April 2020 and April 2021.

“It is extremely encouraging to see that energy costs – which have been at historically high levels for much of the past decade – are coming down,” Gallagher said. “But there is definitely still work to do before we can say that Australia’s small businesses are operating comfortably in terms of their ability to meet their energy costs.”

A number of states also introduced default offer requirements that provide a safety net offer, set by the states’ respective regulators. The report pointed out that the introduction of default offers has demonstrably contributed to lowering overall energy costs.

“These default offers are having a clear impact on lowering energy bills for small business,” Gallagher said. “Their introduction has been a genuinely impactful reform. It’s important to note, though, that the default price is seldom the lowest available one. Small-business owners and operators can usually get a better deal by investigating market offers or contacting their retailer.”