The QHA is acutely aware of the cost of electricity to our members’ businesses.
During the 18 months prior to the Covid-19 shutdown, the QHA commenced feasibility and due diligence regarding assessing the viability of a Power Purchase Agreement (PPA). During this time, the price of electricity reduced markedly and currently the PPA process, while being revisited, is still at least another 18 months away and the value proposition is yet to be confirmed. The QHA advice to members regarding negotiating their electricity and power contracts is to proceed ‘business as usual’ and take advantage of the current relatively low market prices.
To assist members in their dealings, QHA Silver Partners, Trans Tasman Energy Group provide the following expert advice:
Paying too much for electricity – how would you know? What can you do?
Keys to managing your electricity costs are:
- obtain the best energy price terms and conditions from the market,
- only pay the appropriate network charge,
- manage/minimise consumption, and
- check you are paying the right amount.
In this article we address the first two points.
Energy Price, Terms and Conditions
Whilst current Queensland wholesale electricity prices have retreated, volatility has been huge. Sharp rises can happen ‘overnight’. Although not a ‘real’ market, where supply and demand set prices, all electricity market prices relate to the traded spot price.
Indeed, Australian electricity is the most volatile market in the world. Prices can go from minus $1,000 to $17,000 per megawatt hour in 5 minutes! Retailers (eg AGL, Origin) manage this risk for you by using financial contracts with generators (eg Stawell) to lock in firm prices for future electricity production and consumption.
TIP Always seek prices in market lows even if more than 12 months prior to your current contract expiry.
Alternatively, in non-fixed price contracts, including PPAs, solar proposals etc, the end user (you), typically has some or all of the risk – often for both price and volume.
TIP - Always seek independent expert assessment on any energy proposal.
Seek prices from the market when it’s in your favour and not simply when a retailer comes knocking on your door with an offer to extend or renew your contract.
TIP - Typically any offer from an energy retailer on this basis can be bettered.
How long should the contract be for, or “Can I obtain a better price than this at some time in the future?” This will depend on how good your price offers are versus your assessment of the future market.
You should also request and consider all contestable items in retailer offers, including Large-scale Generation Certificates (environmental charges, should they be fixed or variable), metering, service fees
TIP - Seek price offers from all retailers for all contestable components over multiple periods and then have them expertly assessed.
Are you aware some retailers require you to include your electricity contract in the sale of your business and that you are liable if you do not? Others may have take or pay clauses or default charges.
TIP - Retailer terms and conditions must be expertly reviewed.
While network charges may represent around 50% of your bill, up to 10% of customers are not on their lowest tariff and are simply paying too much. Are you one of the 10%? How would you know? Fixing is cheap compared to continually paying too much.
TIP - Regularly have your network charges expertly reviewed.
Approach your energy contracts professionally, as any sub-par process can be potentially very costly for your business.
Independent expertise typically delivers value through obtaining better prices, terms and conditions, providing peace of mind that you have obtained the best from the marketplace – ie: rather like an insurance policy for your electricity prices.
About Trans Tasman Energy Group (TTEG)
TTEG have been supporters of the QHA since 2006, saving QHA members $10+ millions in energy costs over that period. They have conducted some of the largest energy tenders in the National Electricity Market and are an AEMO accredited Embedded Network Manager.
If you require assistance or extra information please email email@example.com or call 1300 11 8834.
Note: QHA members and industry supporters receive a free assessment of your current bill.