Energy cost shock for small business

Energy cost shock for small business

Australian small businesses are fed up with their energy retailers. This is the finding of the Retail Energy Competition Review which has revealed smaller businesses are increasingly frustrated when purchasing electricity and gas from energy retailers.

The Australian Energy Market Commission (AEMC) released its annual Retail Energy Competition Review which looks into customer satisfaction, levels of consumer confidence and perception around the retail energy sector. It found consumers have experienced substantial increases in retail energy prices and some are struggling to understand the rhetoric and confusing policies of energy retailers.

The 2018 review covers residential and small business consumers in retail electricity and gas markets in Queensland, New South Wales, Australian Capital Territory, Victoria, South Australia and Tasmania.

Businesses pay higher rates for their electricity compared to residential consumers with the same consumption level, and many medium sized businesses have responded by shopping around.

Smaller businesses were less likely to shop around for energy with more than half of these absorbing the price rises without calculating it into their cost of sale and passing it onto their customers. Around half of small businesses tried to reduce energy consumption but only 17 per cent chose to switch energy retailers.

The review discussed how smaller businesses are not only less confident in choosing the right provider, they have lower levels of trust in retailers and are less likely than their larger counterparts to invest in new energy saving technologies such as solar or batteries.

Regional small businesses were more likely than their metropolitan counterparts to actively investigate their energy plans, switch retailers, and investigate solar panel options.

The average annual electricity cost for all businesses was $3,731.

Business customer survey results at a glance
Business type Average annual electricity cost
Sole traders and partnerships $1,932
Micro-businesses (1-4 employees) $3,779
Small businesses (5-19 employees) $7,465
Medium businesses (20-199 employees) $12,570
Average across all businesses $3,731

 

While small business satisfaction has been decreasing since 2016 it is now at the lowest level since the AEMC’s annual reviews started in 2014.

 

The 2018 Retail Energy Competition Review has made recommendation for energy retailers to increase transparency and simplify their information. It also suggests retailers target support to small businesses to help them choose the best plan for their circumstances.

The 2018 Retail Energy Competition Review can be accessed online: https://2018.aemc.gov.au/competition-review/

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