Published on Jan 16, 2018

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Energy costs looming over small businesses

 

 

The energy debate rages on in Australia while small businesses across the state deal with increasing prices and a lack of decision-making about future energy investments.

 

Effects on Business

The Australian Competition and Consumer Commission (ACCC) reported in their recently published Retail Electricity Pricing Inquiry that retail electricity prices have risen by 80-90% over the previous decade, based on CPI.

 

The ACCC found businesses faced rising costs for electricity in the last 12 months, resulting in the closure of some businesses, while other business owners consider staff reductions as a way of coping with electricity prices.

 

The ACCC found that closures of large coal-fired energy generation has ‘concentrated’ the energy production market in Australia recently. Gas powered generation has gained ground, however the ACCC state that recent shortages in domestic gas supply have raised prices.

 

Market control by the three largest suppliers, AGL, Origin and Energy Australia has resulted in a lack of competitive pricing, leaving consumers paying more.

 

The ACCC also found that some businesses are choosing alternative sources of energy such as Solar PV in an effort to reduce unsustainable electricity costs. Unfortunately, investment and subsidies in green energy schemes have led to higher overall energy costs as the cost of such schemes is paid by all electricity users.

 

Lack of political agreement

Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell released a statement this month which criticised State Governments for their inability to reach an agreement regarding the nation’s energy future.

 

Ms Carnell drew on figures provided by the latest East and Partners SME survey* which showed that of 1280 asked, 70% would reduce investment in capital expenditure as a result of rising energy prices.

 

The survey reported that:

  • 5% if SMEs would scale back expenditure in the short term.
  • 8% would scale back expenditure in the long term.
  • 9% would scale back expenditure in both the short and long term.

“The ACCC has revealed the impact of gas exploration bans on supply and distribution in Victoria and New South Wales, but these governments continue to shift the blame elsewhere,” Ms Carnell said.

 

“The Finkel Report provided a roadmap to repair the long-term damage of failed policies.

 

“All parties and all governments should endorse the report, remove bans on gas exploration and adopt a bipartisan approach to provide investment certainty.

 

“The danger with continued political bickering is that businesses will go to the wall, jobs will move offshore and be lost and consumers will feel even greater pain.”

 

As prices rise and political inertia continues, many businesses and families across Australia will continue to struggle to pay for a service that they simply cannot do without.

 

* The energy question was asked as part of the East & Partners SME Transaction Banking survey, which examines and forecasts demand for transaction banking product lines and service offerings within Australia’s Small to Medium Enterprise (SME) segment (A$1-20 million turnover per annum).