TIPS ON HOW TO NEGOTIATE A BUSINESS ELECTRICITY CONTRACT
The steady rise in the electricity rates has put Western Australia’s businesses in a bad position making it hard to control their electricity bills. Putting businesses that consume high amounts of electricity in a dire situation. Fortunately, the electricity market allows businesses to choose their preferred energy supplier and to have a contract in place. To ensure your operating cost stays manageable, it is important to know how to negotiate a business electricity contract.
Business electricity contracts enable many businesses to have better terms and conditions and cost-effective electricity rates. Allowing businesses to have more control over the terms and conditions (T&C) of how the suppliers will charge their consumption. This article will explain to you about Business Electricity Contracts, the Components of Business Electricity Contracts and How to Negotiate a Business Electricity Contract.
What is a Business Electricity Contract?
Suppose you are a business entity within a specific range of energy consumption, this allows you to choose the electricity provider you prefer. It enables you to engage in an energy contract with a competitive rate for your electricity consumption.
If you are not in a contract, it means you are on a tariff. Being on tariff is not a favourable situation as the tariffs rates keep increasing nearly every year. We refer to the energy contract for electricity as a business electricity contract and the gas as a business gas contract.
Business electricity contracts offer you tailored, specific energy solutions that include benefits such as discounted and fixed rates which allows you to have better control over your energy bill with minimised costs, unlike being on a tariff which might change as per the Government regulations.
With such a competitive market, engaging in business electricity contracts truly benefits the business owners. Whether you’re a small, medium-sized or even a large company, we believe that all businesses will benefit from having a competitive electricity contract.
You can learn more about the Government Regulated Tariff here.
Breaking Down Your Business Electricity Contract
Before we explain to you how to negotiate your business electricity contract effectively, you need to know the important elements within the contract. When Negotiating electricity contracts, here are critical points you must consider before signing.
- Electricity Pricing;
- Types of Electricity Contracts;
- Energy Contract Terms and Conditions;
- Energy Contract Period;
- Energy Contract Payment Terms;
- Solar Power Installation.
To learn more about the options on business electricity contracts, click here.
When negotiating an energy contract with electricity providers there are a few things to take into account:
A business electricity contract consists of several components; these components justify how the energy suppliers quote your electricity consumption.
- The energy suppliers charge you by different rates based on the time of the day. It consists of peak (8 am to 10 pm, Monday to Friday) and off-peak (10 pm to 8 am, Monday to Friday and all weekend). The rates depend on how electricity is used and when.
- Aside from your electricity rate, the contract will also impose some additional fees or expenses as part of the electricity network’s maintenance. The example of this is the supply charge, admin fee and meter charge.
Learn more about what makes up your electricity bill here or click here to have one of our Energy Consultants to help you doing your Electricity Tender for FREE.
2. Types of Electricity Contract
The electricity providers in Perth WA commonly offer two types of energy contracts; we refer to them as the Bundled and Unbundled. The two contracts differ in the way that your bills are itemised.
With the Bundled contract, the electricity suppliers charge you by bundling all the components that make up your energy costs such as the network cost, capacity cost and renewable charges along with the actual consumption cost and daily supply of your electricity.
While in the Unbundled contract all the components that make up your electricity bills, such as the network charge, renewable charges and capacity charge are fully disclosed and charged accordingly.
3. Energy Contract Terms & Conditions
It is essential to understand your energy contract fully; these items are some of the most important things to consider before negotiating your electricity contract. It covers most of the things that you need to know, such as:
- Some energy providers have Minimum and Maximum Take; this is when your consumption goes either lower or higher than what the supplier has estimated over one year.
This term refers to a binding clause which requires customers to fulfil a certain quota of energy consumption lest they are subjected to a penalty to make up the gap.
The shortfall and Overrun are the terms used to describe the gap between the contracted amount of Minimum and Maximum Take compared to the actual consumption by the customers.
The shortfall penalises the customer if they fail to meet the minimum quota of the agreed amount of energy consumption. In contrast, Overrun penalises the maximum amount of energy the customer will be allowed to consume past the said quote.
- Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Refers to the calculation of your energy consumption adds up with CPI included. To learn more about CPI click here.
- Passed Through Charge, this term refers to the situation in which there are changes in the amount of the rates charged to the energy providers due to the Government’s energy policy. In most cases, the energy providers ‘passed-it-through’ to the customers.
- Meter Upgrade Fee, If your meter requires an upgrade or replacement due to age and malfunctioning the fee for this may or may not be included on the contract you are in.
In that case it will cost you extra to have your meter updated to the standard required by the network operator.
- Change in Government Regulation, The energy industry is heavily regulated by the Federal and State Government. They may introduce a new regulation that may impact your energy cost.
When this happens, the retailer will pass through the cost to your contract. For instance, the introduction of carbon cost that is now no longer applicable impacted the cost to customers by 10% at the time.
Finally the rates your chosen energy provider has offered you are to your liking. In that case, it is better to take the more extended contract so long as the Terms and Conditions suit your needs.
Remember that there is usually an increase at the start of the Financial year. The reason is because of the Network cost increase or Consumer Price Index (CPI) adjustment.
Other than that, it is essential to make sure your contract renewal starts before your current contract expires to avoid the out-of-contract rate.
5. Energy Contract Payment terms
It is essential to note the period that your Energy providers puts in place. Make sure you pay your bill within the period to avoid additional fine or penalties. Most electricity providers will give you 14 days to settle your account.
There are not many Electricity suppliers that do NOT penalise you for putting Solar Panels on your business; therefore if you are thinking of doing so, it is best to ask the question first.
If you put Solar Panels on you will be taking away some of the supplier’s profit. Hence, they have to get it back in some way; this is usually by increasing the Daily Supply charge or increasing the rates.
Negotiating an energy contract is not as simple and straightforward as you would think, especially since there are many energy providers with different energy rates and terms and conditions that apply to their contracts.
If you have read this carefully and understand all the different additions etc, you can come up with the best strategy and approach on how to negotiate a business electricity contract.
You can see which supplier gives you the best offer and you can come up with a calculation based on the cost and the terms and condition they offered.
Using Energy Broker to Negotiate Your Business Electricity Contract
As you can see it will require quite some effort to negotiate the best deal. Carbon Energy can help you by doing all of the work for you.
We do all the hard work for you, including the analysis, negotiations and recommendation to get you competitive rates for your energy contract at no direct cost to your business.
You can get an energy broker to deal with all the hassle of contacting the energy providers and doing the cost-expense analysis on your behalf.
It would be a better option than you trying to find a good deal for your electricity or gas supplies contracts by yourself.
Having an energy broker with industry knowledge and experience is far better than losing in the long run, and the amount of savings you will achieve will be significant.
If you are interested in using our service and expertise, click here.
Carbon Energy as Your prefered Energy Broker
Carbon Energy is here to assist you in your attempt to save your business from excessive energy bills.
Our energy specialists possess immense knowledge and vast experience in the energy market. Engaging us to manage your energy requirements will be the best decision to start reducing your power bills.
If your contract is due to end within the next six months and your annual ELECTRICITY IS OVER $14,000 p.a. or GAS IS OVER $7.000 p.a., now is the perfect time to get started on representing you to get you great alternatives and discounted rates.
Our approach is straightforward, risk-free and NO COST to your company. The successful retailer remunerates us should you accept our recommendation.
We will perform the following steps to assist your company:
- Analyse your current energy cost and consumption.
- Invite the retailers to price your business and analyse each offer.
- Run a bill simulation based on your last 12 months data and identify the potential risks that could be involved.
- Analyse terms and condition of the contract (If to be in place).
- Summarise the retailers offer in plain, simple and easy to understand language and this will enable you to make an informed decision.
We will save your time, and do all the painful work for you.
We access you the best solutions in the easiest, secure and convenient way possible. Haven’t used an energy consultant yet? Why wait any longer?
Whether you are looking to save on electricity or gas or commercial solar, we can assist you in finding the best deal for your business needs.
Speak to one of our energy specialists to get a free energy cost audit (valued at $2000) on 08 6460 1613.