Economy

Cheaper power for Victorian SMEs

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Victorian SMEs will soon be forced to shop around to get the best prices for electricity and gas following a Victorian Government decision to deregulate energy pricing in the state.

Businesses that spend up to $25,000 a year for electricity and $50,000 for gas are currently able to buy energy at standard prices set by the Government.

But yesterday’s decision by Victorian Energy Minister Peter Batchelor means that, after 1 January 2008, the state’s 13 energy retailers will set their own prices in order to compete for SME dollars.

Batchelor says he believes the change will mean that SMEs will soon be able to benefit from cheaper prices that larger businesses currently operating in a deregulated environment are already enjoying.

“Up to 13 energy retailers compete for their business and are offering discounts of up to 10% off the standard price,” Batchelor says.

The decision to do away with standard energy pricing for SMEs follows a recent report by independent national regulator the Australian Energy Market Commission, which found that there is a high level of competition in the Victorian energy retail market.

The report found that Victorian consumers, who are already able to shop around for the best electricity prices, were more than four times as likely as consumers in other states to switch between energy retailers to get a better deal.

Batchelor says the report confirms that standard energy prices will usually be undercut by retailers keen for new customers.

VECCI chief economist Steven Wojtkiw says while the move is sensible, it will be important for key bodies such as the Victorian Essential Services Commission to monitor the energy market to ensure the fruits of competition are being passed on to small business consumers.

“There are a lot of influences on electricity prices that nobody can control, such as the drought, but in general we’ll be looking for savings of up to 10% over time,” Wotjkiw says. “For small businesses, it will be worth shopping around and exploring the prices available.”

Of course, there are always opportunities for winners and losers in a more deregulated environment. Bodies such as the Victorian Energy Ombudsman and the Victorian Small Business Commissioner are available to assist small businesses that believe they have been treated unfairly in their dealings with energy providers.

Victorian Small Business Commissioner Mark Brennan has confirmed that his office is prepared to assist SMEs if they find themselves in dispute with their energy retailer.

“For SMEs we would say that in a changing environment make sure that you’re apprised of all the information that affects you, get a good understanding of what it’s about, but if you have any problems my office, perhaps in co-operation with the energy ombudsman, can provide assistance,” Brennan says.

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