The consumer watchdog has warned SMEs are facing confusing energy contracts and skyrocketing prices, with small business leaders observing that electricity bills could cause significant problems for the viability of companies amid other cost pressures.
The Australian Competition and Consumer Commission’s preliminary report into Australia’s energy market has found higher network costs have led to small businesses and consumers being put under “unacceptable pressure” when it comes to paying their power bills.
The preliminary review of power prices across the nation has found residential bills have increased by 63% on top of inflation since 2008. While the exact increases for small business customers are harder to track, the ACCC suggests some businesses have been forced to the point of closure as they roll off old plans and enter contracts containing much higher fees.
Small Business and Family Enterprise Ombudsman Kate Carnell says her office is considering a “short, sharp inquiry” into energy contracts for small businesses, given some of the complexity she has seen of late in small business power contracts is “extraordinary”.
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“The major issue is price, but it’s also about trying to work out what the prices really are,” Carnell tells SmartCompany.
“We’re seeing complaints about cases where businesses are signing up for something, but it wasn’t what they thought it was.”
In its report, the ACCC cites case studies including a retail grocer who reported a 53% increase in its total power bill over the past year, up $36,000 for one of its sites compared to last year. The company has taken measures like converting all store lights to a more energy efficient LED technology, but says these changes incur large initial outlays of capital.
Carnell says the broader lack of national consensus on energy prices is contributing to cost pressures, but in the mean time, SMEs are only focused on “keeping the business running”.
At this point, she advises businesses to complete energy audits and work out places they could invest in more energy efficient solutions. She also recommends companies use brokers to work out the best deal, given energy brokers can “wade through the jargon” present in contracts.
“That’s their job, and they can work on behalf of many businesses to buy the best mix of products,” she says.
Carnell wants to further investigate the experience small businesses are having with energy providers, given at the moment there is “not much clarity” about who is paying for what.
She says there is “absolutely” a group of businesses that are still using residential rather than commercial energy plans, and the true impact of this is not yet known.
The ACCC reports that consumers in Queensland, South Australia and New South Wales have the most expensive residential energy bills, with cost increases over the past year contributing to bills being an average of $167 more across the country.
While the dollar impact of increased bills for small business is more difficult to track, the ACCC has warned feedback from stakeholders suggests “electricity prices in Australia have gone from a source of competitive advantage to a drain on business productivity”.
Council of Small Business Australia chief executive Peter Strong warns power price pressure could end up being “the straw that breaks the camel’s back” for many businesses, particularly if other cost pressures emerge in the next year.
“I’m looking ahead, to things like a potential increase in wages,” Strong says.
“What happens then? Where do we go then?
“What I’m hearing from people out there is that it [power prices] is really bad, but what do you do if you have a bill you can’t pay? It might push you over the line.”
Carnell says at this point, small businesses have to do what they can to limit power costs, despite there being bigger issues of national energy policy at play.
“There are bigger public policy issues that desperately need to be addressed … but make sure you’ve had an energy audit so you’re operating as best as you can,” she says.