Around 30% of Australian SMEs are on outdated electricity plans. That leads them to pay 20% more than necessary. If you haven’t reviewed your plan in a while or don’t fully understand your contract terms, chances are you’re also on the same list. If you are, here’s how to figure it out.
Start with a Detailed Look at Your Bill
The first step is often the simplest. Pull out your latest electricity bill and actually read it. Don’t just look at the total. Break it down line by line. Aiming to switch to more affordable energy plans? Or found a better deal elsewhere? Understand everything about the bill first. Here’s what to check:
- Usage charges (measured in kWh)
- Supply charges (daily connection fees)
- Peak vs. off-peak rates
- Any demand charges (common in larger businesses)
If these terms confuse you, that’s a sign you haven’t had enough transparency from your provider. That alone can mean you’re paying more than you should.
Benchmark Against Other Businesses
It’s hard to know if you’re overpaying without something to compare it to. Try comparing your average cost per kilowatt-hour with similar-sized businesses in your area or industry. Energy benchmarking tools and industry reports can help.
If your rate is significantly higher, and your usage habits are similar, then it’s a red flag.
Watch for Peak Pricing Traps
Many businesses’ electricity plans use time-of-use pricing. This means the rate you pay depends on when you use electricity.
Using heavy equipment or running operations during peak hours can spike your bill.
Common peak periods include weekday mornings and early evenings.
Look at your usage patterns. Are you using the bulk of your energy during high-rate windows? If yes, there might be ways to shift operations or renegotiate your plan.
Review Your Contract Terms
Many businesses don’t know what’s in their electricity contract. If you’ve rolled into a default rate or are still on a plan you signed years ago, it’s likely outdated and overpriced. Look out for:
- Out-of-contact rates (often much higher)
- Automatic renewals
- Exit fees
- Discount expiry dates
A discounted plan from two years ago may have quietly reverted to a higher base rate once the promotion expired.
Check for Unused Capacity
You may be paying for more than you use for businesses on demand-based or capacity charges.
These charges are based on your highest peak demand, not average use. If you had one or two energy spikes in the past year, your demand charge could be set too high.
Solutions might include peak shaving strategies or negotiating a more accurate demand threshold.
Are You Being Penalised for Low Usage?
It sounds strange, but some providers charge small businesses more per kilowatt-hour if their usage is too low.
This often applies to small shops, home offices, or seasonal businesses. If you’re not a big energy user, ensure your plan suits your usage tier. Otherwise, those “minimum usage fees” add up quickly.
Investigate Additional Charges and Fees
Hidden fees can creep in. Some bills contain:
- Late payment penalties
- Meter reading charges
- Green energy surcharges
- Paper bill fees
Individually, they may seem small. But over a year, these extras can cost you hundreds. Go over the extras and ask: Are they necessary? Can you opt-out or reduce them?
Has Your Business Changed?
If your business has scaled up or down recently, your current energy plan may no longer fit. Opened a second location? Switched to remote work? Installed solar panels? Any of these can impact your usage profile. A mismatch between your plan and your current needs can lead to higher rates and wasted spending.
Compare, But Look Beyond Discounts
Many providers advertise big upfront discounts. But these discounts can be temporary or tied to conditions like paying on time or locking into a long contract.
Instead of focusing on the discount alone, calculate the total cost over 12 months. Factor in all charges, fees, and usage rates.
Also, avoid the trap of switching too often. Some plans include exit fees or price hikes in the second year.
Consider an Independent Review
If all this feels too technical, it’s normal. Many businesses consult energy advisors or use switching services that do the comparison work for them. These services can help uncover:
- Better rates
- Hidden contract traps
- Opportunities to reduce usage without affecting operations
It might cost a little upfront, but the savings often justify the investment.
Final Thoughts
Electricity is a major business expense, but it doesn’t have to be a blind one. If you suspect you’re overpaying, chances are, you probably are. A little investigation can go a long way.
Check your bill, understand your rates, compare options, and negotiate if needed. Above all, don’t let inertia cost you money month after month.