Business energy tariffs and contracts

When it comes to powering your business, you typically need to use less than 100 megawatt hours (MWh) of electricity per year to be considered a small to medium business. If your business uses a higher amount of electricity, you are generally considered a large business and you’ll need to contact a retailer directly to get connected.

When you sign up for a gas or electricity plan from an energy retailer (also referred to as your energy provider), you’re entering a contract which means you’re responsible for paying the energy bill.

However, you can break your contract and switch to another retailer (if your state or area has multiple retailer options and competition is allowed).

There are two main types of energy contracts for small to medium businesses:

• Standing offer contracts. Standing offer contracts in New South Wales, South Australia, South East Queensland and Tasmania are capped to the value set by the Australian Energy Regulator (AER) for the Default Market Offer (DMO) which is a reference price and cap for electricity plans. If you opt to remain on a standing offer, adjusted rates take effect from 1 July each year. Similarly, the Essential Services Commission (ESC) in Victoria sets the price for the Victorian Default Offer (VDO) each year which is considered a fair price for an electricity plan. Victorians can opt to sign up to the VDO, but market offer plans can be more or less expensive. Keep in mind, gas is not subject to the same restrictions as electricity.
• Market contracts. These contracts, otherwise known as market offers, may cost less than standing offer contracts and include discounts from retailers. However, rates can change anytime, even shortly after you’ve signed up (your retailer usually stipulates this in your contract, and they’ll give you notice of price changes).

You can ask your current energy retailer which type of energy contract you’re on.

Learn more about small business electricity and gas plans for businesses.

A tariff is the price you’re charged for using energy under your contract. The energy distributors (owners of energy infrastructure) that service your area set these tariff structures.

Tariffs typically consist of two parts:

• Daily supply charge. Often called the ‘service charge’ or ‘fixed charge’, the supply charge is separately shown as a daily fixed rate on your bill that covers the cost of supplying electricity to your business. You need to pay the supply charge regardless of how much energy your business uses.
• Usage charge. This is how much your business pays for each unit of electricity or gas. Your retailer can list your variable charge on your bill as cents per kilowatt-hour (c/kWh) for electricity, and cents per megajoule (c/MJ) for gas; except in WA, where gas is charged per unit.

You can find the supply and usage charges that make up the tariff on your gas or electricity bill. It’s also worth noting that your tariffs depend on the type of meter and your business model (e.g. an office will have different energy needs compared to a restaurant).

The type of tariff you’re on can affect the electricity costs for your business. There are several types of electricity tariffs in Australia:

• Single rate tariff is a tariff where your retailer charges you the same price for your electricity usage no matter the time of day or day of the week. Single-rate tariffs are also called ‘anytime peak’, ‘flat rate’, ‘standard rate’ or ‘general usage’.
• Time of use tariff is a tariff that has different rates for different times of day or days of the week, defined by peak and off-peak periods. Energy retailers in some Australian states also include ‘shoulder rates’ that sit between peak and off-peak periods.
• Controlled load tariff is a lower rate your retailer applies for your usage during off-peak hours – usually overnight. A controlled load tariff is usually linked to high energy-usage appliances such as hot water systems, irrigation pumps or underfloor (slab) heating.
• Demand tariffs measure how intensely your business uses electricity during peak demand periods and are generally charged at a much higher rate to discourage usage during peak demand times.
• Solar feed-in tariff (FIT) is where your electricity retailer credits your energy account for any excess solar electricity that your solar panel system feeds back into the grid (the grid is the intermediary between your home and the power plant).

Choosing the right business energy tariff can help your business become more energy-efficient and help keep costs manageable even during energy price increases.

Most business gas plans usually include non-seasonal single rate tariffs – meaning usage rates stay the same regardless of the time of day or year.

However, some distributors in Victoria may offer seasonal tariffs. A seasonal rate tariff means your usage rates differ between seasons, such as paying peak rates during winter, and off-peak in summer. Specific dates for these tariffs vary between distributors and states.

If you’re a small and medium business customer, you may be able to choose your retailer if your business is in one of the following places:

• New South Wales (NSW)
• South East Queensland (SE QLD)
• South Australia (SA)
• Victoria (VIC)
• Australian Capital Territory (ACT).

Keep in mind that state and territory governments may still set the energy rates in parts or all of Western Australia, Tasmania, regional Queensland and the Northern Territory.

You might have to pay an ‘exit’ or ‘early termination’ fee if you have fixed rates and cancel your contract during the benefit period. Check your plan information and contract terms and conditions to see whether the cancellation fee applies to you.

Your existing account transfers to your new account without disrupting your supply. The only thing that changes is your retailer’s customer service and the price you pay on your new plan. If you’re moving premises, contact your existing retailer so they can disconnect your power the day after you leave.

Be sure to give your new energy retailer at least five days’ notice in advance to ensure you’re connected before you move in, or on your move-in day.

Once you agree to a new energy contract, you have a cooling-off period of ten working days. A cooling-off period means you can exit your contract without incurring any exit or cancellation fees.