If you’re a small to medium business owner, you’ll inevitably come across an energy contract with an electricity tariff or a gas tariff.
But enough of the confusion; let’s help you sort through the industry jargon, so you can make more informed decisions about your energy plan.
What is an energy contract?
When you purchase and use electricity and gas from an energy provider (also referred to as a retailer), you automatically enter a contract. This contract means that when you move into a property (with an existing connection), you’re responsible for paying the energy bill to the provider. However, you can break your contract and switch to another provider (if your state or area has more than one retailer options and competition is allowed).
In Australia, there are two main types of energy contracts: standard retail contracts and market contracts. Let’s take a closer look at these:
- standard retail contracts typically cost more than market contracts, and energy prices (or usage ‘rates’) typically change once a year. Under some standard retail contracts, the government sets the energy prices, not the provider – although the provider can offer input. These types of energy contracts generally don’t feature any discounts or perks; and
- market contracts may cost less than standard retail contracts and include discounts from providers. However, rates can change at any time – even shortly after you’ve signed up (your provider usually stipulates this in your contract, and they’ll typically give you notice of price changes).
You can ask your current energy provider which type of energy contract you’re on.
Keep in mind that state and territory governments still set energy rates in Western Australia*, Tasmania, regional Queensland and the Northern Territory as there are no market contracts available in those states at the time of writing.
*WA Gas and WA Embedded electricity have market contracts.
Before you start searching for a new energy plan, check that your preferred type of energy contract is available in your part of Australia.
Learn more about small to medium business electricity and gas plans for businesses.
What are business energy tariffs?
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:
- supply charge. Often called the ‘service charge’ or ‘fixed charge’, the supply charge is separately shown as a daily rate on your bill. You need to pay the supply charge regardless of how much energy your business uses. It’s a charge that covers the cost of supplying electricity to your business; and
- variable charge. This is how much your business pays for each unit of electricity or gas. Your provider can list your variable charge on your bill as:
– cents per kilowatt-hour (c/kWh) for electricity
– cents per megajoule (c/MJ) for gas (except for WA, where gas is charged per units).
This charge is also called the ‘usage charge’.
You can find the supply and variable charges that make up the tariff on your electricity or gas bill. It’s also worth noting that your tariffs depend on the type of meter and the wiring/appliances you have at your premises (for example, an office compared to a restaurant will have different energy needs).
Which electricity tariff am I on?
There are several types of electricity tariffs in Australia:
- single rate tariff is usually lower than a ‘peak’ charge. So your provider charges you the same price for your usage for different times of the day or days of the week. Single-rate tariffs are also called ‘flat rate’ or ‘standard rate’;
- 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 providers in some Australian states include ‘shoulder rates’ that sit between peak and off-peak periods;
- controlled load tariff is a lower rate your provider applies for your usage during off-peak hours – usually overnight. This type of tariff also often called a ‘dedicated circuit’. 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 at a point in time – retailers in how they apply demand charges.
- solar feed-in tariff (FIT) is where your provider credits your energy account for any excess electricity that your solar panel system feds back into the grid (the grid is the intermediary between your home and the power plant).
N.B. Gas plans are only available with single rate tariff.
Frequently asked questions
Compare energy plans today, and you could save
Not happy with your energy bill or think you can find a better deal? You’re in the right place!
Try our free online comparison tool and compare a host of Australian energy providers on one page.
Simply enter a few details, compare tariffs, rates and providers, and if you decide to switch, we’ll handle the changeover – all at no cost to you. Find out why it pays to compare today!