Energy Minister reveals plan to reduce “unreasonable” small-business energy bills

Energy Minister Angus Taylor says small businesses have been treated “unfairly” by energy retailers and are paying unreasonable prices because they don’t have time to negotiate a better deal.

Speaking at COSBOA’s energy summit in Melbourne on Wednesday, Taylor spruiked a plan to step into the market on behalf of businesses and enforce a price regulation on some energy deals.

The policy, which has bipartisan support, will scrap widely criticised standing offers in states where they exist and instead create a new default market price, to be set by the Australian Energy Regulator (AER).

Speaking to SmartCompany on the sidelines of the event, Taylor claimed $1,000 or more in annual savings awaits savvy business owners who renegotiate their power bills under the proposal.

“The crucial thing for small businesses is to make the call,” Taylor says.

“You will have very clear reference prices and there are very significant savings up for grabs.”

Energy retailers and price-comparison websites are preparing for a flood of enquiries in the new financial year as consumers and business owners chase new deals under new rules.

The ACCC recommended the change last year, claiming if implemented alongside other advice small businesses would save 24% on their bills.

Businesses in already regulated markets, as well as in Victoria, where a separate default price scheme has been promised, will not benefit from the federal plan.

About 20% of small businesses are on standing offers in deregulated markets, including Victoria, NSW, South Australia, South East Queensland and the ACT, which is higher than the proportion of consumers.

Taylor said this was because many business owners “don’t have time to become energy experts” and are getting thrown into deals with “unfairly high prices”.

However, the ACCC says it will be crucial to set the default market offer (DMO) at the right level to avoid hurting the vast majority of businesses who aren’t on standing offers.

“The level at which the DMO is set is critical in ensuring that these measures work to improve competition, rather than risk stifling it,” the regulator said in a submission late last year.

For the vast majority not on standing offers, bill relief will need to come in the form of measures to tackle chronic undersupply in the energy market.

Bills skyrocket

The stakes are hitting fever pitch. Small business power bills have skyrocketed in recent years, with annual average bills passing $3,700 in 2018, while a COSBOA survey released last month found 85% don’t believe they can absorb further increases.

One survey respondent, a bowling alley operator from Townsville, said his bills have increased 29% in two years, eating into his nest egg.

“I’m over 70 now and I’m going to have to retire,” he said. “To be honest, there’s nothing in it. It’s just not worth it and I’d never want to start a business again.”

Just 21% of respondents said they were satisfied with their electricity deals, while only 23% reported being happy with their gas provider, the research found.

While there is general agreement between Labor and the coalition on how to tackle retail market traps, diverging plans for dealing with supply issues is shaping up as a key election issue for small business.

Increasing supply: Australia’s thorny issue

Taylor yesterday doubled down on attacking electricity retailers, arguing a lack of competition, the closure of coal-fired power stations and intermittent renewables had driven up prices.

He told the room of business and energy market veterans wind and solar power don’t generate electricity when the sun is down or the wind isn’t blowing.

Taylor said the Snowy 2.0 Hydro project and the recently announced “Battery of the Nation” in Tasmania would provide Australia with a cheap way to make renewables reliable.

“You’ve got to have a solution and that means storage and back-up,” he says.

The coalition also plans to underwrite new sources of what it calls “fair dinkum power” into the market, but has thus far been coy about whether this will mean building new coal power stations.

Recent research conducted by CSIRO and the Australian Energy Market Operator found existing fossil-fuel power plants remain cost competitive, but solar and wind generation are currently the cheapest way to increase supply by generating new power.

Labor’s Pat Conroy said policy instability had created chaos in the market, blaming the coalition for leaving small business in the lurch by churning through different policies.

Former prime minister Malcolm Turnbull was sacked by his party room last year, days after being forced to dump his National Energy Guarantee (NEG) policy.

A similar NEG plan has now been adopted by Labor, which will involve promoting investment so half of Australia’s electricity supply is renewable energy by 2030.

“We will lower prices compared to what they would have otherwise been,” Conroy tells SmartCompany.

Labor’s policy was created on the premise that a 45% reduction in greenhouse gas emissions will need to be achieved to meet international commitments, although there’s still some uncertainty over the math.

Labor’s NEG plan would involve telling retailers they need to increase supply, but also telegraphing uncertainty to the market by cementing emissions reductions targets over the next decade.

At the same time, at least $10 billion would be invested in programs to support new renewable energy generation, provide loans for the purchase of battery and solar systems, and upgrade the energy network.

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