Great News for Large Electricity Users - Electricity Market in a Low – Secure Now.

You are reading this and most likely saying how is that correct, it is not what the media are saying. What you are hearing about in the media is the estimated increases in tariff not the contestable contract market for larger business. Yes, tariffs are set to rise yet how much is yet to be determined a possible 13% in QLD has been speculated and higher in other states and this does affect you personally if you are a small business or you have a residential account as tariff price is regulated by the government.

Good news if you are a business customer or body corporate that spends more than $1300 per month (rule of thumb) on your electricity account as you may be eligible to negotiate a contestable market contract and the savings could be quite significant. If you are already on a contract the time to act is now. We are seeing savings of 8% to 52% off the bottom line. This is when the market is in its low.

We have said it time and time again in different articles negotiating electricity contracts is all about TIMING. Securing a contracts when the market is in a low, well that time is now or at least when this article is being written. We are seeing shifts in the market and offerings to customers like the good old days back in 2006 and now that the Emissions Trading Scheme (ETS) has been shelved the news that the wholesale electricity price has stayed low.

How long will this hold nobody has a crystal ball yet due to pressure from various sources wanting the pricing to go back up it probably won't stay this way for long.

Why is the Contestable Market at a low when the Tariff market is jumping up? Simple answer, they are 2 different markets with different pricing rules. Tariff market is regulated pricing set by the competition authority in most states and they decide the increase in price versus contestable market where customers negotiate their contracts at a time in the market when it has its highs or lows, similar to investing your money in the bank or creating a share portfolio.

So what are your options if you spend a lot on electricity each month ?

• 1. Do nothing and except the increases and don't whinge about it.
• 2. If you are a smaller customer on a tariff check make sure you are on the correct tariff and ask your retailer for a discount on this tariff for a contract term.
• 3. Check your bill if it is over $1300 a month get it checked by a consultant that knows what they are doing with experience and professional indemnity insurance (WARNING – not all customers with this type of spend will achieve savings). If the sums are not done correctly with all the variables such as peak demands taken into consideration you may not save at all yet once you transfer away from the tariff market you CANNOT go back and it may cost you more forever.
• 4. If you are in contract look at forward dating your contract to lock in rates now as a retailer will price and look at contracts 2 years away from them finishing.

Going from a tariff rate to a market contract is not a bad thing, and there are good savings to be made if done correctly. Get proper advice as it is a big commitment and for Bodies Corporate the decision making process has to fit in with the good buying cycles. In going to a market contract you can make significant savings and also minimize the increases you would otherwise pay if you remained on standard tariff pricing. This is because you can lock in contract peak and off-peak electricity prices under the contract, in which case the only increases are the regulated increases in the network and market charges. Yet the trick is in knowing the best month for your business to secure this contract.

Written by : Michael Newton Watt Utilities