Energy Action highlights tips on choosing the right energy procurement partner for your business.
With the cost of energy steadily increasing and the introduction of the carbon tax, it is more important than ever Australian businesses make sure they are getting the best price for energy they possibly can.
A recent survey by Energy Action found that for Australian businesses, price is the most important factor when choosing an energy supplier.
Many businesses are turning to procurement partners to help them achieve this. It is vital for businesses find a reputable energy consultant that can help them secure a suitable contract. But it can be difficult to know which partner to select.
Energy Action, Australia's leading independent energy management company provides advice on choosing an energy consultant.
Choose a partner who is transparent and provides comparative quotes
Some consultants only provide you with their top recommendation. Go for a partner that is transparent and willing to give you all the information, so you can make an informed decision according to your business needs. The lowest prices do not necessarily equate to the best option for you, as there are many other factors to consider such as environmental charges, network tariff optimisation, operational changes and contract duration.
Go for a clear commission structure and establish who pays
Understand your costs upfront. Ensure that the partner you select receives the same commission from all energy providers. This ensures there is no favouritism involved. Additionally, choose a partner that does not charge multiple stakeholders for the procurement initiative. For example, some consultants may charge a percentage commission to the retailer and then also to you for a nominated percentage of your savings secured.
The party that pays the commission to the consultant can vary. In some cases the retailer pays the commission for the 'signed, sealed and delivered' business, or you may be required to pay the consultant directly.
Don't select a partner that has quotas to fill with providers
If a company has quotas with providers, then it may be difficult for them to remain unbiased. To ensure unbiased advice, choose an independent partner. Often a consultant who only provides one option (the "best option") could be trying to fill a quota.
Ensure your partner is licensed to provide you with advice – ask if they hold an AFSL
Particularly when looking at forecasted prices and future contracts, ensure you are dealing with an energy management company that holds an Australian Financial Services License (AFSL). This means they are licensed to provide your business with financial advice in relation to the wholesale electricity market, which ultimately impact retail pricing.
This license requires the broker to have an in depth understanding of the National Electricity Market and financial products. Certified brokers regularly undergo market training and must act in accordance with ASIC regulations, maintaining the highest levels of compliance.
Choose a partner who looks at the whole picture
Many energy consultants only look at energy rates and fail to consider other factors.For example, being on an unfavourable network tariff can dramatically affect costs.
Choose a provider who looks at the bigger picture on your behalf. After all, as your energy experts, they should be able to identify these savings opportunities for your business, outside contestable contract options. Typically, these services can only be completed by a professional acting on your company's behalf.
Make sure your partner can tailor their services to your business needs
Since deregulation, there are many competitive retailers willing to provide a price based on business specific energy requirements. An experienced broker, or energy management company, can develop a customised specification for a business's energy profile and advise a suitable time to take your contract to market. They will then review and analyse the various offers, giving all the information necessary to make an informed decision.
Make sure the carbon tax is included in their negotiations
The majority of existing retail electricity contracts don't factor in the cost of carbon. Instead they contain clauses that allow for an adjustment to be made when the carbon price is introduced. This means there may be unexpected cost increases come 1st of July.
Insist on a carbon inclusive contract to avoid any unexpected increases in cost attributed to the carbon price. As we edge closer to 1July the prevalence of carbon inclusive pricing will rise, with all contracts inclusive or incurring a 'carbon adjustment' effective from the 1st.
"Energy costs for Australian businesses were already rising before the introduction of the carbon tax," Val Duncan, CEO of Energy Action said.
"Electricity generators are expected to be significantly impacted by the tax and as a result will pass on higher costs to retailers. Retailers will pass these higher costs to Australian businesses via the Carbon Adjustment clause outlined in many retail energy contracts.
"This means it is more important than ever to get the best deal you can for your energy needs. Ensuring you work with a reputable and experienced partner is the first step to making sure you achieve this."
There are a variety of services available to businesses, such as a reverse auction, ideally suited to electricity procurement. The Australian Energy Exchange lets energy suppliers competitively bid live against one another to supply your business's energy on a fixed term contract.
This service has secured energy contracts in excess of AU$5 billion and saved millions of dollars for Australian businesses. An auction typically takes only 15 minutes to complete.