SMEs facing energy bills doubling every two years reveals the urgency required for policymakers to address concerns of a lack of competition and price gouging in the electricity market, or face the prospect of business closures.
Speaking at the National Small Business Summit in Sydney, Fleur Anderson and Chris Black of 89DegreesEast revealed details of an investigation they are conducting in conjunction with the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) about the real-world impacts that high energy prices are having on SMEs, as well as the causes for massive price hikes.
Townsville and Bundaberg Ten Bin Bowl, for instance, revealed that energy was costing $500 each and every day, and that a lack of competition was artificially inflating the price of energy for its Townsville premises.
Ms Anderson noted a $1,200 difference in the energy bills between the two sites, with a major difference being that Townsville (which has the higher cost) has just one energy supplier, but Bundaberg has the choice of two suppliers.
“Frankly, our costs of approximately $500 a day are simply unaffordable,” owner Noel Ambler was quoted as saying.
“We are hamstrung when it comes to having extra staff and improving our facility. To be honest, there's nothing in it. It's just not worth it and I'd never want to start a business again.”
Meanwhile, Byron Bay Beach Hostel closed in 2014 for major refurbishment works, and re-opened as planned in 2016. Yet during these two years, energy costs doubled to more than $100,000 annually, curbing the ability of the business to expand and fully utilise its newly refurbished premises.
The research so far, which has profiled around 200 SMEs nationally, found that a staggering one in ten businesses are already unable to pay their energy bills.
This is having a direct flow-on effect to business expansion: 18 per cent have stopped investing in business growth, and 17 per cent have cut staff numbers and/or hours.
Many SMEs blocked from alternative energy
As previously outlined, lack of market competition appears to be inflating prices by unrealistic margins. But a number of other factors are restraining SMEs from taking measures to reduce their own energy costs.
One such concern is that businesses renting their premises are at a significant disadvantage, with landlords blocking requests for the installation of solar panels and other energy-efficiency improvements internally.
COSBOA chief executive Peter Strong suggested this is particularly problematic where large landlords – like shopping centres and industrial parks – have a monopoly, and are potentially profiteering on energy supplies to their tenants.
But a summit delegate suggested the energy companies themselves are also acting anti-competitively by delaying or restricting access to alternative energy.
The operator of three independent supermarkets said, “We’re now looking at solar at one location particularly… I think we could probably save about two-thirds on our bill. But Energex is a roadblock.”
“We actually have to get Energex to give permission to allow us to install solar – that’s a Queensland-based thing, and it’s a monopoly.”
“Why is the process of getting it through Energex really complicated?”
Another delegate claimed that energy bills themselves have become so complicated as to make it impossible for customers to know which tariff they are on, with electricians being sought to help decipher bills and meter readings.
Options under consideration to drive prices down
There are attempts to force energy companies into being more competitive and transparent around their pricing, but such policy approaches take considerable time to implement.
Ms Anderson said one recommendation put forward is the creation of a national benchmarking tool, which would compare the energy bills of similar businesses within a similar geographic area to provide SMEs with greater transparency on average energy costs and provide them with greater negotiating power.
Another approach is for collective bargaining on energy supply rates, as is being done by a group of SMEs in Dandenong, Victoria. This approach could be based on geography or alternatively left to industry bodies to negotiate on behalf of their members.
A commercial energy saving incentive has also been proposed as a means of encouraging landlords to be more responsive to alternative energy and energy-efficiency measures.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.