We define cheap electricity and show you how to find it.
What is "cheap electricity"?
By definition, cheap is “low in price, especially in relation to a comparable product or service”, so cheap electricity is a relative concept — cheap, compared to what?
Let’s start with a look at current prices, which we can then use as a point of reference to better define cheap.
The Australian Energy Market Operator (AEMO) runs what’s called the National Electricity Market (NEM). They publish average price tables as far back as 1999. Each state and territory that participates in the NEM has their own electricity price.
Over the past 2 years, prices in South Australia has averaged higher than the other states who participate in the NEM (National Electricity Market).
In 2017, South Australia’s average spot price peaked at a whopping $108.66/Megawatt hour (MWh). This was up from 2003’s low of $30.11/MWh, a 361% increase.
Above: No cheap electricity in sight; Adelaide at night.
What factors should you consider?
Above: Studying the electricity market after-hours.
In 2018, prices in SA have now dropped to a slightly more reasonable $97.49/MWh, down about 10% from their highs.
Is $97.49/MWh cheap? Compared to the rest of Australia: No.
But compared to 2017’s records: Absolutely.
The NEM is a spot market. A “spot market” is any financial market where a commodity is traded for immediately delivery; the upshot of this is that electricity spot prices are prone to constant, potentially significant, fluctuations.
Given this, a more specific definition for cheap electricity might be, “low in price, compared to the spot price at a given point in time.”
The point in time you choose to renew your contracts can make a big difference to how much you pay for electricity, and that’s just one of several variables — let’s dive into those in the next section, starting at the beginning of a contract cycle.
How to source cheap electricity for your business:
Review your current invoices.
Decide on timing to market.
- When is your contract end date? Should you go to market sooner, or later?
- Consider forward-purchasing to lock in favourable pricing in a rising market.
- Can you use a “blend and extend” option to reduce rates while on contract?
Shop around widely.
- Tender your electricity account to as many retailers as time allows.
- Notify your existing retailer you’re tendering and invite them to participate.
- Tell the retailers you want cheap electricity and ask them to beat other quotes.
Compare offers in detail.
- “Apples for apples” comparisons can be challenging.
- Use a spreadsheet, and carefully record the variables in each offer.
- Factor in your anticipated usage to estimate your spend on each offer.
Negotiate hard with retailers.
- Narrow it down to a shortlist of the 2, or maximum 3 best offers.
- Let retailers know they’re one of 2 (or 3), and ask for a second round of offers.
- This works great in a falling market, but if prices rise retailers may “pull” offers.
Factor in contact duration.
- Contract duration is a powerful bargaining tool, and must be used wisely.
- A longer contract will generally see you get cheaper electricity.
- A shorter contract gives you more flexibility to renegotiate if prices are falling.
Check your contracts carefully.
- This is important; read your contract in detail, including the fine print.
- Be sure you understand what you’re signing and, it’s consistent with the offer.
- If you’re in any doubt — seek indecent advice. You can contact us.
Go back to the start.
- As we said at the start of this section; this whole process is cyclical.
- When your first invoice arrives, go back to step one, and…
- Review your current invoice: Be sure you understand each and every charge.
Should you engage an electricity broker?
A good electricity broker will complete all the steps listed above, which should have the effect of saving you a lot of time.
Beyond this time saving, there can also be a money saving component, when you consider the potential advantages a broker may have:
Reviewing invoices: Did you spot the metering charge on page three of AGL’s guide: How to read an electricity invoice, above? This is a common example of a “hidden cost”. These are optional expenses that can often be removed to save you some money.
Monitoring the market: This can be a time consuming process, but it’s a broker’s job to keep on top of all the news and announcements, check the charts and to use this information to make an educated guess as to where prices are headed next.
Timing to market: Especially for large market sites, timing to market is absolutely critical and a good broker will be across your options for forward purchasing.
Shopping around: Here an electricity broker can add value in two ways. Firstly, through precise communication; it’s important that retailers understand your expected future energy demands so they can quote properly. Secondly, through efficiency. Brokers have well established communication channels with the retailers, which saves a lot of time shopping around.
Comparing offers: This one of the best reasons to engage a broker — crunching the numbers on multiple offers, especially if you are inexperienced in this regard, can be a massive source of frustration. Not to mention a drain on time!
...but wait! There's more...
Negotiating hard: An established electricity broker will have long-standing relationships with the retailers, and will have put tens, if not hundreds of millions of dollars of deals through a given retailer’s books.
This translates to deep insight with respect to pricing. For the customer, it means comfort that nothing has been left on the table.
Reviewing contract length: The ability to contract for the correct length of time is very much like timing to market, in that it requires a good understanding of the market, plus some guesswork. In this regard, a broker is not permitted to provide advice, per se, but can provide pertinent information to help you make an informed decision for yourself.
Checking contracts: It’s amazing how often we pick up on mistakes in electricity contracts. These can be complicated and lengthy documents, and they are certainly easier to review when you’ve had a lot of practice.
Checking your first invoice: This should be a mandatory part of any good broker’s service. Again, a broker will have an advantage here over a layman in terms of experience.
Dealing with problems: In the unfortunate event that all is not well with your energy retailer — and we see this more than we’d like — your broker is your advocate.
Trying to get the attention of a gigantic retailer with one small account can feel like a David and Goliath situation. But a broker should have a direct line of communication to the right person, and be in a better position to get a fast favourable outcome.
What else can a broker do?
In some cases, your broker can take things a step further. For example, they may have knowledge of a retailer that has an appetite for a particular market segment – and are willing to offer cheap electricity as an incentive.
If the broker is particularly well established, they may also have negotiated a special brokerage agreement with a given retailer, giving them access to pricing not available to customers going direct.
Also, ask your broker if they form buying groups. Especially for tariff accounts it can pay to group these smaller accounts together and create economies of scale that are more attractive to retailers — which means a better deal.
Check out this example…
APSO saved $53,000 PA
27% of their energy bill
Bulk Energy approached Asian Pacific Serviced Offices (APSO) and asked to consolidate their energy account, which included 7 sites and 242 electricity meters.
After tendering to all the tier one and two energy retailers, we worked with APSO’s Operations Manager, Trevor Vandersluy, to select an offer that met the businesses’s needs perfectly.
Bulk Energy were able to secure an annual saving of over $53,000 for APSO, which represented a saving of about 27%. We also consolidated APSO’s billing, brining everything under one account.
Bulk Energy are energy procurement experts.
Why choose Bulk Energy?
Our model is to take small businesses, form buying groups and negotiate with the retailers to secure pricing that may otherwise have been unattainable individually; we call it GO BULK™.
Bulk Energy is passionate about supporting Australian small businesses and providing them with the energy rates that had previously been reserved for the big boys.
Notwithstanding we established Bulk Energy to service small business, we’re also very well qualified to service large market accounts.
If you’re interested in finding cheap electricity for your business: Bulk Energy can help.
The first step is our free bill check.
Energy efficiency & onsite generation
With luck, this page has provided some insights into how to find cheap electricity, and how an electricity broker can potentially help in this regard.
But electricity prices are only the beginning: Using less energy through improved efficiency is a necessary step if you want to achieve real cost savings. Our energy efficiency advice page is a great place to start.
For those who want to take things further, there are now many options available in Australia to generate and store electricity at your site.
As break-even points continue to compress, Bulk Energy are now offering our customers solutions for energy efficiency and onsite generation — please contact us to learn more.
The ultimate cheap electricity: Onsite generation with solar.
Get your FREE bill check.
The next step to saving on energy is Bulk Energy’s FREE bill check.
- For residential we check: Your rates, whether you are on a standing or market offer, and we’ll also look for hidden fees.
- For tariff bills we check: Your rates, the details of your offer, and whether you are paying any hidden fees.
- For large market bills we check: Your electricity charges, network charges, market charges (including environmental fees and market fees), your contract end date and usage — and much more!