We discussed how businesses can implement quick wins through demand management, making the most of the low prices and choosing a flexible option.
Adapt your operations
When it comes to your business operations, there are some quick wins that you can implement to focus on other priorities.
For example, your business could switch off its automatic lighting and air conditioning.
If you’re experiencing lower stock volumes, you could also consolidate your stock into one fridge and turn the others off.
By simply moving your operations outside of peak times to the middle of the day, you could also unlock additional layers of savings.
Take advantage of low prices
Energy prices are on a downward trend and have been since late last year. With an influx of people working from home and businesses being forced to close their doors due to COVID-19, demand has also dropped.
Opportunities are there for businesses to contract low energy prices, not only now, but also for later years. However, you can also look for flexible alternatives and avoid falling onto default rates.
For businesses that are coming out of contract in the next year or two, the current low energy prices can still benefit you, so it’s worth contracting in advance to make the most of the low prices we see today.
If your electricity contract is up for renewal and your business operations have been reduced, it’s important to look at your options for a new contract or you may be charged default rates, which are often much higher. Having a contract in place helps keep your costs down.
For those uncertain about the future of their business with limited visibility over their operations, you can look at a contract that takes into account how and when you use power.
Flexibility in contracting
If your energy contract is up for renewal but the outlook of your business is uncertain, there are a few options your business can implement.
Firstly, you can choose a three-month rolling contract instead of locking in a long term deal until you find the best solution.
If you haven’t signed a contract because you’re concerned that prices will continue to fall, you can take the Active Option. That way, if the market comes down further, you can lock in a lower rate in the future.
It’s as simple as knowing how to optimise your energy savings by taking advantage of the lows in the energy market. Tools like the Active Option can minimise timing risk and allow you to follow the market down.
Let’s look at this in practice.
A business signed a Power Active contract with the Active Option because they noticed low energy prices in the market.
When the market fell again, the Active Option was executed and they got a lower energy rate. To further save costs, the business began moving its operations to the middle of the day outside morning and afternoon peaks.
By doing this, the business saved 15% on the energy bill through the Active Option. They also saved an additional 5% on their energy costs by moving to their operations to the middle of the day.
Being flexible in your business operations and energy contracting allows you to take advantage of low energy prices, both in your everyday energy costs and long term contract costs.
I’m in a contract until the end of the year. What are my options right now?
For customers who may not be coming out of contract for this year or even next year, it’s definitely worth looking at contracting in advance. Currently, the market is seeing four-year lows for calendar years 2021, 2022 and even as far out as 2023.
Customers have options to look at renewing their contract either for one, two or three years. Your business could take out the Active Option to move when the market falls. By doing this, the prices are set, so you can have certainty over prices now, but in the event that the market keeps declining over the year, you take advantage of even lower prices by following the market.
My business is shutting down temporarily, what’s the best energy saving tip that I can implement?
You can look at shutting down equipment like heating, air conditioning, and refrigeration, as well as any equipment that isn’t critical to the business. Check lighting switches are also turned off in areas not in use, and if sensor switches can be reverted to manual switching.
So how does the Active Option actually work?
When a customer takes the Active Option, you pay a small premium to lock a price for a future contract, but you don’t have the obligation to take that contract
If the price on the ASX continues to fall between when you sign up to that contract and the start of the period, we can simply not take that contract and re-price it at the current market rate.
A large portion of our customers that took the option last year saw savings of up to 20%, so that two or three percent premium is typically insignificant compared to the amount of potential savings.
I have been offered prices that are the same as my current contract selling on the 1st July. Is that any good?
The current market presents a lot of opportunities, with pricing at the moment being some of the lowest we have seen for the last three or four years. As always, it’s definitely worth exploring your options and other alternatives if you’re getting the same pricing as you’ve been on for the last couple of years.
My business is closed, but I received an energy bill. Why is that?
Chances are that it’s probably still mostly coming from network charges. Often, around 40% of most invoices are made up of network charges, which can be mostly demand charges.
You can also take this as an opportunity to approach the distributor through your retailer and ask for a reset of that demand charge, as that network charge of the demand charge component is most likely making up a large proportion of that invoice.