Electricity prices will rise as much as 29% for tens of thousands of small businesses across Australia from July 1, as market regulators confirm major hikes to the base rates offered to energy consumers.
On Thursday, the Australian Energy Regulator (AER) announced its Default Market Offer (DMO), the price cap applied to electricity deals across South Australia, New South Wales and south-east Queensland, will significantly increase in 2023-2024.
Small businesses customers reliant on default offers can expect their annual bills to increase anywhere from 14.7% to 28.9%, depending on their location, the AER said.
SMEs using 10,000kWh of electricity a year on DMO rates can expect their bill to rise by at least $639 a year, the AER said.
The most significant cost increase will come in South Australia, where small businesses reliant on the DMO can expect a $1,310 annual increase.
In Victoria, the Essential Services Commission (ESC) announced the Victorian Default Offer (VDO) will also surge in cost.
Small businesses can no longer expect the 31% year-on-year increase flagged in the ESC’s draft determination, but still face a 25% annual uptick.
This means small enterprises may see their average power bill increase from $3,039 to $3,791.
Some 55,000 small businesses use the Victorian Default Offer, the ESC said.
The DMO is not the absolute cheapest price an energy retailer can offer to small businesses, meaning enterprises may still be free to shop around for savings.
However, the rising DMO and VDO both serve as a barometer for overall power prices, which show no signs of dropping as the wholesale energy market volatility of 2022 lingers through the new year.
Renée Wallace, owner of Birch restaurant in NSW’s Southern Highlands, said adjusting to higher power prices is just one of the ways she has retooled the business through a tumultuous economic environment.
Energy costs have “gone up quite a lot” in the past two years, Wallace told SmartCompany on Friday, with the business turning to common-sense processes to reduce its overall power consumption.
The restaurant has enacted “really practical things from a day-to-day operations perspective, in regards to making sure lights are turned off, the fridges not being utilised, making sure they’re turned off at the power source,” she said.
Power has become a “bigger consideration bubble” for the enterprise as Wallace and the Birch team juggle the business’ rising costs against the sensitivity of diners to price increases on the menu.
Hundreds of dollars in energy bill relief flagged by the federal government may be a major factor for some small businesses, she added, but may not dent the costs incurred by a venture the size of Birch.
As in restaurants across the country, direct power costs are hardly the only concern: rising electricity bills are flowing into the cost of produce, and subscription costs for booking platforms are also on the rise.
The venture is working to “absorb and juggle those costs rather than pass that cost on to consumers,” she said.
“Because already we’re finding consumers are changing their purchasing habits due to their own financial worries or concerns and things like that. So obviously, you don’t want to contribute to that in any way.
“But obviously we’ve got to remain sustainable. It’s a bit of a balancing act.”
Those cost considerations, and changing consumer habits, have led Birch to move away from its day-to-day menu towards more curated dining events.
Shifting business models is one way ventures can adjust to challenging conditions as input costs rise, she said.
“How can we do what we love and find a different equation to make that work in in the day-to-day operations, where we don’t have to stress about project cost, or access to produce, or cost of operating?” she said.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
