Power bills for small businesses reliant on ‘default’ energy offers are projected to rise anywhere between 15% and 33% from July this year, with regulators now urging struggling businesses to seek out government relief programs to cope with the impending bill shock.
The Australian Energy Regulator (AER) released its draft determination for Default Market Offer (DMO) prices on Wednesday, outlining benchmark prices available to households and small businesses not locked into a pricing agreement set by their energy retailer come July 1.
The proposed increase is stark. For DMO customers in NSW, south-east Queensland, and South Australia, the cost of power is set to increase between 14.7% and 25.4%, dramatically outpacing the projected cost of inflation.
Victorian small businesses face more dire outcomes, with the state’s Essential Services Commission revealing its own draft determination: the annual bill for small businesses reliant on a DMO could increase 33.2%, raising the typical energy bill by $1,738.
The proposed uptick will only add to cost pressures across the board.
November data compiled by business lender OnDeck found two thirds of small businesses have felt the effect of rising power prices, with one in four claiming energy bills were a greater cost concern than fuel and the price of obtaining stock.
While most small businesses are locked into pricing agreements set by energy retailers, a substantial number of enterprises can expect higher prices if they stick with their DMO.
19.3% of small businesses in the south-east Queensland region are expected to opt for the default offer come July this year, the AER states, with 18.1% in NSW, and 15.9% in SA.
Some 17% of Victorian businesses relied on the DMO in June, the ESC said.
Both the DMO and Victorian Default Offers are open for consultation, with a final decision on both expected in late May.
Given the proposed pricing increases, ESC chairperson Kate Symons issued a clear statement to small businesses: seeking financial help may be in their best interest.
“We understand the impacts on consumers amid a broader environment of cost-of-living concerns and we urge Victorians to take advantage of government support programs offering power price relief,” she said.
Such measures are likely to stem from the federal government’s energy price relief plan, a suite of legislation passed in December which earmarked “targeted energy bill relief for households and businesses.”
Prime Minister Anthony Albanese said the precise shape of that $1.5 billion allocation, to be co-funded by the state, territory, and federal governments will be settled in National Cabinet by the end of the month.
Further initiatives targeting energy prices may arrive in the May federal budget.
A wide range of rebates and grants already exist for SMEs looking to improve their energy efficiency.
Small businesses are free to apply to the federal government’s $16 million energy efficiency grant scheme, which offers sums of up to $25,000 for building tweaks, equipment upgrades, and site assessments likely to reduce energy usage.
Similar initiatives already exist at a state and territory level, with business owners able to search for relevant support measures directly through the energy.gov.au site.
Small businesses have also been advised to shop around in search of market rates which may suit them better in the long term.
A rising DMO is largely attributable to the wholesale cost of energy production, which has increased significantly over the past twelve months.
War in Ukraine has disturbed global energy markets, and extreme weather events domestically, and unplanned generator outages have all contributed to the soaring cost of power.
“Since we last set [DMO] prices, the wholesale market has faced unprecedented supply challenges and volatility,” the AER said.
“In combination, these factors mean that wholesale price rises are the predominant drivers of price changes in [the new DMO rate].”
However, the DMO is not technically the lowest-cost retailers can offer their power, meaning small businesses may find more suitable deals by shopping around.
At a household level, small business owners can also access $250 by visiting the Victorian energy comparison site.
Not least, small businesses should also ask their energy provider if a more suitable offer is available.
SMEs behind on their bills should reach out to their energy provider to discuss payment plans or concessions that may be available, Symons added.
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.
