Ways to manage energy price increases for small businesses
A business energy strategist provides her tips on ways to minimise the impact of energy price increases.
At a glance:
- After an uncertain few years, rising energy prices have put salt into the wound for small businesses looking to stay afloat.
- Sharon Musker of WiseUp Energy says business owners should prepare for further uncertainty on energy costs – but that there are ways to minimise the impact of energy cost increases.
- Her advice is to minimise usage as well as to check and negotiate contracts – and to remember that what works for one business might not work for all.
How to manage energy price increases?
With the cost of energy going up, affecting consumers and businesses alike, it’s worth exploring what impact these changes are having on small businesses. Before that, though, let’s start with some background.
A variety of factors have caused the recent crisis – sanctions on exports of Russian oil and gas, an uptick in business activity prompted by the easing of COVID-related restrictions, Australia’s ageing generation plants being offline for maintenance, coal supply having been affected by this year’s flooding, and the arrival of winter upping demand even further. Rising inflation has also had an impact.
Normally, retailers purchase energy from generators on a ‘spot market’, with rolling auctions determining fluctuating prices between wholesalers and retailers, and the retailers then resell energy to users at a set price.
Those wholesale prices surged so significantly that the Australian Energy Market Operator (AEMO) established a price cap and, after several generators withdrew, suspended the market and began directing the operations of generators at fixed time-of-day costs.
AEMO has since ended the suspension, but energy costs climb nonetheless.
What does this all mean for small businesses?
“The impact of increasing rates is determined by usage, not necessarily the size of the business,” says Sharon Musker, director of WiseUp Energy, a consultancy that works with businesses to help them reduce their energy costs. “One small business might use a lot of energy and another might use very little.”
Compare a food retailer with lots of freezers and fridges to a clothing store – even with similar turnover, the factory or food retailer is likely to use more energy.....
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