Given the jargon, technical information and complex calculations, energy bills can be confusing and difficult to understand for businesses. Discrepancies between what organisations should be paying and what they’re actually paying go undetected, resulting in excess payments ranging from a few dollars to hundreds or even thousands of dollars.
Many businesses in fact, do not even negotiate their energy contracts as they believe they are not ‘contestable’, with the result that they continue to be charged on high default rates.
It is important for businesses to understand their energy bills completely as they can correct overcharges and save a significant amount, or rectify undercharging discrepancies to avoid surprise additions later.
Energy Action analysed bills submitted for bill validation via their contract management and monitoring services over a 3-month period.
Key findings included:
- 1 in 5 bills (21%) were incorrect in some way
- On average, 13% of users are overcharged and 8% undercharged
- Overcharges amounted to more than $74,000
- Most common reason for overcharge was incorrect ‘line loss’ charges
She advises businesses to have an independent energy management company assess their energy bills and validate them before payment. Energy Action’s Activ8 service provides energy monitoring and bill validation services to help Australian businesses check the correctness of their bills.
Typical energy charges on a bill:
- Energy consumed makes up just under half (around 45%)
- Network charges cover costs involved in transporting electricity from generators, across the transmission and distribution networks to a site
- Market charges are fees paid to the Australian Energy Market Operator (AEMO) to operate and maintain the National Electricity Market (NEM)
- Environmental charges are costs associated with compliance of State and Federal schemes aimed at promoting efficient use of energy, reducing greenhouse gas and funding renewable energy generation
- Service related charges are fixed fees that typically cover costs associated with electricity retailing such as service charges and retailer fees
Get to know your bill
Energy Action has launched an online guide on its website to help Australian businesses better understand their energy bills.
Check your charges
Get an expert to check bills as it can be difficult to verify the accuracy of the bills without understanding the calculation method. Many bill issues cannot be rectified directly with the energy supplier and will need the expert help of a reputable energy management company who can independently check the bill and advise on savings potential.
Review network tariffs
An energy management company can advise the business if it is eligible for a better value network tariff. As network charges make up a sizable part of an organisation’s energy bills, switching tariffs can, in some cases, result in significant savings. Energy Action highlighted potential savings for its Activ8 customers in Victoria of more than $1.2 million, with average savings of $5,800 and several well in excess of $20,000 per annum.
Think about use
Using electricity in the off peak period is not necessarily the best way to save money. Using large amounts of energy in a short period of time means the electricity company will need to supply the highest amount one uses all day, resulting in much higher demand and capacity charges. It is often better to spread use across the day.
Identify opportunities for energy efficiency
The best way to reduce energy bills is to reduce consumption. Educating staff on ways to reduce electricity use and creating an energy policy are good ways to lower a business’s energy footprint. Other solutions include upgrading lights to reduce consumption as well as producing their own energy with expert guidance. Cogeneration can reduce an organisation’s carbon footprint by up to 30%.
Valerie Duncan also advises organisations spending more than $20,000 per annum on energy to consider securing future energy rates by negotiating a forward contract.