Small businesses struggle to deal with energy retailers

Significant differences are emerging in how mum-and-dad businesses are being affected by the energy market’s transformation, according to the Australian Energy Market Commission (AEMC).

The AEMC’s annual report on retail energy competition has found a growing divide between small and medium businesses as they struggle with the complexity of doing business with energy retailers.

AEMC chairman John Pierce said the divide was based on the businesses size.

“Those with more than 100 employees are more connected with their energy consumption and management options, more confident in finding the right information to choose plans and spending more time shopping around get the benefit of savings now available in the national electricity market,” he said.

“But most smaller businesses are less confident about looking for the right information that suits their particular situation, have lower levels of trust in retailers and are less likely to invest in new technology like solar PV and batteries, especially as many occupy rented premises.

“Rather than shopping around, more than half of these smaller businesses have absorbed the price rise themselves and not passed costs on to customers; around half of them made efforts to reduce their consumption but only 17 per cent looked to switch retailers.”

Mr Pierce said the findings reinforced the importance of retailers targeting information to businesses of different sizes and types to help them choose the best plan for their circumstances.

“The conduct of retailers is making it difficult for all consumers to access the benefits of competition – even though more retailers are operating in the market, and more customers are switching plans and accessing new technology,” Mr Pierce said.

“Competition continues to increase, but retailer inertia and a lack of transparency have emerged as significant barriers preventing consumers gaining the maximum benefits in terms of prices and services.”

While small business satisfaction has been decreasing since 2016 it is now at the lowest level since the AEMC’s annual reviews started in 2014.

“The message is clear – the way retailers choose to do business remains too complex,” Mr Pierce said.

The 2018 Retail energy competition review said last year’s energy price rise affected many small businesses more than households because they pay higher rates, have higher consumption and have little access to the kind of support schemes available to households, like payment plans.

“The switching rate for businesses changing their energy company or plan over the past five years has risen to 70 per cent,” Mr Pierce said.