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When it comes to energy supply, not all businesses are treated the same. Small and medium-sized enterprises (SMEs) typically consume under 100,000 kWh of electricity per year or spend less than about $2,500 each month on energy. These businesses are usually on standard market energy plans, with bills sent quarterly and less room or need for negotiation.
Larger commercial and industrial (C&I) businesses, however, use over 100,000 kWh per year (or over 160,000 kWh in South Australia) or spend more than $2,500 a month on energy. These customers are billed monthly and have access to the wholesale energy market, allowing them more flexibility to negotiate their own commercial energy contracts and potentially secure better rates through forward purchasing.
If you’re unsure which category your business falls into, check your latest energy bill, it will indicate whether you’re an SME or C&I customer.
If you’re in the C&I category, negotiating energy contracts is a crucial aspect of business operations, especially for companies that rely on a steady energy supply to fuel daily activities. However, for many business owners and decision-makers, this process can be more complex than it seems. Without expert guidance, it's easy to make costly errors. Here are five common mistakes businesses make when negotiating their energy contracts without the expertise of an energy expert, and how to steer clear of them.
1. Misunderstanding contract terms
Energy contracts are often laden with technical language and legal terms that can be difficult to interpret without a thorough understanding of the energy market. Businesses without an expert tend to overlook significant details buried within contracts, such as:
- Early termination fees
- Minimum consumption requirements
- Index pricing clauses that link pricing to market fluctuations
Misinterpreting these conditions can lead to unexpected costs or constraints that work against your business needs. For instance, signing a contract with strict penalty clauses for consumption deviations could hurt operations if your energy usage fluctuates seasonally.
How to avoid this mistake: Have an energy expert review the terms for clarity and fairness. Their knowledge can help you understand the implications of contract specifics and avoid surprises later.
2. Failing to compare offers thoroughly
Energy procurement isn’t just about choosing a retailer with the cheapest headline rate. Many businesses fall into the trap of signing the first seemingly competitive offer they receive, bypassing a comprehensive comparison of other retailers and their rates.
However, pricing structures differ significantly between suppliers. Without a line-by-line comparison of the rates, conditions, and long-term value each offer provides, businesses often miss out on better deals.
How to avoid this mistake: Energy experts can analyse, and benchmark offers from multiple suppliers. They evaluate not only cost but also terms, contract flexibility, and service reliability, ensuring you secure the most suitable deal for your business.
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3. Overlooking hidden fees and charges
When negotiating directly with energy suppliers, businesses sometimes overlook additional charges embedded in their agreements. These hidden costs might include:
- Network or distribution fees
- Metering and data service charges
- Environmental levies or taxes
While these may seem minor at first glance, they can add up over time and significantly inflate your overall energy costs. A lack of transparency or awareness about these items often leads to over-budgeting issues.
How to avoid this mistake: An energy expert identifies and calculates hidden costs, ensuring you have a clear picture of your total expenditure. By bringing transparency to contract terms, they help you make informed financial decisions.
4. Not aligning contracts with your actual energy usage
Many businesses enter into contracts without a comprehensive understanding of their energy consumption patterns. This oversight can result in agreements that don’t match actual operational needs, leading to inefficiencies or excess costs. For example, a contract based on estimated or average usage may include minimum consumption thresholds or penalties for exceeding limits, which can negatively impact your bottom line if your actual usage varies seasonally or due to business growth.
Failing to review your business’s unique energy profile, such as peak usage times, operational hours, and anticipated changes, can also prevent you from leveraging contract terms that offer flexibility or cost savings tailored to your needs.
How to avoid this mistake: Work with an energy expert to analyse your historical and anticipated energy usage. They can align contract terms with your operational requirements, ensuring you don’t overpay for unused capacity or incur penalties for variations in consumption.
5. Underestimating the value of expert advice
Perhaps the biggest mistake of all is assuming that negotiating energy contracts is a straightforward process. Without specialised knowledge of the energy industry, businesses often undervalue the benefits an expert can provide.
From maximising cost savings to optimising usage flexibility, energy consultants bring a wealth of insights that most businesses simply don’t have access to. They also act as advocates, ensuring suppliers prioritise your needs rather than merely meeting their own sales targets.
How to avoid this mistake: Partnering with an energy expert eliminates guesswork. They act as your ally in the negotiation process, leveraging their expertise to secure optimal outcomes for your business.
Why you should consider working with an energy expert
Working with an energy expert isn’t just about avoiding mistakes, it’s about unlocking opportunities. These professionals go beyond contract negotiations to identify strategies for improving energy efficiency, managing demand, and saving costs long-term.
With guidance from an expert, your business can enjoy benefits such as:
- Tailored contract terms aligned with your specific energy requirements
- Full transparency in pricing and contract details
- Reduced risk through market-informed decisions
- Ongoing support to adapt to market changes and optimise energy usage
Ultimately, partnering with an energy consultant gives you confidence that your energy procurement is being handled with precision and care.
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How Zembl can help
Zembl specialises in helping businesses navigate the complexities of energy procurement with clarity and confidence. Our team of experienced Energy Experts works closely with you to analyse your unique requirements, benchmark contract options, and negotiate favourable terms directly with energy retailers on your behalf.
By working with Zembl, you gain:
- Access to deep industry knowledge and up-to-date market insights
- A comprehensive comparison of retailer offers to secure the best value
- Full transparency on contract terms, pricing, and any hidden costs
- Expert guidance to align contracts with your actual energy usage and future growth
- Ongoing support to adapt as your business and the market evolve
At Zembl, we offer energy procurement for Australian businesses, big and small, but we know it takes more than energy procurement alone to make the biggest impact on an organisation’s bottom line.
That’s why our service doesn’t stop with procuring your energy contract – instead, we offer you a team of experts whose role it is to unlock the full potential of your energy, armed and empowered with today’s leading energy intelligence tools. We offer:
- Zembl Energy Experts – a team of local, expert people at your service.
- Energy intelligence – AI-powered insights from your entire business’s meter data to uncover and maximise your efficiency opportunities.
- Energy efficiency – using your energy insights, we’ll connect you with our reputed energy efficiency partners to provide professional energy audits, renewable energy consulting, PFC advice and more.
If you’d like to know more, it’s as simple as leaving your details, and an experienced Zembl Energy Expert will call you right back with the next steps.
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