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G’Day, my name’s Tim. I’m the Regional Manager for the Business Services Team here at Energy Action. This is the fourth video in my series on energy market insights. While in my previous videos I broke down a large market electricity bill and how you can combat some of the charges, today I thought I’d change tact slightly.
Unfortunately, today I’m coming to you from New South Wales which of course is in lockdown, which if extended could mean a shift in market pricing as we saw during the earlier stages of the lockdown in 2020. There’s a lot that happens within the market that businesses can’t control, yet has a dramatic impact on your bottom line.
Over the last few months, there’s been a number of events within the market that have garnered national coverage as well as some which were tucked away in the middle pages of the Fin Review. All however are important in their own right and tell the story of how the Energy Market in Australia is a “Bad News Market”. We say this a lot within our teams and to clients when trying to provide advice on all important timing to market – which is when to source your next retail contract.
But what do we mean by “Bad News Market”? In its simplest form (and this can be said across a lot of different tradeable commodities) when the market moves down it does so at a slow rate, but the rate of increase is far more rapid whenever we have a negative event.
As an example, a couple of the most publicised events in the last couple of months, the explosion at the Callide C Power station in Queensland that cut power to large parts of the state with a continued delay to the unit being fixed. In fact, the expectation at the moment is that it won’t be up and running until December 2022.
In June the Yallourn Power Station and coal mine in Victoria were also damaged due to flooding, which powers more than a fifth of the state’s energy. This month we have seen a spike in gas prices to levels not seen since 2016 due to the winter cold snap in the South-eastern state, coinciding with generator outages in Queensland and Victoria.
So why am I telling you this? In short, to provide some advice around the timing to market.
It was only last week I was talking to a client about their electricity contract that expires at the end of this year. Based on all of the market advice we were suggesting they look to lock in now to avoid any further potential increases.
They had sighted that the market had shifted upwards over the last few months (they weren’t wrong, it had – check out this Energy Action Pricing Index from our website which shows this) and that they didn’t want to lock in, in a rising market.
The challenge with this strategy is it doesn’t factor in what has happened in the market previously, any advice around the wholesale market trends or that it would take a bit of “bad news” for us to see a spike.
We are still seeing pricing levels not seen since 2016, so it’s highly likely you’ll see better rates against what you are contracted to, so locking in when you can guarantee a saving is the best strategy. The other option is to “hope” you see a decline – as the saying goes hope is for church.
This is why it’s important to take the expert’s advice when it comes to a go to market strategy. Timing is everything in this market. And if you’re undecided about which consultant to go with, the best thing to look at is what’s their current advice and how are they going to support me in the next 2-3 years.
Because often when you’re contracting now with a consultant, they’ll be seeing you through ‘til your next contract signoff. So you gotta be comfortable that they’re gonna give you the advice in terms of when to go to market. Too often we hear that clients lock in contracts with a consultant and then they don’t hear from them for the next 2-3 years so they only lock in their next when they have to, when their contract’s due to expire.
It’s important that you pick somebody that you trust, and you pick a consultant that will see you through every step of the way. Thanks again for your time and I look forward to sharing more insights in a couple of week’s time.