Signing a new energy supply contract is a major decision for Australian businesses seeking to manage overhead costs. Yet many companies treat energy procurement reactively, simply accepting whatever default renewal offer their retailer provides. To maximise value, organisations must proactively assess all elements of new electricity and gas agreements. This guide provides an overview of key considerations when reviewing your business's energy contracts to secure the best deal.

Critical Factors in Business Energy Contracts

Pricing Structure - Understand how consumption vs demand charges are calculated and how time-of-use rates apply.

Indexation - Review how variable rate components can change over the term and any ceiling protections.

Discounts/Incentives - Quantify the actual value of any conditional discounts or sign-on rebates.

Terms and Exit Fees - Assess contract duration, renewal process, termination clauses and associated penalties.

Billing - Evaluate billing frequency, delivery method, and payment terms.

Service Levels - Compare account management support, outage response, contact channels and restoration commitments.

Scrutinising Pricing Models and Rate Build-Up

Drill into the components determining your rates:

• Fixed vs variable pricing
• Usage/consumption charges
• Demand or capacity charges
• Time-of-use peak and off-peak pricing
• Pass through of network and other regular costs
• Feed-in tariffs if exporting solar
• Penalty rates like payment processing fees
• Incentives like sign-on credits or pay-on-time discounts

Model total expected costs under a proposed pricing structure using your unique usage data.

Indexation Clauses to Avoid Price Shock

Understand how variable charges can evolve over multi-year contracts:

• Review rules around rate changes - are they capped?
• Assess frequency of price resets - quarterly vs. annually etc.
• Benchmark escalation metrics used - CPI, wholesale prices etc.
• Negotiate rate change ceilings - e.g. max 10% p.a. increase
• Clarify rules and notice periods around price changes
• Evaluate risks of the proposed indexation approach

Key Contract Term Considerations

Review agreement tenure, renewal process and exit provisions:

• Weigh longer term 1-3 year contracts versus flexibility of 6-12 month terms
• Understand automatic renewal rules - does pricing revert to higher variable rates?
• Assess ease of switching providers or plans during the term if savings present
• Quantify termination notice periods and any early exit or cancellation fees
• Clarify grounds for mutually ending the contract without penalty

Account Support and Billing Services

Ask about billing and customer service:

• Online account and payment portal access and capabilities
• Billing frequency - monthly vs. quarterly
• Delivery method - email, online, paper bills
• Payment terms - due dates, instalment options, processing fees
• Outage response commitments and incident reporting
• Communication channels - phone, email, webchat

Consult Experts to Finalise Contracts

Leverage experienced consultants in contract negotiations and review. They help:

• Provide market benchmarking to compare pricing and terms
• Model expected costs based on your usage data
• Strengthen contract protections around pricing, exit fees and service levels
• Revise contract language to transfer risk to the supplier where possible
• Ensure best energy deal incentives like sign-on rebates are captured

Conclusion

Reviewing energy contracts requires moving beyond advertised rates to scrutinise all elements impacting value - from pricing structures to exit terms. Taking time to optimise agreements reduces the risk of surprises and also helps businesses secure the best energy deal over the contract duration. Expert guidance further strengthens protections and savings.

FAQs

What contract duration is best - longer or shorter terms?

Pros of longer contracts are price certainty and avoiding renewal hassles. Shorter 6-12 month contracts provide flexibility to switch plans or providers faster.

Should I accept automatically renewing contracts?

Automatic renewal provides continuity but often reverts pricing to higher variable rates. Manually negotiating new contracts captures better pricing through competition.ne

What information should I provide when reviewing contract offers?

Provide 12-36 months of usage data including monthly demand and time-of-use consumption if possible. This enables accurate cost modelling of new contracts.

When should I start the renewal process for an expiring contract?

Begin assessing options 6 months in advance of expiration. This allows time to negotiate, avoid auto-renewal and switch providers if needed.

What hidden fees should I watch out for?

Watch for add-on fees like credit card processing costs, late fees, disconnection/reconnection fees, and paper billing fees that elevate real costs.