Have you always thought that Ergon Energy is the only electricity retailer in North Queensland? If the answer is yes, you may need to read this blog.
OK, I’m going to have to make a couple of clarifications from the start. If you are a residential customer then Ergon currently IS the only electricity retailer available in North Queensland – sorry if you started to get a bit excited.
If you are a small business customer (defined as using less than 100,000kWh/year) then there are a couple more options open to you. However, our experience is that small customer offers from other retailers are very similar, if not exactly the same as, Ergon’s tariffs. Again – sorry!
If you are a large business customer though (defined as using more than 100,000kWh/year), then you have the opportunity of making substantial savings by switching to another retailer. There are several things you need to consider though:
It’s pretty obvious that cost savings are going to be the good thing about switching retailer. Alternative retailers can be more flexible in the pricing they offer for the actual electricity that you use (called “consumption”, and shown on your bill as “kWh”). Ergon Network, who is responsible for maintaining the grid will charge your new retailer for using it. Your new retailer will, in turn, pass these charges on to you as part of their monthly billing. Retailers are well versed in competing against each other for your business, and they are always willing to “sharpen their pencil” to get it. Ergon Retail, by comparison, has its pricing set by the Queensland Competition Authority (QCA) each year. This can be influenced by the government of the day, but Ergon does not have the discretion to offer different pricing to customers as the market changes.
The bad side of leaving Ergon Energy for an alternative retailer is what’s known as the “non-reversion policy”. Residential and small business customers who have left Ergon are able to return if they like. Large business customers however, cannot.
This isn’t Ergon Energy being childish and walking off in a huff. I’m sure they would love customers to come back and re-open their accounts. It’s actually written into legislation. By law they are not allowed to compete with other retailers and this includes if a customer comes to them. Sound strange? We thought so too.
The non-reversion policy leads to a natural fear: “what happens if my new retailer goes broke, or starts ripping me off, and I have no-where else to go?”. There are protections built into the system such as the “Retailer of Last Resort” scheme that means the lights will never go out.
The other fear is that if something goes wrong with the grid connection Ergon will not fix it as the site is not an Ergon customer. This is not the case. A policy called “ring-fencing” means that Ergon Network (separate to Ergon Retail), who maintain the “poles and wires” must repair the grid, no matter who the site’s electricity retailer is, without favour.
There is a very real “bad” that can sting the unwary though. Ergon network have different tariffs for various zones. Get it wrong, and you could find yourself paying much more than expected with no opportunity to undo your mistake.
There has been a lot more focus on buying locally recently as we realise where most of our goods, and the jobs that they provide, come from. When you pick up the phone and speak to someone from Ergon, that someone will always be in Queensland, and very likely a regional location. And this goes for all their services – residential and business retail enquiries, metering, solar, and network, the whole lot.
We recently had an extremely frustrating and long experience with another retailer regarding a meter change after a solar install. We spoke with about 20 different people from this company. None of them were in Queensland and very few of them were in in Australia. If supporting local jobs is important to you, check exactly who you will be dealing with if you make the move away from Ergon.
HOW ENERGY BROKERAGE WORKS
Energy brokerage works in a similar way to any other industry eg insurance. The broker finds the best deal and is paid a commission for their services. The common model for the electricity sector is that the broker receives their commission from the electricity retailer. The amount they receive is usually a percentage of the retail consumption cost. Don’t think that means you get the service for free though, the cost will be passed on to you through your electricity bills. It also means that the incentive for the broker is to find you an offer that is a lower cost than what you are paying now to get you to sign up with them, but as high as possible to get them the best commission (basically, the best deal for them, not you). Some brokers will have a flat rate fee for their services, while others offer several options. At Tropical Energy Solutions we offer either a flat rate or a percentage of the annual savings, not cost. This means our incentive is to get our customers the best deal possible for them.
The other thing you need to know is that when you move away from Ergon you will enter into a contract that can be anything from one to five years. Generally speaking, you will get better pricing the longer the contract. So, be prepared for going through the process regularly.
THE TAKE HOME MESSAGE
If you are a large business customer there is very good chance that you can make significant cost savings by switching to an alternative retailer.
You will do well to find a broker you can trust. This isn’t a one off event, you really need to be market testing well before electricity retail contracts end. With the right broker you can have a long lasting relationship that will see you get the best deal with retailers well into the future.
CASE STUDY 1: FARM, NORTH QUEENSLAND
This customer had left Ergon Energy for an alternative retailer several years ago. As part of a broader project to reduce energy costs through energy efficiency initiatives such as lighting and operational changes, we negotiated a new contract with an alternative retailer.
Annual electricity use: 1,244,949 kWh.
Annual cost at Ergon Energy equivalent tariff: $309,848.
Annual cost at current retailer: $291,059
Annual cost at alternative retailer pricing negotiated by Tropical Energy Solutions: $281,459 (year 1), $275,809 (year 2).
Compared to Ergon Energy: $28,389 (year 1), $34,039 (year 2).
Compared to current retailer: $9,600 (year 1), $15,250 (year 2).
CASE STUDY 2: RESTAURANT, TOWNSVILLE
This customer had also left Ergon Energy for an alternative retailer several years ago. We found that they were being incorrectly charged as a large customer. We managed the transition from large to small customer status, organised an interim energy contract while this was being processed and negotiated a new small business customer plan.
Annual electricity use: 89,687 kWh.
Annual Cost at current retailer: $34,896.
Annual cost at small business customer plan pricing after reclassification organised by Tropical Energy Solutions: $21,325.
Annual savings: $13,571.