Small business electricity contracts explained

A café, a joinery and a warehouse with a coolroom are all “small business” in conversation. They are not the same product on an electricity contract. The residential market runs on fact sheets and a cooling-off habit people have at least heard of. The small-business market mixes standing offers, market offers and negotiated contracts, then adds benefit periods, demand charges and, often, a broker. If you only shop the way a household shops, you will miss the line items that move the bill. Start with annual kilowatt hours, your NMI, and whether the quote is a published market offer or a bespoke rate card.

Small customer, small business, or neither

In the National Electricity Market jurisdictions that apply the National Energy Retail Law, a small customer is defined by annual consumption, not by whether you have an ABN. Electricity is typically under 100 megawatt hours a year. Victoria uses a lower electricity threshold. Cross it, and you are a large customer: fewer standard consumer protections, more room to negotiate, and a contract that can look like a wholesale-linked deal rather than a retail plan.

Plenty of genuine small businesses still sit under the small-customer cap. They can buy a small-business market offer with a published fact sheet, much as a household does. They can also be sold a negotiated rate that never appears on Energy Made Easy. Both can be legitimate. Only one of them is easy to compare against a neighbour’s bill.

If you are still learning the household version of this, how to compare electricity plans in Australia is the right starting point — then come back here, because the business contract will add terms that a home fact sheet never mentions.

What you are actually being quoted

A useful business quote names the network tariff class, the usage rates, the daily supply charge, any demand or capacity charge, environmental scheme costs, metering charges, and the term. A useless quote says “12 per cent off the usage rate” and hopes you will not ask “off what”.

Ask for the rate in cents per kilowatt hour, not a percentage. Ask whether the rate is inclusive or exclusive of GST. Ask whether the quote is a single-rate, time-of-use or demand structure. If the site already has a smart or interval meter, ask the retailer or broker to price your interval data, not a made-up annual average. A bakery that peaks at 4 am is not a real-estate office that peaks at 3 pm.

Standing offers still exist

Small-business standing offers are the boring product. In New South Wales, south-east Queensland and South Australia they sit under the Default Market Offer framework in a way that is easy to confuse with the household DMO. The DMO is a reference price and a cap on standing offers, not a promise that the standing offer is cheap. Read the Default Market Offer explained before you treat a “percentage off the DMO” banner as a business case. Victoria uses the Victorian Default Offer instead; that is a different instrument, and the Victorian Default Offer explained is the companion piece.

A standing offer can be a holding pattern after you open, move, or come off a lapsed deal. It is rarely the right place to stay for a year without checking.

Negotiated contracts

Once a retailer (or a broker acting for several retailers) is quoting a bespoke rate, you are in negotiated territory. The paper may still look like a market contract. The difference is that the rates, the term, the indexation clause and the exit fee were not copied off a public fact sheet.

Typical commercial terms to read slowly:

• Contract term. Twelve, twenty-four or thirty-six months is common. Longer is not automatically cheaper; it is a bet that wholesale prices will not fall, or that you will not move premises.
• Benefit period. The discount or the “fixed” usage rate may last a shorter time than the contract. When the benefit ends, the rate can revert or be reset. Diary it.
• Price review and pass-through. Network charges, environmental certificate costs and metering fees often pass through even when the retail usage rate is described as fixed. “Fixed” that excludes the network is not a fully fixed bill.
• Early termination. Exit fees or remaining-term charges. Moving the shop does not always kill the contract; see moving house electricity and gas connection.
• Credit and security. Direct debit, a bank guarantee, or a deposit on a new ABN.

Cooling-off is not a given. Small customers on standard market retail contracts still get a cooling-off period under the energy rules in participating jurisdictions, and the Australian Consumer Law can still apply to unsolicited sales. A negotiated large-customer contract, or a deal you actively sought through a broker, can look very different. Read the cooling-off clause instead of assuming the household 10-business-day habit applies. If there is no cooling-off, do not sign on the bonnet of a car park.

Demand charges are not a usage rate with extra steps

If the quote includes a demand charge, stop treating the bill as “kilowatt hours times a rate”. Demand is usually the highest average kilowatts or kilovolt-amperes in a short interval — often 15 or 30 minutes — during the billing month, sometimes only in a peak window. A compressor that starts at the same time as the oven and the air-conditioning can set a peak you pay all month.

That is why demand tariffs explained for Australia is required reading before you “save” by moving a process to 4 pm. On a demand tariff, a shift into the peak window can cost more than the usage rate suggests. On time-of-use without demand, the same shift is a different calculation; see time-of-use versus single-rate tariffs. Stagger motor starts, check whether the meter records kW or kVA, and do not add a fast EV charger or a new coolroom without asking what it does to the monthly peak — the same physics as electric vehicle home charging tariffs. Download interval data before you sign. A broker who will not price that file is selling a story.

Brokers, consultants, and who pays them

Energy brokers are not illegal, and they are not automatically on your side. Some are paid a commission by the retailer, built into the rate. Some charge you a fee. Some do both. Ask in writing how they are paid, “savings against what”, and whether you can see more than one retailer’s rate card — including your current one.

A broker who blocks you from speaking to the retailer, or who rushes you because “the rate expires at 5 pm”, is selling urgency. You can still switch business energy retailers yourself in a contestable market. Small customers still have Energy Made Easy and Victorian Energy Compare. A quote that cannot be checked against those tools should make you slower, not faster.

If the site also has gas, do not let a dual-fuel bundle hide a bad electricity rate. Dual fuel versus separate energy accounts and how to compare gas plans in Australia are the checks.

Green claims, solar, and the rest of the stack

A GreenPower percentage or a “carbon neutral” extra is a product choice, not a substitute for the usage rate — GreenPower and carbon-neutral energy plans explains the mechanism. Rooftop solar on a small-business site is usually a self-consumption story: daytime refrigeration and air-conditioning soak up generation a household would export. That only works if import rates, feed-in and any export cap are read together — see solar feed-in tariffs explained and best electricity plans for solar households. Price the imports first.

Where this advice does not travel

Retail contestability is not national. Most households and many small businesses in the South West Interconnected System in Western Australia buy from Synergy; Horizon Power covers regional and remote systems outside the SWIS. That is not the National Electricity Market, and you should not expect an east-coast style shopping trip. Start with Western Australia’s electricity market explained and how electricity markets differ across Australian states. Regional Queensland Ergon small customers are in a similar “limited choice” bucket.

Even in contestable markets, switching retailer does not interrupt supply. The distributor keeps operating the site. If a salesperson implies the lights go out unless you sign today, they are describing a disconnection threat, not a transfer.

Before you shop, know the site

Pull the NMI — what is an NMI and MIRN if the acronym is new — plus annual kWh, interval data, the network tariff name, the contract end date, the benefit-period end date, and any demand line in kW or kVA. Then read the bill properly. Small-business invoices bury network cost, schemes and metering on separate lines. A “cheaper usage rate” that inflates the daily charge is not cheaper. If the numbers look wrong, dispute the bill before you sign a new contract to “fix” an error.

Confirm whether you are a small customer, a large customer, or in a non-contestable market. Compare published small-business market offers on the government comparator if you qualify. If you use a broker, get the fee or commission disclosed. Sign only once the cooling-off position is clear.

Electricity prices still move for reasons that have nothing to do with your ABN. Why Australian electricity prices change is the backdrop. A contract is how you sit in that weather. Read it as a contract, not as a “plan” on a comparison widget.