How to negotiate your energy contract

Many of us feel the pinch when it comes time to pay the electricity bill. Electricity costs go up every year – even beyond the rate of inflation! A power bill can be a significant hit to the budget, and given that it usually comes out quarterly, it can be easy to forget it’s coming. As such we have compiled a few tips on how to talk to your provider and perhaps get a better deal on your future bills. Though, it’s important to first read up on a bit about the energy market as it stands today.

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What do I need to know about the energy market?

The most important thing to know is that it has changed quite dramatically in the past 20 to 30 years. Until the 1990s, the Australian electricity industry was entirely state-owned and run, with no private companies allowed to operate. In the early 1980s, however, a series of large blackouts and power disruptions occurred, forcing the New South Wales Government to launch the first ever independent enquiry into the issue.

The findings of the enquiry recommended a major restructuring of the way electricity was produced in Australia. They concluded that a slow rollout of a privatised network was best practice, as well as the connection between various state networks. These changes were carried out during the following decade, substantially deregulating the market and allowing private companies to begin to offer electricity to consumers.

Fast forward to the 1990s, and reforms have allowed customers to choose their gas supplier, too. Gas offers another resource and competition to electricity, which ultimately can help the market stay competitive. Today there are a wide range of choices for you to consider when looking for an energy provider, and they’re not only about who provides the cheapest tariff rate.

NSW and a handful of other states have fully deregulated energy markets, but the Northern Territory, Western Australia and Tasmania continue to have state-regulated energy providers. Unfortunately, for people in these states, there is not much competition or bargaining power should you decide to switch providers; Western Australia only has one consumer provider – Synergy – for example! Read more on deregulation here.

What types of electricity contracts are there?

Long story short, there are three types of contracts, and it’s important to know which one you are on.  You’re taking a look at your contract, and thinking of switching or negotiating a better deal. Knowing the type of contract you’re under is very important; contracts are the glue that binds you to your electricity provider.

There are two primary types of energy contracts you can enter in deregulated states- standard retail contracts and market retail contracts. But before we delve into these, there is a third type of contract to explain – a regulated contract. In the case of NSW at least, a regulated contract is what you would have been on prior to 2014, before the industry was deregulated. After 2014, if you were still receiving government-provided electricity, you were placed on a transitional tariff. This was designed to encourage people to move to a privatised electricity provider. Think of it in the framework of this flowchart:

energy flow chart

Now let’s look at both Standard Retail Contracts and Market Retail Contracts. Assessing both is worthwhile to analyse whether you’re getting a good deal or not.

Standard Retail Contract features:

  • Have terms and conditions set out by law
  • They are designed to protect your rights
  • They have no exit fees, which makes changing providers easier
  • Prices set can only be changed every six months.

Standard retail contracts have terms and conditions set out by law designed to protect your rights.  These contracts have no exit fees, allowing you to change provider as you wish, and the prices they set out can only be changed every 6 months.  This is the best choice if you want a simple, no-fuss contract with a decent rate.

Market Retail Contract features:

  • Are more limited in the conditions prescribed by law
  • Details can vary dramatically by providers
  • Usually have fixed durations, exit fees and different billing periods
  • It is possible they can be cheaper than standard contracts
  • Could be more likely to offer renewable energy options

These contracts may offer you substantial savings compared to standard contracts, but you need to do your homework before choosing one.  You need to consider:

In a lot of cases, you are most likely to be on a Standard Retail Contract if you have never negotiated with your provider, or if you have never switched providers. So, the way to think of it is that a Market Retail Contract is often the result of negotiating your contract; they involve negotiated terms, which could save you money, but you are more likely to be ‘locked in’ with a penalty for an early contract termination.

Overall, both types of deregulated contracts offer a potential for money savings on your power bill. Standard retail contracts are easy and fairly straightforward, saving you hassle. Market retail contracts on the other hand require a little more footwork, but that leaves you with more breathing room for a potentially cheaper bill. The extra homework you do now could potentially save you money next quarter.

How can I negotiate a better deal with my electricity provider?

There are lots of factors to consider when negotiating with your electricity provider. Your electricity bill can be complex, is more complicated than just so many cents for every kilowatt-hour. Below are some factors you need to assess when it comes to your own power bill. You also have to consider:

This may sound very complicated, but these factors may affect how you deal with your energy provider. Once you know more about what type of plan you have, you can assess your contract. After all, knowledge is power, and being well-equipped with knowledge can leave you better off.

All in all, the most important thing to look at is your own situation. Doing the homework is necessary in knowing what type of contract is right for you. We get it, contracts are like identifying the snake that just bit you; it’s unpleasant but necessary.

Knowing more information about which contract type you’re under leaves you more empowered when talking to your electricity provider. We hope that the information provided can at least provide some clarity and send you on the right path.

If in doubt, compare electricity prices using our ratings, or talk to your provider directly.

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