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Have energy costs increased for Australian businesses?

Business energy costs are rising 171 77361 0 14100920 300

Like homeowners, Australian businesses have witnessed considerable rises in their energy costs over recent years, which have undoubtedly affected their bottom line.

It's no secret that energy prices have been rising for some time now and for businesses, it's becoming a problem that increasingly takes its toll on profits.

Both gas and electricity prices have escalated over the past five years, no doubt leaving business owners wondering what they can do to curb costs and rein in their spending.

What's the damage?

A parliamentary report into electricity and gas prices found manufacturing industries are among the worst affected. During the 10 years to June 2013, retail electricity price increases for this sector alone have increased 60 per cent, while gas prices are up 29 per cent.

This undoubtedly puts pressure on margins and leaves businesses wondering where they'll be able to cut costs - and it might not be a situation that's rectified any time soon.

A report from AEMC titled Electricity Price Trends shed light on just how much prices have risen over recent years, as well as the trajectory they are likely to follow in the future.

Transmission prices alone are expected to increase 13 per cent between 2012-13 and 2014-15, adding around 0.3 cents per kilowatt hour to the average bill. Meanwhile, distribution network prices are forecast for a 12 per cent increase over the period, equating to around 1.4c/kWh.

As Australia continues to invest in the infrastructure needed to ensure it meets the energy needs of the future, business owners could find their bills are unlikely to come down any time soon.

The government has acknowledged that underinvestment in energy networks has emerged over the past few decades, which is something that now needs to be addressed.

Which states are worst affected?

The AEMC report took a closer look at energy price rises on a state-by-state basis, showing that some parts of the country have been harder hit than others.

During the period in question - 2012-13 to 2104-14 - the Northern Territory is expected to have witnessed a 34 per cent rise in energy prices, adding 8c/kWh to the already high costs businesses are facing.

The situation is slightly better in other states and territories, but it's worth noting that only one - South Australia - is expected to see a decline in prices.

A retail price increase of 11 per cent is predicted in Victoria, while businesses in Queensland and Tasmania can expect rises of 9 per cent and 7 per cent respectively. The Australian Capital Territory is forecast to see prices increase 6 per cent, while Western Australia is gearing up for a 5 per cent rise. New South Wales is likely to see the smallest increase of all on 2 per cent.

Parliamentary analysis also points to the fact that price rises have been different across all states and territories.

From 2003 to 2013, electricity prices have increased 107 per cent for Sydney businesses, 73 per cent for those in Brisbane, 41 per cent for Adelaide-based companies and 30 per cent in Perth.

Meanwhile, gas prices have increased from 40 per cent in Sydney right up to 78 per cent in Perth.

The nation's homeowners aren't immune from this trend either. Data released by the Australian Bureau of Statistics in June 2014 showed costs are rising as consumption levels are in decline.

Households were found to be using 4 per cent less electricity than they were four years ago, but the value of the power they access has risen 43 per cent.

What does the future have in store for business energy?

There's just no getting away from the fact that rising energy costs are eating away at business profits and with investment still being made in the grid, it's unlikely the situation will change in the near future.

The government has committed to the further deregulation of retail prices, as well as the privatisation of state government-owned electricity networks.

In addition, it plans to make changes to environmental policies that might be taking their toll on wholesale energy costs. Analysis will also be carried out on what value customers place on the reliability of their network.

A recent report from the Minerals Council of Australia attributed much of these cost rises to energy policy interventions - namely the carbon tax and Renewable Energy Target (RET).

The Minerals Council of Australia claims that the carbon tax accounted for around 16 per cent of a large industrial user's electricity bill in New South Wales in 2012-13. On a national basis, carbon pricing added around $6.4 billion to the average tax bill.

However, now carbon pricing has been repealed and the RET is up for discussion, it's possible the scenario could improve for the nation's business owners.

It's nevertheless essential for bosses to ensure they are with the right electricity or gas supplier for their needs and aren't afraid to switch if they're paying over the odds.

Posted by Liam Tunney