Business groups have called for the Tasmanian government to offer a financial lifeline to hundreds of small and medium businesses that could soon face a doubling of their power bills.
Key points:
- Businesses that have power needs of above 150 megawatt hours — with annual bills of around $40,000 — will have to enter into market contracts
- Ones using less power will pay the same lower rate as householders
- There are calls for the government to consider a rebate scheme for businesses
This week's federal budget predicted electricity prices to increase, on average, 20 per cent by Christmas and a further 30 per cent in the next financial year.
Combined, that would amount to a 56 per cent increase in power prices over the coming 18 months.
Tasmanian Small Business Council chief Robert Mallett said many businesses would soon have to negotiate new electricity contracts.
"Depending on the business, this could be a make-or-break as to whether they survive at all, let alone having to whittle down some staff or change the ways they do business," Mr Mallett said.
"This could be devastating for some businesses if we don't do something about it very soon."
Goanna Energy principal consultant Marc White helps businesses negotiate energy contracts, and said many business people were worried.
"We've had a number of small family grocery stores, irrigators, dairies, hotels, all quite concerned about what happens when their current contract lapses," Mr White said.
"Most large businesses contracted a year or two ago, but there's still a few hundred small businesses that are facing large increases because they've left their recontracting for the last minute."
Call for business power rebates
In Tasmania, businesses that have power needs of above 150 megawatt hours — which equates to annual bills of around $40,000 — have to enter into market contracts for their electricity.
Businesses that use less power can pay the same lower rate as residential customers, which is set by the Office of the Tasmanian Economic Regulator in July each year.
Mr White and Mr Mallett want the Tasmanian government to consider a rebate scheme for businesses, with market contracts, similar to one that was run in 2017-18.
Then, the government reimbursed businesses for every dollar they paid for electricity above $85 per megawatt hour.
Mr Mallett said that, this time, the threshold could be higher, to reflect a reasonable price increase.
"Anything that a small business person might be paying over $100 per megawatt hour could well and truly be reimbursed by the Tasmanian government."
Mr White said the rebate scheme would not be unaffordable for the government.
"I think the time's right to re-look at the 2017 energy rebate scheme because this pricing from the mainland has just run too far away from the Tasmanian fundamentals," Mr White said.
"Back in 2017-18, the energy rebate scheme cost state government $20 million, and we think there are a lot fewer customers impacted this time, because most of them have entered into those contracts early, so we're hopeful the cost to the state government will be well less than $20 million."
Tasmania's premier, Jeremy Rockliff, said businesses understood the risk of price rises when they entered into contracts.
However, he did not rule out considering rebates for small businesses.
"Of course we will work with the business community to ensure that those price shocks are limited, if there is a policy intervention that could possibly be there that is affordable of course," Mr Rockliff said.
"Now I'm not going to make any policy on the run, what I am interested in doing is ensuring that we're listening to the business community to ensure that the sustainability of [small-to-medium] businesses in particular."
Small businesses would struggle with higher electricity prices
Jeff Sadler's business manufactures quilts and pillows and also offers a quilt cleaning service in the inner-Hobart suburb of New Town.
He said his whole operation was energy-intensive.
"When we fill a quilt, we use electricity. When we clean a quilt, we use electricity. When we have our shop out here, we use electricity. So, it's every aspect of our business," Mr Sadler said.
He said he was unsure how he would cope if his electricity bill got bigger, because he could not afford to reduce his (sales) margins further.
"We've got three options really: put up our prices, increase our sales, or lay off staff."
Mr Mallett said another way to help businesses would be to allow more to pay the retail standing offer that residential customers get.
He said this could be done by increasing the power-use threshold below which they could qualify.
Mr White predicted that the standing offer would likely increase by between 10 and 20 per cent next July because it was heavily influenced by the wholesale electricity price in Victoria.
"This wholesale price problem is imported from Victoria's market pricing and, at the moment, there's a disconnect between what's happening in Tasmania and what's happening on the mainland," Mr White said.
The Tasmanian government has rejected calls from the Labor opposition to de-link from the National Energy Market.