Is Your Energy Contract Still Working for You? 5 Things Victorian Businesses Should Review Before Renewal
- J Thompson
- Aug 12
- 5 min read
Updated: Aug 13
For many businesses, electricity is treated as a bill to be paid rather than a contract to be managed.
The invoice arrives each month, accounts pays it, and the energy agreement often receives very little attention until a retailer calls, a broker sends through a renewal proposal or the existing contract is approaching expiry.
But energy contracts can have a meaningful impact on operating costs. And the lowest advertised electricity rate does not necessarily mean the lowest overall energy cost.
For Victorian businesses, reviewing an energy contract should involve more than comparing cents per kilowatt-hour.
It should involve understanding how your organisation uses energy, what you are actually paying for, what risks sit within the contract, and how your energy requirements may change over the next few years.
The Australian Government specifically recommends businesses regularly review their energy contracts and notes that savings may be available simply through renegotiation or moving to a more suitable offer.
Here are five things we think businesses should consider before their next energy contract renewal.
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1. Understand what contract you are actually on
The first step sounds obvious, but it is often overlooked.
Start with the existing agreement.
When does it expire?
Is the electricity price fixed or variable?
Are there exit fees?
Are there automatic renewal provisions?
Are there discounts that expire?
Does pricing change at particular points during the contract?
And what happens if you simply allow the existing agreement to roll over?
For smaller Victorian businesses, there are generally market offers and standing offers available. The Victorian Default Offer also provides a regulated standing electricity offer for eligible small-business customers.
In Victoria, a small customer is currently defined as consuming no more than 40 MWh of electricity or 1,000 GJ of gas per calendar year. Larger organisations can generally negotiate individual commercial energy contracts based on their consumption, load profile, location and other requirements. This distinction is important. A café consuming 25 MWh per year and a manufacturing operation consuming 2,000 MWh per year are both businesses — but they should approach energy procurement very differently. There has also been a recent change worth knowing about.
From 1 July 2026, Victorian retailers must ensure eligible small customers who have remained on the same contract for more than four years are paying a reasonable price. That is a useful consumer protection. But it is not a substitute for actively reviewing the market.
2. Look beyond the headline electricity rate
When comparing energy offers, it can be tempting to focus on one number:
cents per kilowatt-hour.
But the retail electricity rate is only part of the story.
Depending on the size and structure of the account, the total cost of electricity can include:
energy consumption charges
network charges
demand charges
metering charges
environmental and regulatory charges
retail margins and other contract components.
For large energy users, network charges alone can represent a meaningful portion of the total delivered electricity cost. The Australian Government notes these charges can account for approximately 10% to 20% of total costs for large users, depending on the customer and network arrangement. This is why comparing two retailer proposals based purely on the headline energy rate can be misleading. A contract that looks marginally cheaper on paper may behave very differently when applied to your actual load profile.
The better question is:
What would this contract have cost our business if it had been applied to our actual electricity consumption over the last 12 months?
3. Understand when you use electricity — not just how much
Two businesses can consume exactly the same amount of electricity over a year and have very different energy costs.
Why?
Because when electricity is consumed matters.
A business with relatively stable daytime consumption presents a different load profile from an operation with short, sharp demand peaks, large equipment starting simultaneously or significant consumption during peak network periods. For larger energy users, retailers use a customer's demand characteristics when assessing pricing and risk.
A more volatile or unpredictable load can contribute to a higher risk premium. Peak demand can also materially affect network charges. This is where interval data becomes valuable.
Rather than simply reviewing 12 monthly bills, businesses should ideally understand:
their average daily load profile
maximum demand
seasonal changes
weekday versus weekend consumption
overnight base load
significant operational peaks
periods of unusually high consumption.
The Australian Government recommends using detailed consumption data when negotiating energy supply and suggests obtaining at least a year of usage information where possible.
We tend to describe this more simply:
You should understand the energy behaviour of the site before buying energy for it. Sometimes the biggest opportunity isn't a cheaper electricity rate. It is changing the way electricity is being consumed.
We design and install energy monitoring devices in businesses to capture real-time energy data
4. Think carefully about contract timing and term
Energy procurement is also a risk-management decision.
A one-year contract provides flexibility.
A longer contract may provide greater price certainty.
Neither is automatically better.
The right answer depends on market conditions, the organisation's appetite for risk and what is likely to happen within the business during the contract period. The Australian Government recommends considering both market timing and contract length rather than automatically renewing at expiry. It also notes that businesses do not necessarily need to wait until the end of an existing contract before investigating future supply arrangements.
For larger organisations, this means procurement should ideally be planned rather than rushed.
Waiting until a contract is days away from expiry can reduce the amount of time available to:
understand the site's energy data
test the market
obtain multiple offers
negotiate commercial terms
assess different contract durations
consider renewable-energy options
obtain internal approvals.
Price is important. But so is certainty. For some organisations, knowing the energy price for the next three years may be more valuable than trying to capture the absolute lowest possible market price.
For others, particularly where the organisation is undergoing significant change, flexibility may be more important.
5. Consider what your site will look like during the next contract
This is probably the area we see becoming increasingly important.
An energy contract should not simply reflect the business you operate today.
It should consider the business you expect to operate during the contract period.
Are you planning:
Solar?
Battery storage?
Electric vehicle charging?
Electrification of gas equipment?
A building expansion?
New plant or machinery?
Longer operating hours?
Energy-efficiency upgrades?
All of these can change the amount of electricity you purchase from the grid — and potentially when you purchase it. Installing a substantial solar system, for example, can dramatically reduce daytime grid consumption. A battery may further alter the site's demand profile by shifting electricity consumption between different periods or reducing short-duration demand peaks.
Likewise, electrifying heating, adding EV charging or expanding production may increase electricity requirements. Nyawi Sustainability Consultants recommend factoring significant future business changes into energy procurement decisions because expansion or operational changes can materially alter future energy requirements. This is why procurement, solar, batteries and energy efficiency should increasingly be considered together.
"We believe energy procurement should form part of a broader energy strategy. The objective isn't necessarily to chase the cheapest electricity retailer every twelve months. It is to understand the organisation's energy position well enough to make informed decisions.
Nyawi takes a holistic approach to energy and helps businesses find the answers to critical questions such as:
And increasingly:
Solar generation, battery storage, demand management, energy efficiency and electrification are changing the relationship businesses have with the electricity market. For some organisations, the next energy contract may simply involve negotiating a better retail rate. For others, it may be an opportunity to reconsider the entire way energy is purchased, generated, stored and consumed across the site. |
