- Nick Xenophon to block tax cuts unless the government acts on the crisis
- Large industry to bear the brunt of price hikes
- Small commercial customers could be facing an increase of $50k per year on bills
- 5% tax cut will not offset to spike, businesses must be proactive now!
Australia will be facing an energy crisis by the next year and the bad news for business is that even though electricity prices have more than doubled in the last two years, they are continuing to increase at an alarming rate.
Senator Nick Xenophon, who controls three votes in the senate is trying to force the government’s hand. He will block the proposed decade-long 5 % tax cut for businesses, saying the government must get its priorities right and sort out electricity prices and the forecasted shortfall in power.
Uncertainty has been compounded by the fact that even if Prime Minister Malcolm Turnbull can cobble together a bipartisan approach to the energy supply problem, the country does not have enough gas in silos to meet local demand.
It is a bizarre situation, to say the least; one of the most energy-rich nations in the world exporting so much gas that it has left itself with a shortfall. The Prime Minister admitted that this has been the result of decades of political failure. Here at Leading Edge, we believe in proactive solutions and our expert team can help you and your business find the best deals for electricity as well as eliminating waste and generating your own power.
The time to act is now, inaction could mean the failure of your business. Leading Edge can help you.
Who is going to suffer and when?
The first to be in the firing line when the crisis begins to bite will be large energy-intensive industrial and commercial players. Some companies have projected that their power bill could go up by $20 million per year.
Such companies will experience sharp and immediate pain, with the new tariffs cutting into their revenue streams. Small and medium enterprises and your average household will begin to feel the pinch in the longer term.
SMEs, in particular, will be hurt by the price hikes once they come to renew energy contracts. Because the energy retailers make projections for the future, prices will be fixed in advance and some end-users could be facing a situation where bills will have increased by $50,000 per year.
The government has proposed to a 5 % tax cut bringing it down to 25% over a decade to try and soften the blow. But this is also being seen as political opportunism. In a world where commercial tax rates in Asia have been reduced to 23% in Asia, 15% in the US and the UK and the EU, Australia should be doing this anyway not just as a response to the energy crisis.
Wage and salary growth are certainly going to be stifled, and there could be mass redundancies – at least in the short term.
Is anyone doing anything about it?
Senator Nick Xenophon is trying to force the Prime Minister’s hand by refusing to back the tax cuts proposed by the government. He said that he feels it is pointless in pushing these through when the energy crisis is being ignored. He was right on cue in telling The Australian Financial Review that the government should get its priorities right, then it should be focusing on forcing prices down to “give relief to business and ensure productivity”.
He warned that the energy crisis is contagious and that the blackouts experienced in South Australia will become the norm for the whole country. Mr Turnbull, to an extent, has been vindicated in terms of his consistent position that Australia needs more power. The problem, however, has landed squarely in his lap and his call for a summit of electricity suppliers and the Federal Government will smack of hypocrisy, given his admission that the local shortfall of gas supply (when tons of it is being exported) is a political, not industrial problem.
He might have seen this coming, but the 5 am Thursday bombshell email which made an official prediction of massive shortfalls will have taken him by surprise. While businesses scramble to find a way to remain viable, it is up to him and Energy Minister Josh Frydenberg to find a solution.
Call to action
There are options available, but before any can be considered, politicians must prove that they are willing to put their differences aside and act in the interest of Australia’s national wellbeing. Here at Leading Edge, we believe that a common-sense approach will lead to results.
First off, the government could impose quotas of coal seam gas to be set aside for domestic consumption. Secondly, the moratoria put into place on prospecting for new seams of gas could, and should, be lifted.
A third option is to follow Queensland’s example of sharing land for gas extraction with farmers, giving it a dual-use. While QLD energy prices have also risen over the past two years (140%) those prices are still at the lower end of the scale, and the state has enough gas to power itself into the future.
The government must also continue to push for the creation of more renewable energy. Although these are dependent on the weather and expensive to generate and maintain, it will add to Australia’s super-stressed energy mix. It must also ensure that a Hazelwood scenario never repeats itself. In a world of de-regulation and divesting of state assets, perhaps the government out to roll back to the years of state intervention in energy supply. Subsidised state-backed energy plants could force the commercial generators to increase supply and also lower their prices.
Businesses must take action now
Businesses must take action now before it is too late. As it stands, they will be facing a double whammy where prices will continue to skyrocket – driving up costs and lowering profit margins.
The second very real and ominous factor is that supply will not be guaranteed by the end of 2018. No supply means no power and no power means no production or output.
Here at Leading Edge, we pride ourselves in not only finding you the best energy contracts but also in analysing your consumption patterns, identify and prevent waste as well as presenting you with a set of options to generate your own power through solar.
At a time when supply is simply not guaranteed and prices going through the roof, we can identify a solar solution that could generate up to 70% of your energy needs – depending on roofspace.
What measures can business operators take to counter price hikes?
- Negotiate: Negotiate the lowest possible rates with your energy retailer. Leading Edge can assist you with this.
- Optimise tariff structure: Ensure your electricity is in the lowest cost market and is on the lowest cost network tariff structure. Leading Edge can assist you with this.
- Monitor: Monitor the way your business consumes power to identify wastage. Leading Edge can assist you with this.
- Change behaviour: Change behaviour in your business and eliminate needless waste. Leading Edge can assist you with this.
- Invest in energy efficiency: Energy efficiency is a general term that may encompass upgrades such as lighting, power factor correction, variable speed motors and drives, natural refrigerant upgrades and more. Leading Edge can assist with each of the solutions identified above.
- Invest in generation: Solar is the most obvious and viable generation solution for business. Solar panels are at the cheapest they have ever been. However, whether or not to invest will depend on a range of factors such as property ownership and available roof space.
About Leading Edge Energy:
Leading Edge Energy is an integrated energy cost reduction solutions provider. We offer a bespoke service to our clients by following our standard “Loop” methodology. In simple terms, we help our clients reduce their exposure to the cost of grid sourced energy by guiding them through a path towards energy cost reduction. We follow the path of highest return on investment to deliver the best possible value to our clients.
Our initial review and assessment process is a complimentary service and you are not obliged to accept our recommendation or offer.
Call us today t. 1300 852 770