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Energy Action launches Energy Price Index for Australian businesses

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Leading independent energy management company, Energy Action has launched the Energy Price Index to help Australian businesses gain better insight into their retail electricity prices.

To be published regularly throughout the year, the Energy Action Price Index (Business) will give businesses transparency on retail electricity price fluctuations, and is based solely on electricity contracts secured for Australian organisations. Australian businesses will have access to a realistic benchmark to baseline and compare their retail electricity rates.

The Index for businesses encompasses pricing from numerous energy retailers via the Australian Energy Exchange (AEX), offering genuine insight into retail electricity rates. The AEX is Australia’s only reverse auction platform for electricity and runs approximately 10 to 15 electricity auctions every day.

Businesses have traditionally used the Consumer Price Index (CPI) to forecast increasing overheads. The CPI has helped Australians understand pricing levels across a broad range of goods, including energy but has its limitations when it comes to businesses.

The Energy Action Price Index attempts to fill this gap by showing the raw electricity component of a bill (excluding any network charges, etc.) so businesses can better understand pricing.

Electricity rates differ between residential and business contracts, making it difficult for Australian organisations to accurately understand, predict and track electricity cost movements. Most Australian businesses have become accustomed to forward contracting their electricity to secure a level of price certainty with many relying on advice based on the wholesale electricity market’s price movements, which may be influenced by constantly changing market conditions.

The Index highlights electricity price movements and the real impact of market forces when securing forward contracts. For example, a clear jump in pricing can be seen in February 2012 due to the introduction of the carbon price. Although the carbon price commenced later, energy suppliers began to price their forward contracts on the Australian Energy Exchange (AEX) with carbon included from February 2012. Existing carbon exclusive contracts have incurred a carbon adjustment uplifting their energy rates to factor in the carbon increase.

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