The energy business has hotted up for winter in the rural market with the arrival of some new players in the retailing sector. Suddenly there are plenty of good deals flying around, aimed at farmers considering a change before the sharp end of their power consumption season kicks off.

But Ruralco Energy Account Manager Tracey Gordon is cautioning Shareholders to take a deep breath, stand back and carefully scrutinise those deals – all the while remembering that if something looks too good to be true, then it usually is.

She is urging energy shoppers to carefully go through every aspect of the energy bill and identify where that ‘good deal’ will come from before making the jump to a new retailer.


Irrigation Capacity Charge

The biggest component of irrigation energy bills in recent years for rural buyers has been the dreaded Capacity Charge. This charge took a significant leap upwards two years ago, thanks to a shift in how it was calculated.

The shift resulted in the charge almost doubling from 30c/kWh to almost 60c, resulting in additional costs amounting to several thousand dollars for larger electricity users.

“But that capacity charge dropped back down by 31% from April 1. However some Ruralco clients are getting quotes from new companies where they are not comparing like with like. Instead these companies are quoting prices comparing their current pricing to the older and higher capacity charges.”

The capacity charge is a straight through cost from the network for most retailers. Retailers offering a blanket discount across the account, will add the discount into the capacity charge to then take it off at the end, equalling a straight through capacity charge cost.  

“So really look hard at where they are pulling that Capacity Charge cost comparison from when that quote is made.”

Check the power source

With non-generating retailers getting into the market, it is also important to question them closely on where they are purchasing their power from, and the implications of pulling out of a contract you are not happy with.

“Often these companies will buy your load in your contract forward and be carrying that cost, so it may cost you whatever your load cost is to exit that contract, which makes it very expensive.”

What may look good over the coming couple of months may in fact be a poor deal over the longer term run of the season.

GST – in or out?

It is a simple enough point but one that is being played upon in some of the deals on offer. Meridian is the only company that includes GST within every line of its calculations, with other companies keeping GST separate, adding it in at the bottom of the bill’s ex-GST total.

“Some offers used in comparison have added GST onto a bill that already has GST in it, doubling it up. It always pays to look extra hard at where GST has been added into any quote equation.”

Winter versus Summer

Depending on your farm or business type it is possible to choose a “flat” load charge or a summer-winter load charge. Typically for homeowners, a flat load charge works out the best, based on an even spread of the cost over the year. Be very cautious about comparing a flat load charge quote to a winter account for the farm, this will only give a misleading comparison, making the flat load quote look better.

“You really need to compare it across the whole year’s consumption, otherwise you really are not getting a sense of where the entire cost will fall for you.”

Daily charges – no deal maker

Daily charges do not form a significant part of a farm electricity user’s bill, often amounting to only a couple of dollars a day.

For that reason they should not become the reason for dropping an electricity retailer for a better deal. Instead it is the per kW charge that matters when you are using thousands of kW hours’ worth of energy a year.

Overall, it is important not to get hung up on what the discount is that a company may be offering on a new deal.

What matters is the per unit of energy cost price, and how much of a discount the energy supplier is prepared to offer on that.

If you have been made an offer that looks too good to refuse, then it may pay to discuss it with your local electricity expert. They know power costs inside out, and can offer an independent, realistic assessment of the deal, and point out where the fishhooks might be that could make getting out of it tough and expensive.


Written by Richard Rennie for Ruralco