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What is a default rate and could it be costing me thousands?

As a business owner, when you hear the term ‘Default rate’ you might immediately think of an unpaid bill or a bad loan. But in the energy industry they are far more common and far more covert: we’re talking about Default Market Offers and Rates, and how a lack of involvement with the energy industry might be costing you more than you think.

Simply put, a default rate in the energy world refers to the rate you will be put on when your contract ends. For example, you may have signed on with a new retailer for a 24 month period at a certain rate, and if that contract isn’t re-negotiated, or you don’t move to another retailer, you’ll be automatically transferred over to the provider’s default rate.

Previously, these defaults were open slather for retailers, and could dramatically turn your anticipated monthly costs into a complete blow out. But in 2018 the Australian Competition and Consumer Commission (ACCC) cracked down on retailers taking advantage of consumers who didn’t take an active interest in the industry, and had lapsed onto default rates.

From this investigation sprung the Electricity Retail Code, a Code that governs South East Queensland, South Australia and NSW on what is an acceptable maximum rate for electricity default rates.

For Victorians, default rates are managed by the Essential Services Commission, Northern Territory by the Utilities Commission NT, Western Australia the Economic Regulation Authority and all other areas by the Australian Energy Regulator.

As this range suggests, regulation is a fine balance between balancing our privatised energy provider setup, and ensuring vulnerable Australians are not taken advantage of due to their lack of involvement in the industry.

As our own services will attest, this lack of involvement is rarely due to laziness or ignorance. Energy in Australia is a vast labyrinth of information, and keeping up with changes is a job unto itself - Hence why our expert broking team regularly saves thousands of Australian homes and businesses on their energy bills every year with energy procurement, at no cost to them.

Related: How holistic energy management saved these businesses thousands


If default rates are capped, how could it be costing me?

Yes, while the industry is now monitored with checks and balances in place, the default rate is openly not the lowest price possible for your needs or location. So much so that the main page of the Victorian Default Offer website states in its opening paragraph “The default offer will not necessarily be the lowest price available to you”.

The standardisation of default rates is simply a way to ensure you are not paying unfairly for energy, but by no means reflects an optimised approach. And this is where the energy procurement team at Choice Energy come in: While many states have offered comparison websites to help Australians find a better deal, there is no comparing a blanket offer by a retailer to the active brokering and negotiation of a new energy agreement. Your energy needs are put before a wide panel of providers to create competition in order to ascertain the provider’s absolute best offer. Then, you’ll be given a chance to view these offers, and receive some fantastic advice on your options, as well as other energy bill busting services. So much so, that there have been many cases of negotiated rates being 2 to 3 times less costly than the current default rate.

For large market energy users, the system is far more complex

If you’re a heavy energy user, your contracts may read a little differently to the standard small business and as a result, standard default offers may not apply. For Victorian businesses, this is businesses who use more than 40MwH a year in energy, and differs between states.

If you’re a large market energy user, it is even more essential to have an energy specialist on your side, as you are more likely to face complex issues such as high tariff charges. By combining energy procurement with our monitoring services and commercial solar assessments, you’re in better hands to optimize your energy bills and usage, with minimal interruption to your day and with a vast majority of complementary, no cost to you or cash flow positive services.

If you’re concerned about falling onto default rates, or know it's time to optimise, reach out to the Choice Energy team on 1300 304 448 or click here to get the journey started.

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