Understanding the RISKS of CHEAP Prices: Part 1

As the economist Milton Freidman once said, “There is no such thing as free lunch.” We all have heard this before, but how does this relate to buying your electricity contract? Truth be told, it’s easy to be fixated at the cheapest price when comparing offers between electricity retailers.

In this paper, Power Choice energy experts researched how several retailers present their offers and how the energy price can be positioned as the single point of discussion in a customer’s buying decision. Let our energy experts guide you in looking beyond the price and how to not fall into the trap of always picking a contract with the cheapest price.

Devil is in the details, so read the fine print!
Let’s take insurance as an example when deciding to buy your electricity contract. Higher insurance premium gets you the best coverage whereas, a lower insurance premium gets you less coverage and may come with extra fees and hidden costs when you make a claim. Similar to the electricity market, if a supplier is offering a relatively lower price, there could be some hidden strings attached in the fine print of your electricity contract.

Power Choice energy experts analysed five comparable retailer contracts to examine the relationship between the energy price and the risks that could potentially increase the total cost. As shown, the analysis revealed that as the energy prices of retailers go down, the potential risks may go up which could lead to a higher total cost. These potential risks can be found in your energy contract’s terms and conditions such as putting a usage cap on your energy use, exposure to monthly price variability, qualification of force majeure events, payment terms and the interest rate for payment defaults.

Remember, energy contracts act as protection to customers from the volatile movements of the electricity spot market prices, which in the past has gone up to $14,700/MWh. Customers, like you, don’t want your cashflow to be potentially at risk due to these fine details hiding behind the seemingly cheap price. Let’s be discerning enough to know that cheap contract price may bear higher risks that can affect your overall total cost.

Save Your Business More, Seek the Help of an Expert.
The anxiety and the surprises of potential price spikes in your electricity bill can be a consequence of choosing your contract based on the cheapest price. It helps to be well-informed when choosing your electricity contracts.

If you need assistance in reviewing your energy price offers, seek the help of an expert.
This small but vital step may mean thousands of dollars saved for your business.

Speak to a Power Choice expert today! Call us at 1300 165 020 or email [email protected].