On Monday the Commonwealth Government launched the Business Energy Advice Program (BEAP). The $11.7 million program aims to help small businesses across the nation save money on their energy bills and increase their energy efficiency.
The program plans to achieve this through two free services: A personalised energy advice service, and an online benchmarking tool designed to give small businesses a quick insight into how their bills compare with their peers.
On first glance, the BEAP is the type of complementary measure needed to drive better engagement in the small business market, and represents a positive announcement by the Government.
But will these two new programs actually deliver savings to small businesses?
Small business engagement
Surprisingly, small business operators, described at the BEAP launch by Energy Minister Angus Taylor as “naturally competitive individuals”, have been slow to take up the opportunities presented by competition in the retail energy market.
While larger businesses have been relatively more engaged in the market, the ACCC’s 2018 Retail Electricity Pricing Inquiry recommended improved and targeted business information for small businesses. The ACCC found that far more than 20 per cent of small businesses across the National Electricity Market remain on standing offers, and 38 per cent haven’t searched for a new deal in more than five years, despite the huge savings available.
So why don’t small businesses engage with the market? There seem to be two problems. The first is simple: Many small businesses don’t have time to spare, and owner operators are spread thin with all the decisions they need to make while running a small business. The other issue is information: The BEAP aims to solve this issue, and as a first generation release, should be able to deliver small businesses timely and relatively useful information in minutes.
Whilst residential customers are largely homogenous - that is, comparable households tend to have pretty similar energy usage and bills - small businesses are distinctly heterogeneous. Their usage is very different, depending on the type, size, or location of their operation. And here is where the BEAP might help.
It taps into Xero’s Small Business Insights database to compare energy bills of like businesses, down to a granular level. So, a cafe in country NSW with five employees and a $500,o000 turnover can compare bills with other like businesses - and this has always been the missing link.
Energy retailers know about consumption, but they don’t know much about the type of business their customer is operating, while the business knows what they do, but they don’t understand how their bills compare with their competition The BEAP’s benchmarking tool instantly tells a business owner where their annual energy spend bills sit on the spectrum of other businesses, highlighting if there are savings to be made.
While a step in the right direction, there are some shortcomings with the new tool. One key shortcoming of the first iteration of the BEAP is that it doesn’t provide a business owner with quite enough information to really identify the best ways to save.
Higher than necessary bills can be caused by two factors: 1) Using more electricity than what’s needed, and 2) The business is not on the best deal for its energy use. Currently, the BEAP’s benchmarking tool either suggests users visit EnergyMadeEasy to find an alternate deal or book an appointment with an expert. It doesn’t tailor its recommendation to what a business owner actually needs.
We hope that the developers, AlphaBeta and Xero, will have opportunities to build further on the functionality of the tool. And if future iterations of the BEAP can help small business customers to quickly identify which problem they should focus on, it will deliver an easier and more streamlined path for businesses to save money, without the drop-out rate from those who consider it all too hard or who are already too time-poor to engage in the market.
As a possible solution, the BEAP developers could ask users to volunteer how much energy they use after they get a bill benchmark to slowly build a database and feed it back into the models. Linking business type, consumption, and cost, would represent a huge step forward in data capability.
While the program’s second initiative, a one-on-one small business advice service offered by Australian Business, might solve some of these issues in the short term, an easily accessible digital solution that delivers what businesses need quickly could be a real game changer that retailers would be wise to support.
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