Would You Sign a Mortgage Without Shopping Around? Many Australian Businesses Do Exactly That With Energy Contracts
- Written by: Jonathan Pooch, Managing Director, DETA Consulting
When you last renewed your energy contract, did you go to market, compare structures and challenge the terms? Or did you accept what was put in front of you, lock it in and move on?
Too many businesses do the latter. And in the current market, that approach can be costly.
The timing could not be more pointed. According to the Australian Energy Market Operator’s most recent Quarterly Energy Dynamics report, wholesale electricity prices fell 47% year-on-year in the second quarter of 2026 to $74/MWh across the National Electricity Market – the lowest Q2 average since 2020, driven by record renewable generation and growing battery storage.
For large commercial and industrial operators locked into contracts negotiated during the 2022-23 price spike, that market shift could mean paying well above current market rates, with limited ability to act until their contract expires.
That’s the cost of treating energy procurement as a set-and-forget exercise.
I have spent years working with manufacturers, commercial operators and industrial businesses across Australia and New Zealand on energy strategy. The same pattern comes up again and again: businesses that would never sign a mortgage without shopping around, comparing rates and understanding the terms can make energy contracts worth hundreds of thousands or millions of dollars a year without applying the same level of scrutiny.
“Do you sign the first mortgage that comes across your desk?” is something I ask clients regularly.
Energy contracts are basically the same thing. Electricity is a commodity. There is competition. There are different tariff structures, different terms and different procurement models that suit different businesses.
The value of getting this right is significant.
Market timing alone – independent of any changes to energy use – can result in businesses paying 20 to 30% more for the same future contract product simply because they went to market at the wrong time.
That’s why planning ahead matters. It gives businesses multiple opportunities to enter the market, rather than forcing them to become a price taker when a contract expires.
And the headline commodity rate is only part of the equation.
Non-commodity costs – including transmission, distribution and other regulated charges – can represent 30 to 50% of a business’s total energy spend. Yet I regularly see organisations focus almost entirely on negotiating the electricity rate while leaving other components of the bill largely unexamined.
We have seen this play out in practice. For a major global data centre client, we identified that its energy supplier was charging a significant premium for renewable energy certificates bundled into the contract. By unbundling and self-managing that single line item, we helped the client avoid close to $750,000 a year in costs at one site alone – without changing its electricity consumption.
There is another problem that is just as common: procurement decisions being made in isolation from what is happening operationally.
A business signs a three-year energy contract. Six months later, it announces a major electrification project, installs solar or changes its production profile. The contract was negotiated around yesterday’s business, while the business itself is moving somewhere else.
If you are planning to electrify, install solar, change production volumes or make significant changes to your energy footprint, those plans need to be factored into your contracting strategy before you sign – not after.
The assumption that certainty is always worth paying for is another issue.
Certainty has a cost.
We have seen businesses paying hundreds of thousands of dollars more per year because they locked in at the wrong time, under the wrong structure. They bought certainty, and what they actually bought was a very expensive position.
That doesn’t mean businesses should simply avoid long-term contracts or try to predict the energy market.
It means they need to understand their options.
The businesses consistently managing energy costs well treat procurement as a strategic function rather than an administrative exercise. They understand their energy profile, monitor market conditions, consider how that profile is likely to change and create opportunities to make procurement decisions when the conditions are favourable.
They also understand that procurement and energy efficiency cannot be separated.
You can negotiate a better contract, but if you are consuming more energy than you need to, you are still carrying unnecessary cost. Conversely, you can invest heavily in efficiency but undermine the benefit if you continue to procure energy poorly.
You can’t do one without the other.
When smart procurement and demand reduction come together, that’s when the real savings happen.
The current market shift makes this particularly important. Businesses approaching contract expiry have an opportunity to reassess their position rather than simply rolling over into another agreement. Those with contracts negotiated during very different market conditions should also understand where they sit relative to today’s market.
But that requires preparation.
These operators are not necessarily spending more. They are simply treating energy differently. They are monitoring their position throughout the year, going to market before they are forced to, understanding the full cost structure of their contracts and making sure procurement decisions reflect where the business is heading – not just where it is today.
Energy is not a fixed cost.
It is absolutely controllable.
The decisions you make about how you procure and use energy today will have a direct impact on your cost base for the next decade.
Most businesses don’t treat it that way.
But the ones that do are consistently better off.
About Jonathan Pooch
Jonathan Pooch is Managing Director of DETA Consulting, an Australia and New Zealand engineering and energy advisory firm. A chemical and process engineer and EMANZ accredited Energy Auditor, he helps industrial and commercial clients including Cheetham Salt Australia, Coca-Cola, Goodman Fielder, Saputo, Mondelez and Fonterra reduce energy costs, optimise operations and deliver measurable decarbonisation outcomes.
