Electricity tariff increases are decided through a multi-year determination, which means the increase for a given year is usually known well before it lands. That is unusual among input costs and it is an advantage small businesses rarely use: the number is published, so it can be built into next year’s pricing rather than absorbed as a surprise.
The regulator sets an average annual increase across a multi-year period, then adjusts each year’s figure to account for earlier over or under recovery, which is why a single year’s percentage can look unexpectedly low or high against the average.
A low increase in one year is usually a correction
When an annual increase comes in well below the multi-year average, it generally reflects adjustments for previous years rather than a change in direction. Owners should plan against the multi-year average, not the current year’s figure, because the following year often corrects back.
Know what proportion of your costs is electricity
For a bakery, a laundry, a cold storage business or a workshop, electricity is a major line. For a consultancy it is noise. The response should be proportional: businesses where it is material need a plan, and those where it is not should not spend management time on it. Work out the percentage before deciding anything.
Pass it on in advance, not afterwards
Where the increase is known and dated, a price adjustment can be scheduled and communicated to customers ahead of time with a reason attached. Customers accept a signalled increase far better than a sudden one, and a business that absorbs the cost quietly is giving away margin it will not recover.
Efficiency spending competes with everything else
Lighting, refrigeration, insulation and timers pay back predictably and are usually the cheapest response. Generation and storage are much larger commitments justified by continuity of supply as much as by cost. Treat them as different decisions, because they solve different problems.
Follow the determination, not the commentary
Tariff decisions, the reasoning behind them and the multi-year framework are published as official determinations, accessible through the government’s services portal. Reading the decision itself tells you what is coming, while news commentary mostly tells you how people feel about it.
Frequently asked questions
Why do annual electricity increases vary so much?
Because a multi-year determination sets an average and each year is adjusted for earlier over or under recovery, so single years diverge from the average.
What should a business plan against?
The multi-year average rather than the current year’s figure, since an unusually low year is typically corrected later.
Which businesses need a plan for this?
Those where electricity is a material share of costs, such as food production, cold storage, laundries and workshops. For most service businesses it is not worth management attention.
Should an increase be passed on to customers?
Yes, and in advance with the reason stated. Signalled increases are accepted far better than sudden ones, and absorbed costs are rarely recovered.
Is efficiency or generation the better response?
They solve different problems. Efficiency reduces cost predictably and cheaply; generation and storage address continuity of supply and require much larger commitment.
Further reading
Originally published in February 2017. Updated September 2026 to explain how to plan for tariff increases, using the lead story from the original roundup.
