WITH the sheer number of
energy-related stories in the media
towards the end of 2013, including
the dire warnings that the UK is
close to having
minimal
spare
capacity to
generate
electricity, it
shouldn’t
come as a
surprise that
businesses need to be proactive in
lowering their energy consumption.
According to the Carbon Trust in a
December 2013 document, Better
business guide to energy saving, most could
use a lot less energy and indeed, from
the Trust’s experience, even low or no-
cost changes could bring bills down by
10%.
This is a claim
that is backed up by
Chris Caffery, an
adviser at utility-
options.co.uk, an
independent energy
consultancy, who says that 95% of
firms that contact him can save either
on their upcoming contract renewal or
their current pricing. It irritates him
that there are still too many businesses
on uncompetitive contracts or paying
high non-contract prices.
“Get out of jail” card
There are a number of easy steps that
firms can take to keep their bills in
check and these start with
understanding that being “out of
contract” is not like possessing a “get
out of jail” card.
Having no energy supply contract
may give flexibility, but it also means
that customers will be charged out of contract prices that can carry a 30-
40% premium over standard tariffs.
However, while many energy suppliers have stopped automatic rollover of customers onto new 12-
month contracts (where notice to
terminate was not given on the
appropriate renewal date), some still
operate this policy.
Their customers
need to diarise the contract renewal
date and give notice accordingly if
they want to be able to move. They also need to
ensure that the
correct
termination notice
is served to the
right location in
the required way.
Businesses wanting to exit their
contracts should, says Mr Caffery,
either use the services of a broker to
aid this transition, and there are plenty
of them according to Google, or make
sure that they know the notice period
for their contract.
Different suppliers have different
termination windows. For example,
firms wanting to leave SSE need to
serve a termination notice 30 days
before the renewal date while British
Gas demands notification 90 days
beforehand. Either way, firms should
have their next contract agreed at least
one month before the old contract
ends.
Interestingly, Ofgem brought in
new rules at the end of
August 2013 that treat small
businesses that spend up to
£10,000 on each fuel – gas or
electricity – per year more fairly. And from 31st March this year
these small businesses will be entitled
to clearer information about the key
facts of their energy contract, will
benefit from no automatic rollover and
will be able to give notice at any time
for the given due date (instead of
within the standard 90-day window
before the contract ends).
Consultancies can help
Unlike the domestic market, because
of the way the business energy supply works, making a quick online
comparison is not possible. While the
domestic market is largely based on
location, the business market has a
number of elements that determine
the tariff cost.
The majority of the rate is based
on the wholesale energy cost which,
says Mr Caffery, is influenced by many
factors and changes daily (or hourly).
Then there is the transportation cost, a
charge by the generator of the
electricity to an area to deliver the energy to the customer on behalf of
the supplier. Another contributor to a
bill is government taxes and levies (of
which there are multiple). And, of
course, there is the profit margin for
the supplier that is surprisingly small in
most cases.
There are also other factors that
need to be considered when looking at
prices including credit rating (because
firms are effectively borrowing from
the supplier), and the length of
contract (a deal may be poorer at first
but over time this improves as market
prices rise).
It’s hard to set down in print the
target price that businesses should be
aiming for because, as we’ve seen, it
very much depends on the area of the
country in which the user is based. Mr
Caffery notes that Scotland and
Yorkshire command the highest rates
due to the transportation costs
associated with the energy distribution
while central England has some of the
lowest rates.
He says that there can be as much
as 25% difference in price just because
of where you are in the country. For
example, electricity in the East
Midlands for a single rate tariff costs
around 10.05p/kWh while the same
tariff in Northern Scotland is charged
at 11.56p/kWh.
Just as with using intermediaries to find the best deal
for, say, insurance,
so businesses can
use an energy
consultancy to
trawl the market for
the best tariffs. Says Mr Caffery:
“Apart from the fact that a broker has
access to some preferential rates from
suppliers, it’s the fact that the contract
is managed that could potentially save
a customer a great deal of money.”
Consultancies offer a range of
services including full bill analysis, bill
correction where required and
reminders in multiple formats of when
the contract renewal is becoming due.
“It removes the stress from the already
busy business owner, and prevents
them from receiving bills at high non-
contract rates,” he adds.
Of course, there are different types
of energy consultant. There are firms
like Mr Caffery’s utility-options.co.uk,
and then there are consultancies such
as expert-energy.co.uk which offer a
more internal and investigatory
approach with energy surveys, lighting
surveys, sustainable build and
renewables consultancy.
Choosing a new energy
supplier
No supplier is perfect, says Mr Caffery,
adding that businesses and brokers –like most of us –
often base their
first choice on
price: “It’s the
bottom line that
matters to 99% of firms.” However, some suppliers are
more customer service focused than
others, but that only really matters if a problem arises. But this is where the
energy consultancy can help with its
experience.
The “gotcha’s” that firms should
watch out for when changing supplier
have diminished slightly, at least for
the smaller business, because Ofgem
has become much more involved with
supplier practices over the last two
years. As we’ve seen earlier, Ofgem has
put pressure on suppliers to stop
rollover contracts and forced them to
state the contract renewal date on all
bills.
Most suppliers stick to a contract
price for the period of that contract,
but they still have clauses that allow
them to change prices or include new
levies as they are introduced.
Businesses should bear this in mind.
Alternative energies
For many, the concept of going green
and self-generation is an utopian ideal.
But are the likes of roof-mounted
solar panels and ground source heat
pumps (pumps that circulate liquid
through an underground loop,
bringing warmer or cooler
temperatures to a building depending
on the season) worth the investment?
According to Mr Caffery, the deals
that were available a couple of years
ago were very good as the government
needed to hit EU targets; self-
generated power (from renewables)
was being sold back to the network at
43p/kWh, a rate guaranteed for 25
years. The “feed-in tariff”, as it’s
termed, made the payback time short with an average of three to five years.
That rate is no longer available and is
now around 25p/kWh, making
payback more like 10 years.
While ground source heat pumps
are a technology worth attention, they
aren’t cheap to install and require a fair
amount of land in which to lay the
underground loop. However, biomass
– woodchip – heating systems are
another matter entirely and can bring
in reasonable savings if there’s space
to store the fuel.
But one problem for businesses
wanting to go green is their ability to
raise the initial cost of installation. The
situation isn’t helped by the fact that
grants and financial help for
installation are complex and patchy
throughout the UK.
Getting redress
In the majority of instances, the
energy supply relationship works out
well, but where there’s a suspicion of
unfair treatment, and things go wrong,
there is a natural inclination to ask
about rights of redress.
Mr Caffery says there are three
avenues of complaint open to
businesses which think they have been
unfairly sold a contract or rolled over
onto a new contract having abided by
the terms of the old one.
“All suppliers have an in-house
complaints process, and they are doing
more now than ever to get complaints
dealt with first time, although it is still
a far cry from being perfect.”
But having exhausted that route, he
suggests trying Ofgem and the Energy
Ombudsman to have a complaint
taken further.
