IN just a short period of time, the world has become utterly dependent on technology. Our voracious appetite for energy-consuming devices causes much angst and hardship as utility prices go ever higher. And it’s not going to get any better. As recently as June 2011, the energy industry regulator, OFGEM, has said that it wants to “radically overhaul” the energy market. It has put the big six power companies on notice that their incredibly complex tariffs are going to be put under the microscope – again – over the next few months. So with the background of rising prices, can practices (and other businesses) do anything to lower their energy bills?
Energy is different
Unlike the world of telecoms where users choose different technologies to make and receive calls, energy provision is much simpler: gas and electricity goes into a network and users take it out. The issue really is a question of who provides the utility, whether they are trusted to bill correctly and do their contracts stack up. Or is it?
Be proactive
Savings can be made if you overcome inertia. Suppliers often rely upon inaction from their customers when it comes to pricing. The supply of energy is no different. Tariffs are always changing so what seemed like a good deal when you signed up may be hopelessly out of touch with the market price now. Whether it’s banking, insurance, telecoms or utility provision, it’s worthwhile shopping around at least once every year. Loyalty
rarely helps your bank balance.
Check your present deal
Before you can make any changes, you need to be certain of the deal you’re on, the terms of the contract you’ve signed up to including the rate you are being charged, whether there’s a standing charge and, most importantly, what the notice period is. Energy companies are obliged to give notice of tariff changes and the end of a contract under rules that were introduced by OFGEM in January 2010 but which took effect in April 2011. But this only applies to domestic users and micro-companies (under 10 employees, annual gas usage under 200,000kWh or electricity usage under 55,000kWh). If that letter doesn’t arrive – or you fail to open or act upon it – you could be automatically rolled over into another contract with no exit route; householders, in contrast, can switch supplier on demand. Be mindful that to change to a different supplier you don’t have long to act; sometimes you may only have a 30-day period in which to instigate a switch. Further, the window of opportunity when a switch can be made can come (and close) when it’s least expected – sometimes 90 to 120 days before the contract expires. Failure to give the right notice at the right time can leave you rolled into a new contract with a rate of the supplier’s choosing, which more likely than not will leave you with more expensive unit charges. However, according to energy consultancy Utilityoptions.co.uk, if businesses can prove (or debate long enough) that the letter wasn’t sent, some utility suppliers will admit defeat and break a rolled-over contract. Arguably, if a letter was sent, there should be an electronic reference to it: you should request a copy under data protection rules.
Seek assistance
Make It Cheaper, another energy consultancy, offers a free webpage that can calculate how long a business has to switch provider: www.makeitcheaper.com/how-to- witch/windowchecker. aspx. At the very minimum, diarise when your notice period starts and finishes when you take out a new
contract. Consultancies such as Utility Options will do this for you as well as manage your account, deal with queries and any metering problems. Apart from the consultancies, all of the main
names that you probably know – moneysupermarket.com, gocompare.com, uswitch.com and others – can assist. But unlike comparison websites for consumers, these sites will not run an online search leaving you to pick the best deal from the options listed. Instead, they require you to make contact where they then take the details needed to perform a search. They’ll then let you know what is, in their opinion, the best deal for your circumstances.
Exit route
As we’ve seen, businesses cannot get out of their energy contracts just because they don’t like the tariff. But there is an
exception. If you move premises you can leave your old supplier. However, don’t move into the new premises and forget to review your energy needs thinking you’ve escaped a tyrannical supplier and are now contract free. On the contrary, you’ll have inherited the supplier that the previous occupier was tied to and you’ll be charged “deemed” or “out of contract” rates which will be much higher – sometimes twice as much as was charged to the previous tenant – as you are potentially a bad risk. There is only one solution and that is to enter into a formal energy supply contract. If you play your cards right and keep switching, you can take advantage of “new customer” rates offered by the energy suppliers as they try to win new business. These rates are often used as loss leaders on the basis that a good proportion of businesses that sign up for them stay and end up on more expensive tariffs. Again, you’ll need to keep tabs of your notice
window to play this game.
Gotchas
Unlike supplies made to domestic users, business users have a different set of criteria that determine the rates that will be charged – that’s the reason why you cannot search for a supplier online. Further, unless you are a huge consumer of electricity, say an aluminium smelter, there’s no haggling over the price per unit. The first thing to note is that your credit score has a serious impact on the rate quoted and some suppliers won’t offer to supply businesses with a credit score under 46/100. By definition, this means that those firms with a score over 46/100 get better rates. Crucially, you need to do what you can to improve your business credit rating which will yield results for
your business overall. Your postcode will have a bearing on the rate too as, for example, electricity transmission cost charged by National Grid (which owns the power lines) are built into the unit charge. There are, for example, some pockets of Scotland where transmission cost are very high because the distance between generation and “consumer” is so great. Whilst this is something you cannot affect, it can add between 10% and 15% to the cost of a unit of electricity. The length of the contract will also determine the prices you pay. Rather like the deals offered on a fixed rate mortgage, you’ll pay more initially for longer-term deals because you’re hedging against rises in unit rates. But as rates rise, as they surely will (and are), the better the value you will see being returned and, indeed, you could end up with a proportionately better deal than the market is offering to others. Whilst it makes little odds when you use gas, there are deals for night-time electricity usage. So is your practice able to utilise electricity at a lower night rate? At the same time, consider if your business is seasonal or a relatively low consumer of power? If so, you could be better off with a tariff that features a low standing charge, leaving you to pay per unit consumed. Some energy suppliers are pushing businesses to install so called “smart meters” on the basis that it will save money as they only pay for energy consumed instead of estimated. Bills that are estimated often lead to positive cash balances with the energy supplier. However, you need to be aware that smart meters are in their technical infancy and whilst they can aid cash flow, they will restrict the suppliers you can move to as a number of energy suppliers don’t yet support them. Ideally, you should return meter readings to the energy supplier on a regular basis. One other thing to consider with smart meters is that, whilst they report on usage through a builtin phone mobile phone SIM (not at your expense), they can also receive instructions to cut off your supply should a bill go unpaid. Unlike domestic energy users, there is no financial advantage to having a dual fuel deal with a supplier. However, for administrative purposes, it may still be easier to have one supplier for both gas and electricity. But just like domestic customers, there are savings that can be made by paying for usage via direct debit rather than by cheque on receipt of the paper bill – at the time of writing you can save 2% with EDF and 4% with EON. Lastly, charities shouldn’t lose sight of a valuable concession: that they only pay VAT at 5% on fuel rather than the 20% businesses pay (domestic users pay at 5% too). Charities that have missed this trick can apply for a rebate of the VAT paid over the last three years. So whatever your situation, don’t let inertia
stop you from switching. Moving energy supplier is not hard, difficult or time-consuming. The new supplier, or the consultant, will make the switch for you. The bottom-line? Read terms and conditions carefully.
