Energy procurement – the devil is in the detail

When a business energy user sets about the process of energy procurement, they will go to the market to get different quotes from suppliers. The suppliers will come back with their offer and a decision is then made based on the average unit rate.

But as well as getting the best average unit rate, it’s important to be mindful that what you actually end up paying depends on the detailed Terms & Conditions (T&Cs) of each supplier.

A lemon of a deal

Comparing apples with apples is difficult when energy offerings have many unique pass-through clauses.

These can range from published distribution to published environmental charges and that’s before you consider the possible future impact of volume penalties.

A fixed-price energy contract is a relative beast. It is interesting to note, that unless you look back on how your energy contract actually performed, you’ll never know if your apple was in fact a bit of a lemon in disguise!

The human touch

Even if you factor in the differences in the terms and conditions into the supplier selection process, there is one fact that often escapes the recognition it deserves.

Some suppliers have historically never invoked their T&Cs even though they had the opportunity to recover additional costs. So how suppliers actually behave is more important than what they could do under their T&Cs.

If you would like us to handle your energy procurement strategy to avoid such pitfalls and free up your valuable time, please get in touch on 01225-867722.

Not only will you have peace of mind in the knowledge that you’re on the right contract, but also that your energy costs are being managed professionally on a day-to-day basis.

UK set for EV explosion after government declaration

The government have brought forward their ban on the sale of diesel and petrol cars to 2030, as the UK bids to become the second all-electric motoring country behind Norway.

Originally 2040 was mentioned, then 2035, but now the cut-off point is just under a decade away as Prime Minister Boris Johnson sets about putting his ‘green revolution’ in motion.

As of the end of October this year, Electric Vehicles (EVs) accounted for just over 6 per cent of car sales in 2020 (76,000 vehicles), mainly due to concerns of customers over the cost and the limited range capabilities of EVs.

To go from that low mark to 100 per cent will take some doing, but the government has pledged £2.8 billion to ensure the target is met.

Investment in the installation of more charging points and the development of mass-sale EV battery production in the UK will take place as part of a wider plan to make the UK carbon-neutral by 2050.

Businesses looking to install charging points on site have a number of hurdles to overcome, but from initial scoping through to installation, Energy Management has the expertise to help smooth over the process.

For more information on EV support, please contact a member of the team on 01225 867722

A flick of the switch that could help save hospitality

The default position of a lot of people is to fear change, they feel safer when surrounded by familiarity and adopting the same practices that have served them well.

Nothing wrong with that. But what happens when things aren’t going so well, and action needs to be taken?

Inertia often still applies because those charged with the decision-making process find it difficult to break out of the cycle of continuity.

Shop around

Changing energy suppliers, like your internet provider, for example, may feel like an onerous task because of the perceived paperwork involved, but it really does pay to shop around, especially at a time when finances are at their tightest.

Just think how good you would feel if you could save £20,000 per annum simply by switching suppliers and getting yourself a better deal. The savings made could even save you the difficult decision of having to let a member of staff go.

The hospitality industry knows better than most how badly Covid-19 has affected income, yet a report has found that 20% of hospitality providers last changed business energy supplier up to five to six years ago.

More than a quarter admitted they were (not so) blissfully unaware of how much they were paying for their units of electricity and gas, according to YU Energy survey of business owners.

Time is money

Of course, many business owners do not have the time or the energy industry expertise to deal with energy procurement personally, which is where a reputable business energy consultant can help.

If you would like to discuss your business energy needs and formulate an energy procurement strategy that is right for you, please give us a call on 01225 867722.

How to control energy costs in the Covid-19 crisis

Controlling costs has always been good business, but during the COVID-19 pandemic, it is now more important than ever.

With turnover having taken a hit in so many different sectors, the ability to manage overheads could make all the difference to a business’s survival or demise.

Government initiatives like the furlough scheme have helped employers keep wage costs down but what can be done to protect against energy costs?

Spiralling energy costs can sap the life out of a company, so it is important to put a cost-control plan in place and get the power back in your hands, so to speak, wherever possible.

Controlling energy costs can be done through better energy procurement, by introducing a range of energy efficiency measures and by leveraging government help.

Procurement

The price of gas and electricity nosedived during the first U.K lockdown as industry ground to a halt and demand plummeted. But once industry started to open up again and people realised the end of the world wasn’t nigh, prices rallied significantly.

Currently, market conditions are favourable to securing contracts early but, in a volatile energy market such as they one we are currently experiencing, a flexible approach shouldn’t be ruled out when formulating your energy procurement strategy.

Business energy deals offer a wide procurement window for tendering contracts and are more flexible than those available to domestic users in that they can be fixed for anything up to four years.

While it is not possible to forecast prices changes with a 100% degree of accuracy, the best business energy consultants are able to offer informed and impartial advice about the type of contract best aligned to your business’s needs.

Energy efficiency

COVID-19 has changed the way we conduct business, with home-working and Zoom conference calls now the norm.

Companies have reduced their carbon footprint as a result of less road and air miles being used to get to and from meetings, while energy consumption has dramatically fallen as premises remain empty or part-empty.

A greener way of living and working has been one of the few positive spin-offs of COVID-19 and there is an opportunity to build on this once the worst of the pandemic has passed. After all, the cheapest unit of energy is the one you never use.

European Regional Development Funding is still available to SMEs for energy efficiency measures, despite our withdrawal from the European Union.

We would advise businesses to check with their local Chamber of Commerce to see what level of support is being offered as these vary from region to region.

Government help

As experienced practitioners in the handling of Climate Change Agreement applications, we continue to help companies maximise the Climate Change Levy (CCL) discounts available to them.

Companies have been asked to monitor their energy performance against a 2018 baseline instead of the old 2008 baseline and the data is then used by the Environment Agency to set targets for TP5 (Target Period 5, 2021-22).

As well as providing this information in a timely fashion, contact details for the appointed authorised and admin CCA personnel need to be kept up to date, too.

Failure to do so could result in discount notification emails going unread because they’ve been directed to the wrong member of staff or to someone who has either retired or moved on.

The Metallurgical Exemption is another aspect of the CCA that can benefit certain industry sectors.

As a point of good housekeeping, multiple site operators who use different suppliers should ensure they resubmit the relevant forms if they ever change one of those suppliers. Otherwise, they could run the risk of missing out financially.

To coin a phrase, ‘if you take care of the small things, the big things take care of themselves.’

If you would like to speak to one of our business energy consultants about managing your nergy costs better, please get in touch by calling us on 01225-867722.

Educating Hertfordshire in the practice of energy procurement

A school in Hertfordshire is the latest public sector organisation to sign up to our Choice Energy Framework (CEF) and enjoy the multitude of benefits that this brings.

The school in question had been managing their own energy procurement after gaining academy trust status. But without the necessary in-house industry expertise, they decided too much time and money was being wasted on this crucial aspect of operations when a better deal could be found elsewhere.

Looking at the options available, they opted to access the best energy solutions via the Choice Energy Framework.

Power of six

With six different and properly vetted business energy suppliers encompassed by the framework, the school will enjoy the most favourable energy contract terms and conditions and tariff competitiveness on the market, in addition to other services such as invoice validation.

As the Choice Energy Framework is compliant with the Official Journal of the European Union (OJEU), signed-up organisations will be freed from time-consuming form filling and save as much as £20,000 on admin fees.

Years of experience in public sector energy procurement has enabled Energy Management’s business energy consultants to understand what clients want, explains the company’s senior energy consultant, Malcolm Barrington.

Choice and competition

He said: “Energy Management has been working closely with many schools, colleges, universities and councils to procure and manage their energy. We have seen how central purchasing centres procure a framework with just one energy supplier. How can this be a competitive way to buy energy?

“Energy Management’s “Choice Energy Framework” was new to the marketplace last year and really does provide choice and competition.

“Our CEF framework has been procured through OJEU and provides framework participants with a panel of up to six suppliers to tender supplies via mini-competition.

“We are excited to be able to provide a different type of energy framework that gives control, choice and competitive pricing back to public sector bodies across the UK.”

For more information on the Choice Energy Framework, contact Malcolm Barrington on 01225 867722 or email cef@energymanagementltd.com.

The effect of Lockdown 2 on energy procurement strategy

Whilst not as severe in its restrictions nor hopefully as long in duration as the first national lockdown in March, ‘Lockdown 2’ will inevitably lead to a nationwide reduction in energy use.

More businesses will either go to the wall or temporarily close their doors and encourage home-working wherever possible, leaving vast swathes of office floor space empty.

Meanwhile, non-essential retail outlets will put up the ‘Closed’ signs as of one minute past midnight on Thursday morning, and pubs, cafes and restaurants unable to provide takeaway food will also be left eerily quiet.

At the end of March, less than two weeks into the initial period of restrictions, electricity demand dropped by as much as a tenth as businesses were forced to close their doors as part of the measures introduced to curb the spread of coronavirus.

GB day-ahead electricity prices fell 10 per cent as a result compared to the previous week and the downward trend largely continued until lockdown restrictions slowly started to ease in mid-May when prices did a U-turn and increased again. Not all of these price wholesale price drops, however, were passed on to customers, at least not in the initial stages.

Whilst planning for the future is never easy at the best of times, let alone during the uncertainty of living through a global pandemic, an effective energy procurement strategy will help mitigate against some of the peaks and troughs.

Flexibility

Business energy deals offer a wide procurement window for tendering contracts and are more flexible than those available to domestic users in that they can be fixed from anything up to four years.

Business energy is also cheaper per unit of electricity and gas used, but it is important to be aware of associated non-energy costs, such as the Climate Change Levy (CCL), when considering which contract to sign.

Non-energy costs are those that are incurred around the purchase and supply of energy rather than the actual unit spend on gas and electricity and have risen incrementally in the last few years to form a larger percentage of the overall energy bill.

100 per cent accuracy in forecasting price changes is impossible given there are so many external factors involved, such as a change in government policy or unseasonable weather.

But, at Energy Management, we have the monitoring capability and in-house expertise to help clients make better-informed decisions about the type and length of the energy contract best suited to their needs.

If you’d like to use the latest lockdown period to do some energy ‘housekeeping’, please get in touch on 01225-867722.