Archive for August, 2013

In a report published at the end of August, the Confederation of British Industry (CBI) found that many businesses continue to overlook behavioural and technological opportunities to reduce energy consumption, wasting an estimated £1.6 billion.

The report stated that there were several barriers to implementing efficiency measures, including a lack of technical skills and awareness and understanding at all levels of the potential benefits of energy conservation.

The CBI’s Director Business Environment Policy said that “there is so much potential that remains unfulfilled. With energy prices still on the rise, energy efficiency can help mitigate the impact on firms, particularly heavy users”.

The simplification of government policies relating to energy efficiency was also called for, with the CBI finding that overlapping policies make energy efficiency unnecessarily complicated, bureaucratic and costly, adding little value.

The report also found that businesses needed to focus their efforts, with leadership from senior management a vital element in identifying and exploiting savings opportunities.

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Around two-thirds of UK businesses use energy brokers or consultants to help manage their energy procurement. Some brokers focus solely on placing contracts, from which they earn a commission or fee, and provide little additional value or service. While this is a valid option, there are several areas where a good consultant can provide significant additional value beyond just recommending annual contracts

1. UK energy prices are volatile: the wholesale energy market can increase/decrease by 50%+ in a 12 month period, so waiting until your contract ends to renew leaves you exposed to significant price surprises. Independent expert advice on the best time to go to market, which is often not just before your current contract ends, can result in significant savings.

2. Contract offers are increasingly complex: the growing number of 3rd party costs (transmission, distribution, metering, Renewable Obligations etc) makes it difficult to compare offers from suppliers all presenting their prices differently. Interpreting these price models so you’re comparing like-for-like is vital, yet requires specialist knowledge.

3. Validate invoices: just as price offers are becoming more complex, so are charges and invoices. Reconciling and checking actual consumption data and pass through charges such as the Feed in Tariff (FiT) with invoice data identifies supplier errors and ensures you’re not overpaying, yet requires specialist systems and expertise available to some brokers.

4. Switch suppliers smoothly: although improved in recent years, switching suppliers can be a fraught process, resulting in punitive out of contract rates if it goes wrong. A good broker will handle this process, saving time and potentially money.

5. Consumption reduction: by analysing meter data to understand consumption profiles, energy consultants can recommend savings opportunities, from low-cost behaviour change to payback assessments of energy-efficient technologies (eg LED lighting)

As most energy brokers/consultants earn fees from the energy suppliers (added to your energy bills), it’s always worth checking exactly what you receive for this indirect fee.

If you’re not receiving at least some of the benefits listed above then do get in touch; Energy & Carbon Management clients receive these benefits as part of their procurement service, with no extra fees, generating savings and identifying opportunities to reduce energy costs.

There were warnings this week that energy prices were about to erupt, with prices set to increase by 5-10% in the next few months.

In comparison to last summer, energy prices for winter contracts are already 10% higher than they were one year ago, mainly due to the introduction of the carbon floor tax.

The warning came hot on the heels of several energy companies announcing record profits, with the Labour Party accusing the Big 6 energy companies of recording a 73% increase in profits over the last three years to £3.7 billion.

For companies with contract renewals over the winter months now is definitely the time to be reviewing prices for future contracts as all indications are that the wholesale energy price, and, more significantly, third-party charges such as the carbon floor tax, will only increase over the autumn.

Npower has announced that the era of automatic roll-over energy contracts will come to end for new business customers in April 2014, although existing customers will have to wait until November next year.

The automatic contract roll-over is one of the most criticised supplier practices, putting customers on higher priced fixed-term contracts if they don’t sign-up to a new tariff with either their current or a new supplier.

npower is following the example of British Gas who announced in July they will no longer sell automatic roll-over contracts to business consumers from 1 September. All being well other supplies will follow the example set by BG and npower.

Suppliers are under pressure from both industry and government to improve the transparency of energy contracts which can result in significant and unexpected hikes in energy costs.

Good energy consultants should ensure that you avoid roll-overs, while also highlighting potential contracting terms that could lead to financial penalties.

For instance, some contracts have notice periods if you plan to change supplier (anything from 30 to 120 days), so it’s always worth giving notice to your current supplier well in advance of the contract renewal date, even if you subsequently decide to stay with them.

Investment of £250 billion is required to improve the UK’s water infrastructure according to a recent report, leading to rises in water bills.

The renewal of ageing water mains, reservoirs, waste water treatment centres and even water company vehicles and IT systems are needed,  which at current rates of investment (around £5.5 billion a year) will take 50 years. In order to increase that rate of investment and ensure the water infrastructure remains fit for purpose businesses and consumers are set to see higher bills in the shorter-term.

While water users in England and Wales are currently unable to switch suppliers (unlike Scotland), the only way to minimise water costs is to:

  • check and optimise your (increasingly complex) water & sewage tariffs and make sure you’re not overpaying
  • benchmark your consumption against similar facilities to eliminate waste
  • reduce consumption through water savings technologies (eg automatic sensor taps, rain water harvesting and grey water)

A proactive approach to water management through tariff analysis, wastage elimination and the application of new technology ensures that your cost base is kept under control, freeing up cashflow and mitigating the risk of future price rises.

July’s hot weather dampened energy market activity despite increasing electricity demand due to increased air conditioning loads. Electricity prices remained stable compared to June, up only 0.86%, while gas saw a similar rise of 0.92%.

Compared to June 2012, however, energy prices have increased: electricity is now 2.31% higher than a year, ago, with gas up by 8.62%. The relative price stability reflects both moderate demand (influenced by the stumbling economy), strong supply margins and the introduction of the carbon floor tax at expected levels.

In the longer-term falling UK gas production and increased reliance on Europe and Middle Eastern imports will continue to lave the UK vulnerable to geo-political price risks.