Archive for November, 2014

Many organisations, understandably, ask several energy consultants/brokers to price their energy contracts to introduce competition and ensure they receive the best price.

What not so many realise is that suppliers asked to quote for a supply by several brokers will give them all the same price: any difference is either down to the level of commission added, or the way the price is presented, for instance, charges such as the Renewables Obligation or Climate Change Levy are excluded, which means you’re not comparing like-with-like.

The end result may still be a good price, but there’s a risk that the lowest price results in the worst service, increasing costs in the longer-term.

A better way to test a prospective (or current) broker is to understand their fee structure, how they’d develop and implement your procurement strategy and what else you receive in terms of additional energy services, and then negotiate the service and fee that works for you. (If they won’t reveal their commission, do the same as you would with any supplier who wants your business but won’t tell you their price.)

While some brokers only provide a basic procurement service, the strong ones will also…

  • Develop a procurement strategy based on an understanding of your business and approach to risk eg fixed or flexible contract
  • Monitor the energy markets to identify the best time to renew, which is usually not just before your renewal date
  • Validate your invoices and resolve supplier queries so you don’t have to
  • Identify energy reduction opportunities and help you realise them
  • Help meet regulatory requirements such as the new Energy Savings Opportunity Scheme (ESOS)

By conducting a through selection process, in the same you would for any professional service, you’ll ensure the correct balance between price and service, while empowering your consultant to negotiate on your behalf with suppliers to obtain the best price.

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Warnings that the gap between the UK’s generating capacity and potential demand is at its lowest level since the 1970s have increased business fears about security of supply, according to the CBI.

A survey of CBI members found that UK companies are losing confidence in the security of energy supplies, with 80% of respondents taking fears over future supplies into account when making investment decisions, and 74% factoring in future price rises.

Theses findings come at a time when wholesale energy markets remain at historically low levels. Above average temperatures, a low oil price and high levels of gas storage after the mild weather last winter have continued to keep a lid on both gas and electricity prices.

This means that any organisation with contracts due to terminate in 2015 would be advised to check their options – several Energy & Carbon Management clients will experience reductions in their next contracts by locking in their next contracts now.

Slightly early for bonfire night, a major fire at the Didcot B power station lit up the Oxfordshire sky recently, raising further concerns about the UK’s ability to keep the lights on over winter. This was the third major fire at a fossil-fueled UK power station this year, following on from Ironbridge in February and Ferrybridge in July.

While the National Grid’s tried to downplay the risk of power cuts in its Winter Outlook, the margin between supply and demand could be as little as 4.1%, compared to 15% a few years ago.

The tightening margin is due to the closure of polluting coal-fired generation, breakdowns (and fires) at several plants, and new generation not coming on-line as quickly as expected.

The National Grid has measures in place to ensure supply include agreements with three power stations to make additional capacity available if needed, as well as the new Demand Side Balancing Reserve, under which large businesses are paid to reduce consumption at peak periods.

While a full-scale black-out has only a 5% chance, the likelihood of a brown-out has increased from 0.1% to 10% according to a recent study, which can have side-effects for electrical equipment.

Power cuts may remain unlikely but the UK’s slim capacity margin should focus business minds on energy efficiency and self-generation for both financial and security of supply reasons.