Archive for April, 2016

After a lengthy period of declining energy markets the last couple of weeks have seen wholesale electricity prices spike to around £40 p/MWH compared to January lows of £33.

A mix of Sterling falling against the US dollar and Euro on the back of Brexit uncertainties has pushed up the cost of energy imports, rising oil prices (nearing $48 p/barrel against lows of $27), along with the recent cold snap increasing demand, have created a volatility not seen for some time.

In the longer-term the expectation is that the market will remain suppressed, but the current volatility highlights the importance of monitoring the market well in advance of renewing your energy contracts – buying at the wrong time could turn out to be an expensive mistake.

It’s therefore important not to wait until you receive your supplier renewal letter: prices fluctuate, so implementing a long-term strategy ensures you’re buying when the wholesale energy market is in your favour, not just when your contract terminates.

 

 

 

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New research indicates that landlords could have problems renting property that falls below new minimum energy efficiency standards.

The Energy Act requires new leases or lease renewals from April 2018 (and for all rented property from April 2023) to have a minimum EPC rating of ‘E’, with properties required to meet at least this threshold before landlords are able to let the space.

According to the Cushman & Wakefield report around 20% of commercial property currently has EPC ratings of F or G, making it unlawful to rent them from April next year, with 19% rated E. Owners of non-compliant property could be fined up to £150,000.

While there will undoubtedly be a cost to improving a building’s EPC rating it’s important to take the longer-term view that upgrading a facility protects, if not enhances, its value, while also making it more attractive to tenants increasingly conscious of operating and service charge costs.

There are a number of exceptions from the regulations, though owners will have to sign-up to a register opening in October 2016.

 

 

The long-awaited report from the Competition and Markets Authority (CMA) into the UK energy market has found that the big six energy companies have made excess profits on supplies to SME customers of around £280 million a year.

This equates to a roughly 6% premium on gas and electricity than in a better functioning market according to the CMA.

Of the £280 million a year around £230 million is estimated to be related to micro-businesses i.e. those organisations using less than 293,000 kWh of gas or 100,000 kWh of electricity a year, or with fewer than 10 employees and an annual turnover total not exceeding 2 million euros.

In an effort to improve the market the CMA proposed a number of long-needed measures focused mainly around price transparency:

  • suppliers should be required to disclose all available prices to micro-business customers
  • out-of-contract rates and deemed contract prices should be disclosed on supplier websites
  • auto-rollover contracts should not be permitted
  • micro-businesses should have longer notice periods with no termination fees

 

Greater transparency and contract flexibility should certainly level the playing field for smaller business energy users, though it will remain important that these businesses shop around and don’t just accept their current supplier’s renewal offer.