It’s boring, but it’s vital. Yes, I’m talking about your business’s gas and electricity. It keeps the lights on, heats our offices and cools us down nicely during those few hot days during the summer. But for most of us, we barely look at the cost and simply renew each year when the renewal reminder lands in the accounts department. But that’s where most businesses go wrong. You can guard against potential wholesale price increases over the coming years.
The cost of fuel is only going one way, and that’s up. The Hinkley Point C nuclear power station is scheduled to charge nearly three times the current wholesale price now that it has the go-ahead. Even though the current wholesale price for electricity is the lowest in some years, the UK now mostly imports its fuel requirements. Any changes in demand or foreign exchange rates adds to the long-term cost at source.
Although we have a regulator, they’re not going to be bringing prices down any time soon, because the majority of the retail price is from the wholesale market—and this is influenced by factors outside of their control. Their job is to ensure we have power when we need it and look after the home energy market. There are no power cuts these days, but prices continue to rise. The energy companies are required to invest millions of pounds each year in infrastructure changes and the Smart Meter rollout, and have little room for manoeuvre. However, not all energy companies have the same cost base, so average energy bills vary considerably by supplier. That’s where a few minutes each year could potentially save 50% or even as much as 70% off your current bill.
It’s easy to take a look at how much you can save by using comparison sites or energy brokers that perform the donkey work for you. Even so, a pricing quote can be produced from a building number, postcode and annual consumption. You don’t need the numerous additional factors that renewing car or home insurance require, so it’s really an exercise that takes minutes if you do it yourself.
When buying commodities, you should simply aim to get the lowest price. Strangely though, whenever research into this area is undertaken, the majority of businesses still state they either haven’t switched their supplier or have no intention of doing so. Rather than looking at bringing down the unit price, most businesses are trying to introduce some form of energy efficiency into their organisation. That’s all well and good, but the cost of some of these measures has a payback period of many years against potentially halving your bill within a few minutes by switching your supplier.
The savings add up
It’s estimated that UK SMEs are overpaying some £1.8 billion each year for their electricity by staying on their renewed contracts and not switching to a cheaper deal. Two minutes can halve your electricity and gas bills. Yes, many businesses really can save that much, and here’s how.
You’ll likely save at least 50% if you fall into one of the following categories:
1) You’ve never switched
2) You took last year’s renewal prices
3) You’ve just moved into new premises and not contacted your supplier
4) You’re not in a contract at all
Each of these categories means you’re not on a standard tariff, and standard tariffs are all that exist for businesses. It differs for homes, but SME business customers simply get one tariff option calculated from where they’re regionally based and the contract length in years.
To use your two minutes effectively, select one of the comparison sites or use the services of an energy broker. All UK brokers have the same access to the same tariffs available for use. They’ll add a small commission to the price to cover their costs. They’ll not charge you anything on top of that. An additional service offered by a broker is to ensure your tariff is renewed correctly at the end of the term, rather than you having to remember when it’s due. Because all business contracts need a formal termination, that’s something else they’ll take care of for you.
The energy companies also want to try and make your life simpler, and save themselves administration costs at the same time. There are additional discounts if you pay your bill by monthly Direct Debit. At the top end is a 7% discount from EDF, while most others are in the region of 4-5%.
Keep on saving to reduce costs.
One final note on managing energy costs: I talked a bit about companies investing in energy efficiency measures earlier, and for larger companies, that can really make a difference. For the smaller organisation, there are some no- or low-cost changes that could save a few hundred pounds each year.
The things we have been told for years about saving energy in our homes equally apply to businesses. Remembering to switch off lights and appliances when not in use, using energy efficient lightbulbs and turning thermostats down by one or two degrees all add up over a year.
If you are in any doubt that savings can be made, then go online and check out the suppliers’ tariffs. Unfortunately, none are made public, so you’ll need to enter your details to check the prices against your current contract. By simply comparing prices before you renew your contract, you’ll be sure to make the best choice for your budget.