Part one: Powering down

Energy bills can be a drain on a business’s bottom line. Businesses that aren’t switching supplier could be paying more than necessary

By Adam Bernstein | Published:  04 December, 2017

Brexit is on the horizon, costs of energy are rising following the fall in sterling and an increase in taxation, and it appears that the UK’s energy generators can only just meet energy demands. It’s not hard to see why firms should be keenly aware of the impact of energy usage on their bottom line.

According to the Carbon Trust in a December 2013 document, Better business guide to energy saving,
most firms could with low or no-cost changes could bring bills down
by 10%.

Make a saving
Chris Caffery, an advisor at Utility Options Ltd, an independent energy consultancy, reckons that 95% of firms can save either on their upcoming contract renewal or their current pricing. He finds it irritating that there are still too many businesses on uncompetitive contracts or paying high non-contract prices.

From his point of view firms should understand that being “out of contract” – that is, not signed up to a deal but instead, paying standard pricing – is not a smart idea. He says: “Having no contract may give flexibility, but it also means that customers will be charged ‘out of contract’ pricing that can carry a 20-30% premium over standard tariffs.”         He explains: “Suppliers say they have to buy energy on an ad-hoc basis, paying the wholesale rates for that anticipated energy on a daily basis. They will build extra margin in to these tariffs to cover large wholesale increases. On a fixed contract, the supplier buys the energy for the whole contract at the price agreed. This way they know their margin and this can’t change for the period of the contract.”

Thankfully rollover contracts have been abolished. They were nasty and effectively trapped firms into a given supplier and tariff if notice wasn’t served in the prescribed manner.

So, when should firms give notice if they want to leave? Caffery says two to three months prior to the contract renewal is usually good timing: “The new system requires a standard 30 days but termination can be served to a supplier before this time as long as the customer doesn’t try to switch before the renewal date. Should they go past the renewal date they will usually revert to the standard tariff which they can leave at any time by giving 30 days notice.”

How to switch
Of course, it’s entirely possible to find and switch to a new supplier without any external help – especially if a customer contacts a supplier directly on the right day when rates are low or the sales department have a
target to hit so are able to reduce their margin.

From Caffery’s point of view there are better solutions than DIY. The first is to either use a broker that can obtain a better rate because they deal with suppliers in bulk. The other is to use a consultant who can do the same but adds other benefits such as bill analysis to confirm correct low rates, contract renewal notification and reminders, and non-tariff related savings such as meter downgrades/installations.

Choosing a new energy supplier
No supplier is perfect and it’s only natural that companies base their first choice on price as it’s the bottom line that matters to 99% of most firms. However, some suppliers are more customer service focused than others, but that only really matters if a problem arises. Service is, of course, where the energy consultancy or broker can help with their experience.

When searching for external help, as with most trades or service providers, there are going to be some that take advantage of their clients so an internet search could possibly be a little bit like a lottery. If the business is a member of trade organisation then it may be best to ask them who their chosen consultant is for their members. The Federation of Small Businesses (FSB) offer this as does the Independent Garage Association (IGA).



Related Articles

  • First Line steering & suspension range ‘Includes Fittings’  

    All First Line ball joints, link bars, and suspension arms that come with the necessary fitting components as standard will now bear the new 'Includes Fittings' logo on the packaging. With this clear message showing that the necessary fittings have been supplied with the component, technicians can be sure that a smooth and efficient installation can be carried out.
        
    To further aid the efficient identification of its steering and suspension components, First Line has added positioning layout images to the WebCat, which has been proven to significantly reduce look-up time.

    www.firstlineltd.com

  • part two: A FINE PENSION MESS and how to avoid it  

    Pensions auto-enrolment, the government’s drive to have everyone saving towards their retirement is just over five years old and recently, this last February, completed its rollout. However, while it might be the end of the rollout as far as the government is concerned, for businesses, the process is never-ending as the obligations continue… forever.
        
    Ignoring the rules and failing to meet the obligations can lead to very painful penalties being imposed by The Pensions Regulator.

    Don’t fall foul of any changes to the rules
    The government has done a pretty good job of improving the rules as they go along, even though they may seem rather onerous at first. Nathan Long, a Senior Pension analyst at Hargreaves Lansdown, explains more about how firms can be caught out by the law.
        
    Nathan says that there “is a ruthless determination to ensure auto-enrolment remains successful and the government recently made recommendations as to future changes to the legislation.”
        
    The two key changes for employers are that staff will need to be automatically enrolled from age 18 as opposed to 22; and contributions will accrue from the first pound of earnings, whereas currently the first £5,876 can be excluded.
        
    Nathan says the changes are great for pension savers, but will impact on some sectors more heavily, especially those that employ large numbers of younger people: “These recommendations will not only mean people retiring with more income, it means they will have greater control over leaving work. In fact, someone with average earnings could increase their pension pot at retirement by over £60,000.
        
    “Increasing the reach of auto-enrolment is great for the long-term retirement prospects of the nation but adds yet further costs for businesses. The government is clearly mindful of this alongside the ongoing Brexit uncertainty and so opted for a long implementation period, with the changes not due to be rolled out until the mid-2020s.
        
    “Even so,” reckons Nathan, “it is widely recognised that 8% contributions are not enough for a comfortable retirement, with a growing consensus that contributions of 12% are more appropriate – the government has also recommended reviewing the minimum contribution levels from April 2019. Small businesses in particular should be alive to the very real risk of increased costs coming down the tracks.”
        Empirical evidence is showing larger employers driving higher levels of understanding and engagement amongst their staff by embracing workplace financial education programmes. Nathan thinks that smaller businesses may struggle to offer these services: “A possible solution to improved engagement could lie in allowing staff to be able to select where their auto-enrolment pension contributions are paid if they already have their own pension plan.” There would still be a company appointed provider for anyone that doesn’t choose, however anyone who has truly got to grips with their pension planning could continue to contribute to their preferred plan. The responsibility would then be on pension providers to engage their customers in order to retain their business.

    Nathan thinks this solution need not add more administration for employers: “In the same way that you require an employee’s bank account details, so you can pay their salary, simple details of pension provider and policy number could allow correct payment of pension contributions. The technology to enable this already exists, it simply must be adopted for this revised purpose.”

    To finish
    The key message for employers of any size is that auto-enrolment is an on-going exercise and crucially requires on-going compliance with any rule changes. First up will be the contribution hikes in 2018 and 2019, but employers need to keep their wits about them. Whilst it may seem The Pension Regulator is out to get small businesses, actually the opposite is true and its website is a great source of information for businesses of all shapes and sizes: www.thepensionsregulator.gov.uk

  • Head to the top – Businesses sign up for Top Garage  

    The best garage businesses in the industry are signing up to see how they measure up against their peers in the brand new Top Garage competition. Have you signed up yet?

  • Small Steps = BIG Results 

    There’s no doubt about it-  the technical challenges that face an independent workshop grow daily and this has the ability to not only affect the commercial performance of the business but also the morale of those at the sharp end.

  • Top Technician/Top Garage 2018 launches 

    Top Technician is coming back for 2018, and is bringing a new competition with it; Top Garage. This all-new related contest will enable whole businesses to compete to find out who is the ‘Top.’


Search

Sign Up

For the latest news and updates from Aftermarket Magazine.


Poll

Where should the next Automechanika show be held?



Facebook


©DFA Media 1999-2018