business energy Cost Saving by Gemma

7 Business Energy Procurement Tips and Tricks as a Guide

October 2017

It's likely that your energy billing will rise during winter months. Demand is of course greater, which drives up the associated cost. But it's not all down to you using more electric and gas, which results in larger bills. The suppliers themselves face various costs in supplying gas and electricity to businesses meaning the price you pay will reflect these costs.

Before we jump into the 7 Energy Procurement Tips (below), understanding a few key points regarding the energy market, will allow you to manage your energy procurement and help you get a better deal on business energy when purchasing gas and electricity;

  • Climate change Levy (CCL) - A Governmental introduction in 2001 to essentially incentivise businesses (most charities are exempt - and a quick note on this - we've seen billing from charities that have CCL on it that simply shouldn't. If you're a charity, and you'd like us to help you with CCL exemption, please get in touch) to improve their energy efficiency and reduce carbon emissions. The cost is charged on a per unit basis.
  • Wholesale costs - This is the price energy suppliers pay to purchase gas or electricity from the wholesale market. The pricing can change daily. It's also heavily influenced by global markets, international disasters and political events. It will also go up and down based on supply and demand.
  • Transmission Use of System (TUoS) - This charge is for the National Grid to recover the cost of installation and contributes to maintenance of the transmission system. This is usually a flat rate; however, it is based on your geographic location and you may pay more if your business is located in a remote area.
  • Distribution Use of System (DUoS) - This charge is applied by Distribution Network Operators (DNO) who own and operate the distribution network that bring electricity from the transmission network directly to premises.

  • 7 Energy Procurement Tips and Tricks

    1.Implement an energy procurement strategy. Ensure you're ahead of the game and that there are no unforeseen costs. Minimise risk by seeking advice on business energy.

    2.Compare the market. Although suppliers are increasing their prices, the market is extremely competitive and so suppliers are under pressure to keep prices down in order to gain new and keep existing business. Compare business energy across the full range of both large and small energy suppliers (or outsourcing the practice) to ensure you get the best deal on business energy.

    3.Understand your own business needs. Whilst you may not know how this relates to the type of energy tariff you're on, because price plans vary so greatly and with price being fundamental throughout your cost base, a business energy expert will be able to match your specified business needs to the right business energy tariff. Understanding your business needs and developing your risk tolerance now will allow you or your broker to be able to negotiate an energy contract with the energy prices and terms and conditions that deliver the best value for your needs.

    4.Check your bills. And check them carefully. We uncover billing errors every month for our clients and so it's safe to say that you shouldn't just assume that they're correct. If you've never spotted a billing error; you're probably not checking hard enough.

    5.Make sure you are not being charged out of contract prices or that you're on a deemed contract/ deemed rates. This can happen when a contract has expired or no contract has ever been negotiated when you moved into premises. These energy prices are extremely high and you should immediately move to a fixed term contract either with your existing supplier or an alternative supplier.

    6.Be choosy when selecting your supplier. Good brokers will be picky for you anyway but if you're going it alone then many cheap (often new entrants to the market) energy suppliers are keen to win your business with cheap energy tariffs but can lack the experience in customer support and infrastructure resulting in unacceptable aftercare and support.

    7.Engage the market when prices offer good value (a good broker will do this for you) for your circumstances and business, not just when your contract is about to expire. When it comes to energy procurement, this is one of the biggest mistakes businesses make. For some businesses there's not much advantage to buying further out than a few months but because businesses don't have to wait to buy electricity 2 or 3 months out from renewal; if the market has good pricing 18 months out, that's when some should be buying.

    "Compare the market. Although suppliers are increasing their prices, the market is extremely competitive and so suppliers are under pressure to keep prices down in order to gain new and keep existing business. Compare business energy across the full range of both large and small energy suppliers (or outsourcing the practice) to ensure you get the best deal on business energy."