How To Future-proof Against Rising Energy Prices...

[Dan Welch]

The average business electricity bill has increased from £590.15 to £755.80 since Jan 2016 and looks set to continue increasing. This is driven by more expensive fuel, increased distribution costs and rising green taxes.

Data sources: Ofgem and the Department for Business, Energy & Industrial Strategy. RPI based on January 2010 = 100. Last updated 14th June 2019.

What Affects My Prices?

Larger users of energy, such as manufacturing organisations, pay a lower rate due to the higher consumption. However, the energy companies increase the daily standing charge to compensate for the lower rates. The following guides you through what could affect the unit price you pay:

• The type of business you own dictates the consumption usage patterns during the week. Not all businesses work Monday to Friday 9.00am to 6.00pm. Those that consume high energy during the evenings and weekends will have different rates than during the day. These are usually lower as the demand is lower from the network.
• How much overall energy you use in one year generally dictates the pricing. Normally higher volume equates to a lower price. However, if unit rates decrease sometimes the daily standing charge increases. It’s always best to check your overall offer in terms of the cost incurred for a full year rather than unit prices.
• Whether you run a small business or large corporation depends on your buying power. There are some “group buying” organisations that work on behalf of SME companies, but they’re rare. A micro business just has to take the standard tariffs that are on offer.
• If you have both electricity and gas under a dual fuel contract you may find that both fuels have slightly lower rates. This isn’t the case for every power company so check single and dual fuel contracts together.
• Your current energy provider could be the most or least expensive in the marketplace. You won’t know until you undertake a business electricity comparison to check if you really are on the best deal available.
• The region your business is located within the UK affects quotes because prices vary around the country. Scotland has some of the highest prices in the UK, whereas the Midlands some of the lowest.
• The length of your contract has an impact on both unit rates and daily charges. On average each year you extend your contract adds an additional 6% to the unit cost whilst 2%-6% is deducted from the standing charge.

What Can I do?

1. Switch supplier when your renewal is up. If you don’t renegotiate your contract, then your prices will increase by as much as 120% because of the nature of the industry in terms of rollover contracts. Research shows that as many as 80% of businesses simply allow their tariff to roll over to the next year. The contract extension will happen automatically if you don’t renew correctly and for most people this will result in increased rates. Use a comparison site such as uswitchforbusiness.com to get a quote.          
2. Look to improve the energy efficiency of your electrical equipment. On average, lighting accounts for one third of a businesses electricity bill. It is one of the best places to start when looking to reduce energy costs.

Enter, LED bulbs. Over the years, these bulbs have grown and grown in popularity, overtaking traditional lighting such as halogen bulbs. In fact, on September 1st 2018, halogen bulbs were banned across Europe to make way for a continent-wide switch over to LEDs. Halogen bulbs proved to use around five times more energy than LEDs and it’s thought that doing away with them will save more than 15m tonnes of carbon emissions a year. Businesses the world over are switching to LED lighting, and it’s not difficult to see why.

The savings

Most things in business boil down to money, so cutting down on energy costs is something that should be reviewed regularly. Switching to LEDs is an easy win as something as minor as a 20% reduction in energy costs can add the same benefit as a 5% increase in sales for business. Switching to LED lighting has the potential to reduce lighting costs by as much as 90% – a no-brainer for small businesses.

The return on investment

For many, the main argument for not switching to LED bulbs is the initial installation cost. LEDs are more expensive than other bulbs, which is often a turn-off for a small business who perhaps can’t justify the costs. It’s worth remembering however, that you will recoup your initial investment within the first few years and the lights will pay for themselves. The financial and energy savings are huge as they can last up to 25 times longer than traditional bulbs. This means lower bills and lower maintenance and replacement costs, which is not only financially friendly, but you’ll rarely need to think about replacing bulbs, making time for more important things – such as running your business.

FUNDING IS AVAILABLE FOR WOKING SME's!

If you’re really unsure about taking the plunge and facing the large upfront cost of having an LED overhaul in your office space then ThamesWey can help. We have funding grants of up to £2k to help SME’s that are based in Woking upgrade to LED Lighting.  Get in contact with us to discuss whether you qualify for the SME grant funding. Contact us on 01483 545098 or email at [e-mail]