In a speech at KPMG in Canary Wharf today, Nick Clegg will announce an 'historic' agreement between the Big Six and the government. It's good news for domestic energy customers, but what about businesses?

Image from Liberal Democrats via Flickr. Credit Alex Folkes/Fishnik Photography.

Under the agreement, domestic customers will get a letter from their energy supplier once a year, telling them what the best tariff for them is. There will also be barcodes on bills which customers can scan with a smartphone, making it easier for them to compare their tariff to others on the market and switch if there's a cheaper one on offer.

It's great for domestic customers, but where does it leave businesses?

From the details of the speech released by the Cabinet Office, it doesn't sound like businesses can expect the same treatment.

Even if the rules did apply to businesses, they wouldn't have such an impact. 99% of domestic customers are with a Big Six supplier (British Gas, EDF, E.ON. SSE, Scottish Power or npower), compared to only 76% of businesses. (Based on figures for our customer base from 1st April 2011 to 31st March 2012).

In addition, the best tariff is often likely to be with a different supplier, not your existing one, so there's no guarantee this agreement will guarantee you get the best deal.

Mr Clegg is expected to say that families "could save up to £100 a year", and I'm sure I'm not the only one wondering whether the money they save will be clawed back from businesses? In fact, I know I'm not - Caroline Flint MP, Labour’s Shadow Energy and Climate Change Secretary last week accused the Big Six of doing as much. 

Paired with yesterday's proposals for compensation for domestic energy customers, which would fall short for many businesses, it's a pretty frustrating time for businesses looking to the government for help with the burden of energy bills.

Under new proposals from the government, Ofgem would be able to order energy suppliers to give their customers compensation if they broke the rules - including (some) businesses.

Could your energy supplier be writing you a cheque under new proposals? Image by CarbonNYC via Flickr.

Compensation would be on a 'pound for pound' basis if the loss is measurable or on a 'goodwill' basis if it isn't - and it would be down to Ofgem to decide what's appropriate. Plus, Ofgem would still be able to fine companies, and could impose a fine and order a supplier to pay compensation too. The idea is that the new powers would mean Ofgem could make sure energy suppliers put right any wrong they do, as well as/instead of punishing them with a fine.

The proposals also say that Ofgem would be able to make an order forcing the energy supplier in question to put a stop to whatever led them to break the rules, so that other people don't fall foul of the same issue.

Sounds pretty good so far, right?

Well, there's a hitch. (Isn't there always?)

To be covered, a business must:

• use no more than 55,000 kWh of electricity, or 200,000 kWh of gas a year; or
• have fewer than ten employees (or their full time equivalent) and an annual turnover or annual balance sheet total not exceeding €2 million.

This means that, based on their number of employees alone, at least 200,000 businesses will not be eligible for compensation under the proposals. However, the real number is likely to be much higher when you take energy consumption and turnover into consideration.

Why? The trigger for compensation would be a license breach, and only small and micro-businesses are covered by license conditions - larger businesses are left out.

Another hitch is that small and micro-businesses are covered by fewer license conditions than domestic customers, meaning scenarios where compensation would be available are thinner on the ground. 

We think the proposals are definitely a positive move, but we'd like to see the introduction of license conditions to safeguard all businesses, not just small ones.

Interestingly, Labour MP Caroline Flint has recently accused the Big Six of ripping off small businesses, and her party is proposing that small businesses should have the same protection as domestic customers.

The proposals are part of a consultation, so DECC is welcoming feedback with a deadline of 02/07/2012.

DECC has today published new guidlines for the rollout of smart meters, but what will this mean for your business?

Image by Tom Rafterty via Flickr

1. Two million small businesses will have smart meters installed by 2019. 

2. You'll get more accurate bills. 

With a smart meter, meter readings are automatically sent to your energy supplier, which means accurate bills, which means better cash flow for your business.

3. You won't get a sales pitch

DECC has banned energy suppliers from using installing your smart meter as an opportunity to make sales pitch. It has also placed restrictions around how the data your smart meter provides can be used, and given customers some control over who can see what information.

4. You could save £190 a year

DECC has said that businesses can expect to make savings of £190 by 2020, rising to £200 a year by 2030 as a result of having a smart meter. It's important to note that these savings aren't automatic. If you want to make these savings, you need to be proactive and use the smart meter and the data it provides to change your habits and be more energy-efficient, which is why DECC also has said that when your new meter is installed you should be given energy efficiency advice. 

5. It could mean innovation in the market (and more savings)

Smart meters can provide energy suppliers with much more data about how much energy we use and how we use it. This means that energy suppliers can more accurately forecast how much energy they need to buy and when they need it, which means they can be more efficient. Hopefully greater efficiency in terms of forecasting shape and demand will mean the energy suppliers can pass the savings they make on to their customers and also come up with innovative new tariffs.

On the whole, we think this is a positive for businesses, but we have to ask why it's taken so long? Smart meter technology has been around for well over a decade, energy suppliers have been installing them for years and many businesses have already taken the plunge.

by Liam Clark

As one of the largest players in today’s business energy brokerage market, we were very interested in George Osborne’s plans for the industry in last month’s budget. 

As the Department for Energy and Climate Change becomes more and more relevant to the future of our economy, government decision makers and regulators are assuming pivotal responsibility for protecting the interests of UK businesses, and energy costs can play an important role in our ability to compete through times of austerity and global competition.

Image by HM Treasury via Flickr

When a government budget is announced the simple fact is there are several veiled decisions that can directly affect the revenue streams in your business. Within George Osborne’s claim to “unashamedly back businesses” in this year’s budget, there are certainly signs that this will extend to the energy sector. 

As an example, measures to protect North Sea Oil & Gas operators from tax hikes have been assured by the chancellor, and projects to continue increasing gas storage capabilities in the UK confirmed. In theory, although the energy market is now driven by global influences, this shows intent by George Osborne to tackle rising market rates through sustainable policy.

So, potentially you’ve saved in the long run. Admittedly not a done deal, but reason for optimism.

On the flip side, there are still many baffling policies and procedures in the energy market that are yet to be tackled by this, or any other government. From my perspective, perhaps the most frustrating are the restrictive contract termination periods and the barbaric out-of-contract rates that energy suppliers are able to apply to all businesses. There is no industry standard on this but some, including the Big Six, require you to terminate your business energy contract 90 days before the actual end of that contract. Other requirements vary, but 28 days is the absolute minimum on the market today.

Now on some level this is understandable. As with any business, energy suppliers are required to manage their workflow and need time to process all the information associated with a transfer. But 90 days to acknowledge you want to leave? This has to be considered a reach and can only benefit the supplier. Energy Execs will argue that the whole episode of transferring an energy supply represents such a risk to them that they have no option but to implement such strategies. In reality, such regulation is lenient toward energy companies and is very a useful mechanism for keeping customers; usually on rates 20-30% above what is available on the market, so you’ve just handed that saving back to the energy supplier.

We’re trying to change this. We believe that businesses deserve the flexibility to change their energy supplier on fair and competitive terms, and without the risk of unjustifiable rate increases separate from market trends.

In the meantime the following points should prove useful:

1) Pay attention to terminating your contract – If you miss the window you are likely to end up on higher rates than those available to you. The best policy is to read the renewal information provided by your supplier in detail, set reminders on important dates, and keep evidence of termination whether on email or through recorded delivery. 

2) Don’t be a passer-by – Saving on your energy costs through a broker can hand your business a competitive advantage.

3) Watch this space – We are committed to promoting competition in the energy industry, and we will keep applying the pressure until you get the flexibility you deserve.

For businesses focussed on cost-efficiency, the savings you can make on energy through a broker can make a real difference. As industry experts, we are a good place to start.