The draft Energy Bill: a five-minute summary
Today DECC has published a draft of the new Energy Bill. Here’s a five-minute summary to get you up to speed.
What’s in the Energy Bill?
Electricity Market Reform (EMR)
The way we use and generate electricity is changing. Our demand for electricity is expected to double by 2050 as we move towards electric heating and transport, but lots of old power plants are closing.
The much-discussed EMR is intended to try and attract the £110 billion investment we need to upgrade and expand our energy infrastructure for the future, meet our emissions obligations and increase the use of renewables.
The Bill includes:
- Contracts for Difference, which is hoped will provide ‘stable and predictable’ incentives for companies to invest in low-carbon generation;
- Investment Instruments – to help get investment before Contracts for Different come into force;
- Capacity Market – to help make sure we have enough electricity in the future;
- Conflicts of Interest and Contingency Arrangements
- Renewables Transitional – transition arrangements for investments under the renewables obligation scheme,
- Emissions Performance Standard – to limit emissions from new fossil fuel power stations.
A new Strategy and Policy Statement (SPS)
The SPS is intended to improve things at a regulatory level and ensure that the government and Ofgem are working to the same strategy and with the same aims. It will also lay down the roles and responsibilities of the government, Ofgem and other relevant organisations.
The creation of the Office for Nuclear Regulation (ONR)
The ONR will regulate the nuclear power industry, to regulate the safety and security of the next generation of nuclear power plants. This move signals the government’s ongoing commitment to nuclear as source of electricity in the UK.
What's not in the bill?
There are few things that you might have expected to be in the Bill that are missing. One such example is energy efficiency; there's nothing in the draft to do with cutting energy usage. There is also less of a focus on renewable energy, with gas and nuclear being the focal point of the Bill.
For more information on the Energy Bill visit our partners Busines Juice.
60% increase in business energy costs as average turnover falls by 6%
New figures from uSwitchforBusiness show that while average business turnover has fallen by over 6%, energy bills have risen by over 60%.
The numbers from BIS show that between 2010 and 2011, average business turnover fell from £716,309.49 to £671,960.36, while our stats show the average business energy bill rose by 60% from £2,130.28 to £3,408.89.
This means that business energy costs now represent 0.51% of an average business’s turnover. It might not sound like much, but it’s a 70% increase on 2010, when it was just 0.3%.
Our sister site uSwitch.com, has noticed a similar trend in domestic energy prices: the cost of household energy has grown five times faster than the average salary since 2004.
Why? Well, the economic crisis explains declining turnover, and rising wholesale energy prices have a big part to play in rising energy prices.
James Constant, director at uSwitchforBusiness.com, commented: “Historically, businesses could afford to ignore energy costs, because they seemed almost negligible in relation to their profits. But with costs having leapt up from 0.3% to 0.51% of turnover in just one year, this is no longer the case.
“Furthermore, if this trend continues, energy costs may soon hit 1% of total business revenues, a hugely concerning figure that should force businesses into acting fast.
“No one is in a position to accurately predict the market right now, but anyone responsible for energy should certainly ensure that they are as prepared as possible for what is to come. Businesses should therefore be sensible and think about cutting and offsetting costs when they have the opportunity. Switching suppliers, or even just your tariff, can save a business an average of £946 a year.”
And while that £946 saving won’t quite wipe out the £1,278.61 rise we saw between 2010 and 2011, it will still make a big difference to your balance sheet.
Business week in brief: 11th May 2012
Business week in brief: 4th May 2012
Business week in brief: 27th April 2012
Business week in brief: 20th April 2012
Business week in brief: 13th April 2012
An 'historic' agreement between the Big Six and the government, but what about businesses?
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.
Ofgem could get you compensation under new proposals, but size matters
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.
For more information on business energy rules and regulations visit our partner company Business Juice.
DECC's new smart meter guidelines: five implications for your business
DECC has today published new guidlines for the rollout of smart meters, but what will this mean for your business?
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.
For more information on smart meters visit our partner company Business Juice.
- The draft Energy Bill: a five-minute summary
- 60% increase in business energy costs as average turnover falls by 6%
- Business week in brief: 11th May 2012
- Ed Miliband and the Queen talk energy
- Interview with Steve Fitzsimons of new business energy supplier, Hudson Energy
- Business week in brief: 4th May 2012
- The see saw of corporate profit
- Business week in brief: 27th April 2012
- EDF Energy’s Business Customer Commitments: four key pledges
- Businesses buck the trend when it comes to smaller energy suppliers