A Green Deal for businesses?
DECC has today published a new consultation on the Green Deal, a government initiative which will invest £14bn in energy efficiency from October 2012.
Although the domestic market is the main beneficiary of the green deal, there are some benefits for businesses too.
The consultation says that every British business will be able to install energy-saving measures like insulation with no upfront cost; the repayments will be made from the savings the business makes on its energy bills.
While help with eenrgy efficiency is likely to be welcomed by many businesses, there is a flipside: the cost. The money to pay for the Green Deal has to come from somewhere and the consultation also includes an analysis of what impact the Green Deal will have on on business energy prices and bills:
As the graphic shows, while policy will mean an eventual reduction in energy bills for domestic customers, it will lead to an increase for businesses.
The consultation emphasised that while it’s important that businesses play their part in the transition to a low-carbon economy, it’s vital that they remain competitive too. So before the end of the year, the government will be announcing a package of measures to help energy-intensive businesses.
I asked our director, James Constant for his take on the Green Deal consultation:
“Any help to enable businesses to reduce their energy overheads and protect the environment is to be welcomed, however this should not be at the expense of increasing the transparency of the market and fair pricing for businesses.
“For too long domestic customers have been the sole focus of market improvements and businesses have been left to suffer in hopeless silence; as a way to raise business energy up the agenda this move is welcomed, but there shouldn’t a sting in the tail of price rises to support the benefit for the few who are able to make use of the energy efficiency measures being proposed.
“It would be far better would be to increase market transparency, encourage innovative new suppliers to enter the market and make smart meters and active energy management the cornerstone of business energy efficiency. This would not only reduce unnecessary energy costs, but also boost businesses’ cashflow with accurate billing.”
New Ofgem business energy proposals: our thoughts
Ofgem has announced proposals for reforms to the business energy market; how will they affect your business?
Ofgem has announced new proposals, designed to reform the business energy market.
The four proposals are as follows:
1. The first proposal is to add new standards of conduct to energy suppliers’ licences and give Ofgem the power to enforce them if they are breached. The aim is to ensure that suppliers and brokers are fair, honest and transparent. In addition, all sales and marketing to businesses will have to be accurate, not misleading and written in plain English.
2. The second is to extend existing licence conditions which protect micro-businesses to cover larger small businesses (businesses with less than 50 employees and an annual turnover of no more than €10 million). These rules will mean suppliers have to provide clear and transparent contract terms and conditions up-front and regulate how contracts can be rolled over.
3. Thirdly, Ofgem is proposing that there should be a range of reforms to give businesses more protection from unfair sales practices. These reforms include an Ofgem accreditation scheme for Codes of Practice governing energy brokers, and new powers to take enforcement action directly against brokers for misleading marketing. (Ofgem will have to ask the government for this last reform because it currently has no direct powers to take enforcement action against energy brokers that only deal with business customers.)
4. Finally, Ofgem is currently reviewing whether suppliers are complying to licence conditions which are meant to ensure suppliers cannot “unjustly frustrate” businesses which want to switch to another energy supplier. Ofgem also said that it is considering enforcement action against some suppliers over the issue.
These proposals come in the wake of an Ofgem investigation in March which found that many businesses were concerned about confusing terms and conditions, potential misselling by energy brokers and energy suppliers misusing their powers to block businesses from switching supplier.
Ofgem’s Chief Executive Alistair Buchanan commented on the reforms: “This will greatly increase the protection for businesses, especially for smaller firms. As we have demonstrated in the domestic market, we will also take a tough line on any suppliers we find systematically breaching rules designed to protect businesses.”
So, what’s our take on the proposals?
Well, obviously we strongly support anything that Ofgem does to improve transparency and encourage a competitive market.
It’s also good to see market reforms for small businesses; for many years all the attention has been on what’s been happening to consumers, and this shows that Ofgem is rolling up its sleeves and getting ready to get stuck into the business energy market too.
We think that extending existing micro-business rules to larger small businesses would be a positive change; whether you are a corner shop or a nationwide chain the principles of fairness should remain the same. Many businesses end up on uncompetitive and anti-competitive rollover or evergreen contracts and ‘caveat emptor’ is an unacceptable response. The key here is making sure that businesses know whether or not these rules apply to them and that suppliers don’t put them in the wrong category.
When it comes to the reforms concerning third-party intermediaries and brokers, we’re strongly in favour of self-regulation with the support of suppliers and Ofgem. We also think that the same set of rules that third parties are expected to adhere to when it comes to marketing activity should also apply to energy suppliers. If we’re going to build confidence in the market, businesses need to feel sure that they will be treated fairly whoever they’re dealing with.
In the case of suppliers making it difficult to switch business energy supplier, we’d like to see Ofgem place the onus on suppliers to justify any attempt to block or object to a switch. Businesses that have the potential to save significant sums of money from trying to switch should not be blocked without a very good reason. Businesses should also have the right to raise concerns over an objection to the regulator and be sure of a thorough investigation if they feel they have been blocked unnecessarily or unfairly.
Overall, Ofgem’s announcement is a very promising step in the right direction, but it's just the start of a much-needed overhaul.
How much could you save on business energy bills in your area?
Use this map to find out how much businesses in your area save on their energy bills with uSwitchforBusiness. (It can take a while to load, so please be patient!)
On average, businesses in Slough and Northampton are overpaying by the most before they come to us; businesses in the two locations save an average of over £1200 when they switch. Nottingham was in third place - the average saving there is over £1000.
At the other end of the scale, businesses from Crewe and Sunderland seem to be the most switched on when it comes to business energy; when it's time for them to renew their contracts they don't tend to be able to find a cheaper deal than the one they're on.
Why are there such differences in the average savings in different towns? The main reason is that business energy suppliers charge different prices in different areas. A second factor could be that some areas are known for a particular kind of business or industry - if that business or industry is more energy-intensive, then it has the potential to make a bigger saving.
Whatever area or industry or area you're in, give us a call to talk about your business energy bills, or get an instant quote with our online business energy comparison.
How to be smarter with a smart meter
Is a smart meter a smart choice?
In the news recently was a story written by the Daily Telegraph off of the back of a press release from an energy broker; it raised concerns over the ease with which energy brokers can help business energy customers switch supplier when a smart meter is installed, and also suggested that many business energy customers were switching from smart meters to save money.
A spokesperson for the broker, said of smart metering in the business energy market: “It restricts their switching ability”.
It’s an interesting point, one we have covered before (Pence per kWh or kWh, that is the question) but it is fair to say that we do not entirely agree with this opinion.
In truth, a small minority of customers who were early adopters of smart metering may find that when switching supplier, their new supplier - and more specifically the meter operator they use to collect meter readings - is unable to interact with the specific meter installed for either technical or commercial reasons.
That clearly is not ideal, but in our experience of both energy supply and energy brokerage this is most definitely a minority experience and should not be allowed to overshadow the huge benefits of smart metering.
A few years ago, in anticipation of the potential difficulties for switching, very maturely and collaboratively, the industry got together to find a solution. (That in itself is somewhat unusual in the business energy market!. As a result, the concept of 'inheritor agreements' was established between most of the larger smart meter providers and the energy suppliers, whereby on switching the incoming supplier takes on the responsibility for the smart meter and the customer should, as a result, feel no impact.
But what is of particular interest in the Telegraph article is the concept that ‘switching saves money’. Clearly it does, and clearly using a reputable business energy brokerage will help a business get the best deal in the market. However, that does not always necessarily have to involve switching suppliers or ditching your smart meter.
The two main benefits that smart meters bring are:
- they show you you how much eenrgy you use and help you reduce consumption;
- they ensure you get accurate bills.
In truth the cost savings from using less energy and the cashflow benefit from accurate billing far outweigh any benefit from getting a digit shaved off your pence per kWh for many businesses. If you aren't watching how much energy you are using or how accurate your invoices are a smart meter will make a reall diference. Clearly there will be exceptions to this, but the fundamental point is that the customer would be far better to use a broker to negotiate a better deal from their existing supplier and still receive the benefits of the smart meter than switch away for a marginal headline saving and lose those benefits.
It is important that as brokers we provide the best deal for the customer’s circumstances and if that doesn’t involve switching but does involve improved technology and contract negotiation then that is what we will recommend.
Ultimately technological advancement will change the business energy market for the better for both the environment and the bottom line for business. It takes a shift in attitude from suppliers, regulators and customers, but equally it requires a change in mindset from brokers to make sure they understand the market, the benefits of technology and how businesses can optimise their ability to save money and take control of their energy costs beyond simply switching.
Small businesses have a choice when it comes to energy
There really is a choice when it comes to an energy supplier for your small business.
In the Guardian on Friday was an interesting letter from John Walker, the National Chairman for the Federation of Small Businesses. He was commenting on the ever increasing cost of energy and the impact this has on the 4.8 million small businesses in the UK, especially in the run up to Christmas.
He comments that government must take steps to hold the Big Six energy companies to account for these pressures being applied to businesses. He also says that two things are needed to help small businesses:
- clearer pricing to help customers to make a choice;
- the removal of barriers that block competition.
Now we want to support small businesses, medium sized businesses and businesses of any other size, in that regard we are in no doubt singing from same hymn sheet as Mr Walker. Unfortunately, however, there are somethings that we don't quite agree with in relation to his letter.
Firstly, businesses do not need to sit back and take the prices that are offered to them by their energy company. Most, if not all, businesses can make significant savings by seeing what else is available in the market place. It's not just down to the government.
Business customers are much more fortunate than domestic customers because they actually have a lot more choice about where they get their energy from. In addition to the Big Six (British Gas Business, npower, E.ON, EDF, Scottish Power and SSE) they also have any of the following to choose from:
- Shell (yes the oil giant)
- Total Gas and Power (yes, another oil giant)
- Dual Energy
So the bottom line is this, business customers can save precious money on their energy supply, they don't have to get that energy from the Big Six and they certainly don't have to accept the renewal from their existing company.
You have probably heard this many times before but talk is cheap, it is action which counts. So vote with your feet and make a choice.
Should George Osbourne announce breaks on green tax for businesses?
Could there be a break on green tax inside George Osborne's red briefcase? Image by HM Treasury via Flickr
George Osborne could announce tax breaks for businesses with high energy consumption in his growth review or ‘mini-Budget’ next month.
Businesses which use large amounts of energy could stand to benefit from exemptions on the new carbon levies which have been blamed for driving up business energy prices.
According to Jim Pickard at the FT, the tax breaks could take the form of free allocations of credits in the EU Emissions Trading Scheme or an exemption from the carbon floor price.
This break could be coming at just the right time; as we reported recently, businesses in energy-intensive industries have said that energy prices could drive them – and the jobs they provide – abroad in a bid to keep their costs down.
On the one hand, this is a positive move: it makes sense to provide extra support for businesses at a time when the UK seems to be becoming a less competitive base, and it’s encouraging that an MP in a position of influence recognises this.
On the other hand, we have to tackle climate change and green levies of this kind were meant to play a big part in helping the UK meet the ambitious carbon reduction targets we signed up to earlier this year.
How do you feel about the proposed tax breaks? Is your business likely to benefit? And how do you think the government should be tackling climate change?
Lunch with Charlie: energy policy and reform
Lunch with Charles Hendry MP: energy policy and reform were on the menu. Image by DECC.
Earlier this week I was in the very fortunate position to be able to listen to Charles Hendry MP speak over lunch.
As is often normal practice, the Chatham House Rule applies. I’m sure most of you know what that means, but just in case, here’s an explanation: the Chatham House Rule allows people to speak as individuals, and to express views that may not be those of their organisation, and therefore it encourages free discussion. People usually feel more relaxed if they don't have to worry about their reputation or the implications if they are publicly quoted.
So taking that in to account, that is about it for this blog entry. Thanks for reading.
Only kidding, well, sort of. I am not going to mention anything that would cause me to break the tradition and code of the Rule, but I can share some of what was discussed with you.
First of all let’s make sure we know who Charles is and what privilege he holds in Her Majesty’s Government.
He was born and brought up in Sussex and attended Rugby School from 1972-1976 before going on to study for a degree in Business Studies at Edinburgh University from 1977-1981.
Charles Hendry has been Member of Parliament for Wealden since 2001. Prior to joining the government, he was Shadow Minister for Energy. He previously held the position of Shadow Minister for Energy, Industry and Postal Affairs. And before that, he was the Deputy Chairman of the Conservative Party (2003-05), Shadow Minister for Young People (2002-05) and Shadow Minister for Industry and Enterprise (May – December 2005).
He is now the Minister of State for the Department for Energy and Climate Change and he supports the Secretary of State (Chris Huhne) on:
- security of supply,
- resilience and emergency preparedness,
- international energy,
- renewable energy,
- the Renewables Obligation,
- Feed-In Tariffs (joint with Greg Barker),
- CCS, gas and coal policy,
- nuclear policy,
- grid policy including smart grids and network of recharging points,
- smart meters,
- oil and gas exploration, licensing and revenues,
- offshore environment and decommissioning,
- planning reform and consents,
- regulation and competition in the energy sector (incl. nuclear),
- waste and decommissioning policy for new nuclear,
- nuclear safety and regulation,
- nuclear non-proliferation,
- Energy Council,
- Coal Authority,
- Electricity Market Reform - supporting the Secretary of State,
- country lead on: EU, Russia and former Soviet States; Scandinavia; North Africa and the Middle East,
- lean regulation.
Most of Charles’s career was spent in public relations both related to business and politics before becoming an MP; so it comes as no surprise that he is an accomplished and entertaining speaker.
Now anything and everything I am going to mention is in the public domain and will not cause concern or upset from any attendees at the luncheon or break the Chatham House Rule as stated earlier.
I must also confess that it was quite difficult to hear Charles at times. The reason being that he had to rush off to another engagement so everyone was eating their first course while he was talking. So in between the clunking and clicking, snuffling, munching and chomping this is what I got.
The key elements covered during the session fall into five categories:
- energy policy,
- the role of nuclear,
- Electricity Market Reform,
- working with industry,
- Energy policy.
Times are very tough but exciting too. The events in Japan and Fukushima reinforce the importance of safety in relation to future development of energy generation solutions. In fact, on the same day the UK safety report on Fukushima was released.
Charles spoke of the challenges faced in coming up with an energy policy that delivers safe, secure, low-carbon and affordable energy (we can help with this last one).
He made it quite clear that to achieve all of the above we need a mixture of renewable, clean coal and gas (at least for now) and nuclear.
Our energy generation fleet is aging beyond its useful life span and significant investment is required.
Role of nuclear
Charles believes that Britain can provide leadership to other nations in making nuclear safe at a time when others are panicking. Safety is paramount, but so equally is energy security, lowering carbon output and affordability. We have the opportunity to pave the way in next generation nuclear power.
There is no escaping the fact that significant investment is required in our energy infrastructure and the government is doing everything in its power to ensure that the conditions are right for investment from parties both inside and outside of Britain. Over the next decade over £110 billion is the sort of figure we are looking at.
Electricity Market Reform
The most significant shake-up within the industry for 30 years. It is hoped that the EMR will achieve the following:
- get us off the hook of relying on imported oil and gas by creating a greener, cleaner and ultimately cheaper mix of electricity sources right here in the UK.
- nurture a new generation of power sources including renewables, new nuclear and carbon capture and storage.
- bring new jobs and create new expertise in the UK workforce.
- establish a long-term role for hydrocarbons like gas as well, taking account of how the global market has changed over the years.
Now I am writing this just as the news has come out that SSE has confirmed that it is going to allow all of the electricity which it generates to go on the wholesale market, and it will buy back what it needs from the market for its retail customers. this is quite radical and we will have to see what the other energy suppliers do to follow this.
Could this be an attempt to head off the potential referral by Ofgem (and the stranglehold the ‘Big Six’ have) to the Competition Commission? The advantage of moving first goes to SSE!
Working with industry
We need an infrastructure that allows our economy to flourish. This starts with creating jobs to build the infrastructure that will in turn will keep the wheels of commerce moving and allow businesses to trade from the output of the changes.
Charles said it was also up to government to help British companies to trade and secure opportunities elsewhere in the world.
Another day in paradise: what Phil Collins can teach us about business energy
What does Phil Collins have to do with business energy? James Constant will explain. Image via Wikimedia Commons
80s pop star Phil Collins once insisted that if Labour ever got into power (or more specifically if he was taxed too much) then he’d leave the country.
Labour did get into power, but he’d already gone. The one positive effect they could have on the British psyche and they couldn’t even get that right...we should have seen the signs.
Of much greater concern to the balance of good and evil (take a bow Red Ed) is the prospect of our manufacturing businesses facing financial ruin or doing a ‘Collins’ by jumping ship sharpish to avoid the ever increasing cost base facing us all.
Whilst everyone is suffering to some degree, those businesses which would be termed ‘energy intensive’ and which therefore spend a disproportionate amount on energy are seeing exponential impacts on their bottom line. Some are simply giving up because of the unsustainable nature of their business and the economy, others are facing an equally stark choice for UK plc: pack up all together or pack up and go abroad and remove any chance of future growth, prosperity or tax revenues for the British economy
The BBC reports that Steelite, a Staffordshire pottery business employing 650 people, has seen a 55% increase in the cost of gas in the last year, a hit straight to the bottom line and a major inflection point for future business decisions.
Similarly Thomas Swan, a chemicals business in Northumberland face bills of £1m a year, which even before the latest rises, were the equivalent of a months profit.
Helpfully Chris Huhne sees the plight, but doesn’t envisage a solution, beyond expecting that by 2020, the net effect of the government's energy and climate change policies will be to “reduce bills across the board”. The only problem is that this claim does not mean a reduction in bills compared to now, but reducing the bills compared to what they could be if “we did nothing”. Hmm, all aboard the train at Caveat Central.
Despite some very reasonable concerns about the bureaucratic and financial burden of proposed and feared green taxes, Mr Huhne has said "I don't accept that some of the stories we are hearing about green taxes are correct. There are some ludicrously inflated and exaggerated claims, I do not want to see even the most energy-intensive industries leave the UK, that would be madness. But am I writing blank cheques to anybody who says they've got a problem? No”
Perhaps government subsidy is not the way, but removing unnecessary burdens and calling people to account may make a difference to hard-pressed businesses (assuming they meet Red Ed’s sugar-sweet business barometer - how does it work again?) in hard-pressed locations employing hard pressed individuals to get this country growing again.
It’s not as if he hasn’t had a good steer on the right response from the Coalition’s Chancellor...
George Osbourne said this week: “A decade of environmental laws and regulations are piling costs on the energy bills of households and companies. Yes, climate change is a man-made disaster. Yes, we need international agreement to stop it. Yes, we must have investment in greener energy. But Britain makes up less than 2% of the world’s carbon emissions to China and America’s 40%. We’re not going to save the planet by putting our country out of business.”
Thank the lord for that
As a disclosure: we’ve contacted Davin Bates at Steelite to offer our services in getting him a more advantageous energy deal and to help him solve a critical issue for his business. Even if you don’t have such an intensive energy requirement there are still significant savings to be made. In one sense at least these larger businesses have the choice of relocating abroad, sadly we know that for smaller business the choice is much simpler: survive or die. So any £s saved makes a difference.
Another day in paradise
Can you trust your energy broker? Part II
Image by Pete Prodoehl via flickr
Let there be light!
Here is something you might not have known.
On September the 1st this year the EU ruled out the production of old fashioned 60W bulbs.
This decision was made to encourage people to use energy-saving light bulbs and to help reduce our carbon footprint.
Have you ever thought about the impact you could make on your business if you replaced your old bulbs with some fancy new ones?
uSwitch have written a nice article which helps shine some light on the different kinds of low energy lighting and the impact they have on how much you spend.
- 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