It is well known how volatile the energy market is with fluctuating gas and electricity prices on a daily basis. Successful energy procurement can have a significant impact on a business and can really help to minimise costs and consolidate contracts across multiple sites. It is also a crucial step to working towards accurate company budgeting.
There are many business energy suppliers in the market all offering a variety of pricing structures and tariffs. This can present a daunting process for many businesses and below we have provided a few tips to help you develop a robust strategy.
1. Give yourself plenty of time
Unless you have a crystal ball, it is impossible for anyone to predict the best time of year to procure their business energy contract but it is a good idea to try and find time to review the wholesale market on a monthly or quarterly basis so you can make an educated decision on when to secure your next contract. Most energy suppliers can now price up to 12 months in advance so in your final year of your contract, you should start reviewing the market on a regular basis. Don't reduce your options by waiting until the final months of your contract.
2. Prepare your data
Before tendering to the suppliers, it is important for you to have access to your supply details including consumption history. Consider your usage breakdown across night and day as well as evening and weekend if applicable. Look to see if you can pull multiple sites into the same energy tender and if you have a half hourly electric supply, ensure you request your half hourly data from your current supplier. You should also confirm the Agreed Capacity.
3. Fixed or Flexible contracts
Fixed energy contracts offer financial security and they are ideal for accurate budgeting. They also require relatively small ongoing management. However, you may also want to consider flexible energy contracts, which provide you with a method of keeping on top of market movements and removes the risk of fixing your whole contract when the wholesale rates are high. It allows you to purchase energy in smaller amounts throughout the contract enabling you take advantage of drops in the market and purchase energy when the wholesale market is lower.
4. Compare 'like for like' prices
Each business energy supplier presents their prices in different ways. Some suppliers include elements of the pricing that others exclude and some estimate various parts of a quote. It's vital that you have a clear understanding of each quote and ask the suppliers to clarify points with you that you are unsure of. A couple of examples to look out for here are Feed In Tariff (FIT) and Targeted Charging Review (TCR), which is a big topic within the industry.
5. Weigh up renewable options
Many of the business energy suppliers are now offering renewable energy prices and it's another big talking point in the industry. Ensure you ask the suppliers to provide you with their green tariffs. The renewable prices are becoming more and more competitive and there are now a few suppliers who do not add on a premium for their green prices.
6. Be aware of supplier clauses
Before signing on the dotted line, ensure you are clear on the potential claw backs that will be detailed in their terms. There is increasing pressure on business energy suppliers in a highly competitive market and common clauses such as "take of pay" also known as volume tolerance are now being activated by suppliers. TCR as mentioned above is also a very important consideration when finalising your contract.
7. Consider energy efficient technology and KVA reviews
As a separate exercise to the energy tender, you may consider specific energy efficient technology to help drive down your consumption, costs and carbon production. It is well worth having a look at the ROI's for several initiatives to see what works best for your business. Some examples to consider are listed below:
If your company has limited resources to manage any of the points above in-house, then do reach out to us for a no obligation conversation about how we can act as an extension to your business and one point of contact for all your utilities requirements. Contact our experts on 01625 919854 or email info@clearbridgeconsultancy.co.uk.
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