Many aspects can impact your business energy bills. Apart from your usage and who you choose as your energy supplier, there are factors such as the stock market, the weather, legislation enforced by the government, your annual usage, how many sites you have, the length of the contract, the list is never-ending.
As energy market professionals we are surprised to be increasingly recommending shorter-term contracts of late. This is generally in response to the growing uncertainty surrounding the UK energy markets’ future potential legislative costs. Environmental targets such as those agreed under the Paris Agreement, the UK’s Climate Change Act and the aim to be decarbonised by 2050 means subsequent risk premiums.
UK suppliers are charging these premiums for the pleasure of fixing costs and the resulting set price that the customer receives that goes with it. We believe that this fixed price stability; while offering certainty of cost, is not always offering value.
In response to this, we have been developing several long-term products and services designed to take ownership of setting and maintaining budgets for and on behalf of a client in a cost-effective manner, beyond simply accepting the longest fixed-term contract on the table, during a tender. Our Revolving Green Fund (an exclusive interest-free fund), virtual Power Purchase Agreement and our Platinum Protect (offering the benefits of economies of scale to smaller organisations).
The aim of this blog is to help customers be able to think critically about their energy costs; particularly during tender.
While the process for tendering a contract for our clients is a complicated one; at its core, the following information should be expected from a supplier bidding for your business…
- The total annual projected cost of the agreement
- What portion of the overall cost is likely to change over the course of the contract and why?
- The type of product and service being recommended and why (value-added)?
If these three components are successfully delivered, then a customer can make informed decisions when contracting.
We take steps to ensure this information is covered, provided and clear. By doing so, the chances of getting exposed to the difficulties of this process because less likely. Remaining vigilant to the fact that supplier offerings and supplier sales staff can make this more difficult to achieve, is important. Do not get distracted from the three objected information points.
We are constantly working to educate and support clients during tenders and ensure that customers do not get distracted from the core objective of the tender process; decisions that hold their value. We work to help customers understand energy, transportation, distribution, regulatory and risk (see previous article – Contract Durations, Potential Risk and Finding the ‘Contract Sweet Spot’) and always push for transparency from suppliers when forecasting.
All too often we hear about customers who have agreed one thing and been billed for another (bill validation article to come), in such an event, suppliers will often defer to the contract for clarity with the customer having little recourse to dispute. When you think about how this might be avoided as a result of correct tendering practice, it makes comparing suppliers as much about contracts as it is about costs; which is where the experience of an energy consultant can become invaluable.
Ensure your contract is in the hands of experienced and knowledgeable consultants, contact us here at Utility Team today; firstname.lastname@example.org / 02476 997 901
Article written by: James Rant, Business Development Manager