Choosing an energy supplier in the current economic climate can be a confusing and often frustrating process for the modern business and one which can prove costly if the wrong choice is made, writes Phil Monkman of Solis Consulting.
Not only is the industry rife with jargon and misleading terms but there are now so many different suppliers, tariffs and contract terms available that it has become extremely difficult to determine which supplier will provide the best value for money for an individual business.
Different considerations apply to existing businesses, looking to save on overhead cost, expanding businesses which may be adding to their property portfolio, and start up businesses.
One of the most costly mistakes a business can make is in not acting quickly to agree a contract with a supplier as soon as they take on a property.
Standard practice in the UK is for both gas and electricity suppliers to charge an out of contract or โdeemedโ rate to any new commercial customer in lieu of them agreeing a contract rate. These out of contract rates vary widely between suppliers but can be as much as 60 per cent higher than a standard contracted tariff. The customer is not always aware of this fact, which means if they delay by several weeks, or even months, before they decide to appoint a supplier, then by the time the new contract rate takes effect they will already owe a significant debt due to this deemed rate tariff.
In some cases, if the new contract is agreed with the existing supplier, then it may be possible to backdate the agreed rates to the point the business moved into the premises, if however, the supply is to be moved to a different company, this facility will be lost and the deemed bill will stand.
Even when a business is established there are still areas that can cause problems if not properly managed. It is common practice within the UK for suppliers to bill consumers on an estimated meter reading, essentially a system-generated โguessโ which can itself be based on historically estimated reads and so bear no resemblance at all to the actual readings shown on the meter. Clearly, if this is allowed to continue for any length of time, the consumer can end up owing the supplier hundreds if not thousands of pounds due to underestimated billing.
Over estimated bills can be equally as detrimental to the business, as making unnecessary overpayments to a utility supplier will, not only have a negative affect on the cash flow of the business, but more importantly will affect bottom line profitability if not identified and prevented.
To combat the problem of estimated billing, many suppliers are now replacing their old meters with โSmartโ Meters. Smart meters communicate directly with the supplier either via standard telephone lines or through an ISDN line which ensures that suppliers are always in possession of accurate readings and should never need to resort to estimated billing.
After employing a consultant to look at their energy costs the Habitat Furniture Company introduced Smart meters to all their sites, and were able to achieve savings of over 7 per cent on their utility bills.
During the course of a utility contract, as long as the site is being billed correctly on the agreed contract rate and in line with its actual consumption, there is little that can be done to reduce costs in terms of metering and unit rates until the contract renewal date approaches.
Renewal processes are another potential source of frustration and confusion and must be handled effectively to prevent the implementation of โrollover ratesโ. Each supplier in the UK has within the terms of their contracts details of the notice period a consumer must give in order to be released from their current contract when it expires and so be allowed to move elsewhere if desired. Failure to give this notification can result in the existing supplier rolling the contract over for a further term on much higher rates than those currently in place. Unfortunately many consumers are unaware of their contract end dates and even though the supplier is obliged to send out renewal notifications detailing the date and proposed renewal rates, many consumers simply do not act quickly enough and so end up paying inflated rates for their utilities.
With the greater focus on costs now more than ever, businesses are looking at every line to see where savings can be made. One of the other issues is the difficulty in budgeting for energy in a fluctuating commodity market, particularly if there is a significant spend on fuel. It is possible to save money by fixing the price of all ones energy spend, but firms also want to take advantage if there is a sudden drop in price.
More firms are now seeking the services of experts to help advise them on the best route to take. One such firm is the Solis Consulting Group who offer free advice to businesses from the small single site company up to large national multi site corporations. Typical savings have been around 18 per cent.
Kay Khan who is the Chief Executive of Solis says โdue to the increasing complexity of tariffs and suppliers we have found an overspend in almost all the companies that we have visited. We have a team of professionals who each have more than 20 years experience in the industry, and the demand to tap into our services is increasing at a tremendous rateโ.
In times where every penny is important to us this is an area we cannot afford to overlook. Visit –
