Energy procurement companies are constantly asked for a full evaluation of the market as people search for better energy prices – in today’s business environment that’s perfectly understandable.
It is now quite commonplace for a single energy user to ask a number of brokers to simultaneously use their energy data to approach the same Big Six suppliers. This also sounds sensible – if they offer to do the legwork on behalf of your business, why not let them?
You’d expect these final offers to be broadly similar, barring specific requests for extra services an energy user might throw in. The stark reality is however very different.
An honest mistake?
Experience tells me businesses are increasingly unable to make fair and meaningful comparisons because the system is too complex and the industry suffers from a lack of transparency.
Here’s a simple example. Company X is entitled to a Climate Change Levy rebate. As is the current fashion they are advised to switch to a green contract that will “save them money” as well as the environment. Instead, they lose their rebate and end up paying far more for their energy!
Could this be an honest mistake, a case of incompetence on the part of the advisor or in certain cases perhaps something a little more sinister? Charges of ‘gaming techniques’ in the energy industry is nothing new, I hear you cry, it probably happens in every industry, you might say – but by trusted and valued consultancies? That sounds more like a trick from door to door salespeople.
What’s the solution?
Complex markets inherently carry the continual risk of error – and if that’s the case then perhaps the role of brokers and suppliers is to make things clearer, so the client can make an informed choice that’s also the right choice.
Simpler energy pricing has again been called for by both Ofgem and EDF in recent months and I believe this is essential to eliminating errors and bad decision-making. But until regulation is brought in, responsibility for any decisions rests firmly with the end user.
The important thing is to never stop asking questions, businesses need to be encouraged to question their brokers.
As for what the realistic percentage of your total energy cost will be, check if these charges count on your bill and you can’t fail: Renewables Obligation (11%), Distribution Charges & Losses (11%), Climate Change Levy or Green Uplift Charges (6%), Transmission Charges & Losses (4%), other charges such as AAHEDC or BSUOS (3%) and the Feed-in Tariff (3%).
If you fail to check and none of these surcharges are mentioned or included in a price, then any resulting ‘offers’ are obviously not going to be realistic. Unfortunately the customer has only themselves to blame.
Dr Andy Higgins works at energy analysis and procurement firm Trident Utilities.