By Jason Smith
Energy prices are only going one way over the coming years, and that’s upwards. Although the Tories and Labour have both threatened energy pricing caps, this is unlikely to keep costs down. More than 40% of a typical energy bill is made up from the wholesale market price. That price is now on the increase after several years of stagnation.
Other costs on your bill are not going away either. The so-called “green taxes,” in the form of Climate Change Levies that help invest into renewable energy, supplier commitments for smart meters, certain residential schemes and feed-in-tariff subsidies, all add to the cost.
Even before your business starts to grow, you know you should be concentrating on keeping your gas and electricity bills to a minimum. As your business scales, it’s likely your energy costs will scale with you.
Keep your energy costs low
There are two areas that can help keep your energy costs under control. The first is to compare and switch tariffs each year, and the second is to implement energy efficiency measures as appropriate.
- Switching Tariffs
Approximately 40% of businesses seek out new contracts each year. Many of them switch rather than renew their contract because a wide choice of electricity suppliers offer competitive pricing. The trick is to switch your supplier actively each year.
Companies that have never switched are likely to be paying between 40-70% higher than the lowest price in the market because each renewal year would have had a price increase. In reality over the past years, prices have been relatively flat, with increases only in the past few months.
To mitigate any political and market fluctuations, you can now fix your business tariff for up to five years. Locking in long-term rates now keeps your unit price fixed on today’s competitive rates.
It might take five or 10 extrrra minutes to contact a broker or enter your details into a comparison service, but that could mean an instant 40% saving on your annual bill. The only investment is your time.
For even easier savings, paying by Direct Debit rather than on invoice will save an additional 6% on your bill each year.
- Energy Efficiency Measures
Research shows that 65% of businesses invest in energy efficiency schemes to lower consumption and help reduce carbon emissions.
That’s 50% higher than those that work on their unit rates as outlined above. The investment costs can also be much higher. It’s estimated by The Carbon Trust and other government organisations that most companies could save between 10-20% by implementing efficiency ideas.
These two combined can really make a difference on your business costs. Most of these techniques to cut consumption are not new, but they do have the greatest impact.
- Switch to low energy alternatives. Replacing light bulb with the new LED super-low-energy bulbs provides up to an 80% saving in usage. Using “A” rated appliances in the office or shop-floor could also give a similar reduction.
- Turn off electronics when not in use. Ensuring all heating, lighting, cooling systems, computers and appliances are switched completely off during the night and weekends not only reduces waste but also sustains the working life of each device.
- Create internal programs with management buy-in. Awareness is key to any initiative. Any potential changes need to be fully supported by senior management—otherwise, nothing gets done.
It may seem like a dull subject, but energy is a cost that can be dramatically reduced. No one likes paying over the odds for anything, but a 10-minute conversation could save you thousands of pounds. Environmental awareness and conservation are not only initiatives but are here to stay for any change in government policy. Having a low carbon footprint (or even becoming carbon-neutral) saves your business money and lowers your impact on the environment.
Jason Smith is the Operations Manager of Businesselectricityprices.org.uk