Despite significant progress with vaccine rollout and lockdown easing, in 2021 the coronavirus pandemic remains very much part of our lives, globally and nationally. However, with the prospect of office-based employees soon returning, it might be time to start thinking about how your business energy needs will have changed over the last year. You may also want to start thinking about how to best manage your energy in a post-COVID world.
Unexpected costs
Unfortunately, it’s likely that the industries hardest hit from the pandemic will find it increasingly difficult to secure and manage energy contracts in the immediate future. Sectors such as retail, leisure, hospitality, and travel have suffered a great deal because of continual lockdowns and border closures. Many hard-hit industries have had to resort to downsizing office space, with the little that’s left having barely been occupied for the last 18 months.
With other things to think about, managing energy contracts and rates will have likely slipped down the priority list. It’s possible that this could have resulted in businesses unknowingly falling short on minimum usage requirements, or out of contact rates kicking in if renewals have not been managed. Some suppliers have been waiving these charges due to the exceptional circumstances that we find ourselves in, others have been less generous.
New contracts
Like other organisations who deal with credit, many energy companies are currently assessing the viability of their customer base in terms of risk. This in turn is making it difficult for small business to obtain credit lines. This can mean that they are asked to pay a security deposit before being offered a contract. The result is less choice for new businesses and consequently, higher rates.
This will also impact established businesses who have let their contracts lapse or who are looking to switch providers.
Energy costs
Crucially, the price of energy per Kwh has increased, a trend that looks set to continue for foreseeable future. A survey by the Department for Business, Energy and Industrial Strategy (BEIS) found that, no matter their size, businesses paid on average 15 ppKwh for electricity in Q4 2020. That’s nearly 11% more than the previous quarter.
To understand why electricity costs continue to rise, we need to consider commodity and non-commodity costs. Non-commodity costs include things like the use of networks, government policies and levies, all of which have spiralled upwards since the start of the pandemic. Commodity, or wholesale, costs have also continued to increase in the UK. A large amount of UK electricity is generated from gas, which has been in short supply since a cold snap in Asia increased demand and reduced supplies in January 2021. There are multiple other variables that can affect energy wholesale prices including international conflict, trade, politics and the increasing cost of fossil fuel extraction.
Managing your business’ energy costs
There are currently no signs that energy price increases are slowing down. If you are looking to control energy costs in your business, you can take basic measures to improve efficiency including installing a smart meter so that you have a better handle on your energy costs.
Speak to one of our energy brokers and find out how Eneco can help manage your energy contracts and ensure that you are paying the best possible market price, including reasonable minimal usage agreements.
If you’re a new business, we can help set your new contracts up, starting as you mean to go on. We will manage your contract renewals so there’s no need to worry about out of contract rates.
