What is the right approach for buying energy?
Competitive prices are essential for business to thrive but all too often choosing an energy contract is driven by what appears to be the cheapest short term deal. Does this approach suit your business or should you take a wider view to obtain long term value?
The UK energy environment is complex and generates significant media commentary. Energy prices are a favourite battle ground for politicians and environmental concerns can impact on decisions. International economics and world events can affect prices and businesses need to decide on how much time and effort they invest in securing energy supply. Where to start?
A natural course of action is to secure a handful of quotes through gas and electricity brokers or price comparison sources and agree to fix your price with the cheapest offer. The obvious benefit is that you have price certainty for a definite period as well as the best prices available to you on that day. Should you have contracted for one, three or even 5 years?
What are the alternatives?
With the growing complexity in the energy industry, customers must become more demanding of suppliers to give them the contract options and information they need to manage their purchasing requirements. Fixed pricing may remain the desirable option for many but for what duration? At a time when energy prices seem to move only one way, whether due to wholesale energy markets or wholesale distribution costs, would one or two year fixed pricing really give you the protection you need? There are a range of flexible pricing products available which give the customer flexibility to fix the commodity part of their price when it suits them. Flexibility in the duration of the contract should be sought to enable the customer to buy as far ahead as the markets exist when prices are in your target range. Total Gas & Power offer a ‘Fix for Five' option which gives you the opportunity to fix your energy prices at the beginning of your contract for anything from three months up to five years. Prices are based on how much gas you are expected to use for each month during your contract. Notable benefits aside from fixed rates to make budgeting easier are direct debit options enabling you to save money, no need for a dedicated energy manager and a price that will be agreed per unit of energy (p/k/wh).
What should you do?
You need to decide what is important to your organisation. Is cost the most important objective? Consider how much time you will have to manage your energy contract. Look at how you will stay informed about the energy market, there are a number of daily publications or even online information sources available.
What about energy efficiency?
Firstly you need to know when, where and how to use your energy. Smart meters are now routinely available and you should insist on these being a part of your energy supply package. The benefits are accurate billing by the removal of estimated reads and real-time data to help you to target inefficiency and monitor cost recovery.
The right approach for you?
Yes, making the right energy supply decision for your business can appear daunting but it doesn't need to be. Products can be as simple or sophisticated as you require. Remember, it is in the best interests of a responsible supplier to develop a long term relationship with you so you work with them to get a package that addresses the particular needs of your business.
Post Date: September 11th, 2014