Energy forecasts: attention all buyers!
Wholesale electricity prices are increasing and energy companies are warning 5-10% rises over the next 12 months. This is partially fuelled by the fall in the Sterling.
However this isn’t the only cost that is causing predicted increases; business advisers are warning companies that they could face increases of up to 30% on the total electricity cost from next year due to non-commodity costs.
What are non-commodity costs (NCCs) for energy?
These are obligatory charges, levies, and taxes that are included within the price of the electricity that the energy supplier has to add onto the bill. These costs include things like:
- Climate Change Levy (CCL)
- The Renewables Obligation (RO)
- Feed in Tarriff (FiT)
- Capacity Market
In 2015/16, NCCs accounted for around 50% of a customer’s bill while by 2020, it is predicted that this could increase to around two-thirds of an electricity bill.
Changes could mean increasing cost
The Common Distribution Charging Methodology (CDCM) is due to change as soon as April 2018. The CDCM determines how the distribution charges are calculated and this also forms part of an electricity bill. Currently the charge is generated based on consumption within the peak red time band. For most areas, this will change so that the rates are likely to fall for peak time (red) and rise for off peak (green) which will lead to a net rise overall for the majority of half hourly electricity customers.
Cushioning the blow
It is a good time to review and invest in energy efficiency measures to lessen the impact of the price rises. If your business has implemented demand management measure to reduce peak time consumption, you may need to re-evaluate the benefits to take into account the changes in CDCM.
In the meantime, we advise businesses to investigate new ways of working to improve energy efficiency and invest in new energy efficient equipment.
Interested? Valpak work with third party energy experts who can provide a full range of energy management services. We also work in partnership with energy experts to provide energy procurement services; the transparent energy auction process provides a free and easy way to manage your energy contract and get the best deal for your company. Typically saving around 10% on renewal contracts.
During our webinar on the afternoon of 22 March, we will look at the current CRC and ESOS legislation as well as look at some of the changes ahead and opportunities for improving energy efficiency in more detail.
While looking at energy consumption, your business may want to consider water supply as well. Water deregulation is happening this year, this means that from the 1 April 2017, the water market for non-domestic customers will be opened up and there will be freedom to choose a water supplier (not including Wales and Northern Ireland). So, just like the energy market, you will be able to choose your business’s water supplier and wastewater service and potentially save money.
If you’re unable to attend our webinar on 22 March, please view our other events or contact me at Liz.Minshall@valpak.co.uk or on 03450 682572