The Reasons Why Electricity Costs Are Increasing RapidlyMember News
Part of our role as a Made In The Midlands Patron is to add value to the manufacturing members and share knowledge of the energy sector to help members make better decisions and have a greater understanding of overall energy costs and budgets.
This is a very short snap shot which we thought worthwhile sharing as many members coming out of supply contracts throughout the remainder of the year are likely to see significant electricity increases versus current contract costs. We are frequently seeing upwards of 10% increases which members need to be aware of as soon as possible to not only take action but budget for the increase too.
So what's driving the increase...?
In short, it's all of the 3rd party and non-commodity costs which make up such a large proportion of the invoice. Examples include; Distribution costs, transmission costs, system balancing, renewable obligations, climate change levy to name but a few.
As a broad overview in 14/15 the average cost of these non-commodity costs were 4p/kWh where as in 17/18 it's 5.5p/kWh. Therefore if you're coming out of a 2 or 3 year deal there's every chance you're automatically seeing an immediate increase of 1.5p/kWh.
By 21/22 these costs are forecast to make up 7.5p/kWh of the total cost.
So what can you do to mitigate this...?
Good, sound advice is required where we can provide transparent analysis of your actual costs and forecasts against actual data. Often manufacturers are hoodwinked into thinking an energy contract is much better than it is by a broker manipulating the figures. We often see brokers leaving some or all of the non-commodity costs out when representing an offer. Businesses sign a supply contract then when it goes live are dumbfounded by all of the additional charges suddenly appearing.
The other key aspect is to reduce these non-commodity costs where appropriate. A good example of this is addressing the tax paid within the energy invoices. Certain manufacturing sectors are able to claim relief in this area.
What to do next...?
1st October is a common contract end date. If you're reading this and have yet to commit to a supply contract please call us, we're more than happy to have a conversation and help if we can.
Allow us the opportunity of ensuring you don't get stung and are receiving accurate and timely advice.
For those with 2018 energy renewals the sooner you begin to build a picture of your actual circumstances and arrangements the better.
We currently work with 74 members we try to have as many conversations as possible with businesses but if you contact us it's a lot easier!
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