Energy Prices Are Out of Control

The rising cost of energy has long been a cause for concern, and with the recent announcement that the cap on domestic energy prices is expected to rise by over 70% and remain at a peak until at least 2024, there is no let-up in sight.

But let’s spare a thought for the small and medium enterprises (SMEs) in the UK. With no cap on commercial contracts, businesses are left vulnerable and completely unprotected as they yet again face an uncertain future.

So, what does the rise in fuel costs mean for the commercial market?

To put it into context, in 2020, gas was around £0.29 per therm. Fast forward to today and gas for October 2022 will be £5.28 per therm. That’s a staggering rise in excess of 1700%!

The True Cost

Although energy costs for businesses vary depending on the size of the business, the type of service being provided and number of employees, etc, it remains one of the largest expenses. It’s not surprising then that the current rise in costs is proving to be a significant challenge for SMEs.

Common Causes

There are several drivers for the upward market movement and the hike in costs. A harsh and long winter in 2020/21 left gas storage levels in Europe and Asia at their lowest point for years.

Planned maintenance of gas fields over ran and Nord Stream 1 – the pipeline channelling natural gas from Russia to Europe, looks like it won’t be running at full capacity any time soon. Issues with documentation for a repaired turbine and imposed sanctions for the EU and UK have been sited as the reasons for preventing maintenance from being completed at a compressor station. With only one of the six turbines in operation (three units are awaiting repairs and two are kept as back-ups), capacity is down to 20%.

On top of this, unfortunately, renewable energy sources (wind and solar) have delivered less than expected.

This culminated with the fact that the UK relies on imported power makes the market particularly vulnerable.

Add to this the trail of destruction that was left in the wake of the failed suppliers earlier in the year and the cost of smearing the fees across the remaining companies and it’s easy to understand how the energy market is in such turmoil.

What Does This Mean For Business?

The recent turmoil coupled with the lack of a price cap and the record high level cost of wholesale energy, has meant businesses have seen some staggering increases in the cost of their energy. This volatility has also led suppliers to increase their out of contract rates. This could see companies that have fallen out of contract facing potential increases of up to 400%.

How To Manage Your Spend

As a business, managing and reducing your energy spend has got to be top of the agenda. But tying yourself into a contract that might not be suitable for the needs of the business or switching energy providers can be a minefield to navigate, especially if you have multiple sites.

A quick and simple way to find the most effective and competitive contract to suit your needs is to go to an energy and procurement specialist. However, if you decide to go this route, it’s important to work with energy experts who have preferable been referred or recommended, have a good track record and who can also look after every aspect of your energy needs.

As an independent consultancy specialising in reducing business costs in essential expenditure, we have a team of trained specialists who work on our clients’ behalf to establish the most suitable and competitive deals in the marketplace.

If you are concerned about your energy costs and would like some advice, get in touch with us at: admin@businesssavingsexperts.co.uk