Energy – a Happy New Year or a bad hangover from 2021?

7th January 2022

Steve Wilson from Focus Business Consulting writes about the volatile energy market and what options are available if your energy provider goes out of business.

The last quarter of 2021 saw some unprecedented events in the energy industry – mainly in relation to supply concerns and un-planned outages which dramatically spiked prices and resulted in 32 energy suppliers going out of business within the space of 7 weeks. These extreme price hikes as a volatile market reacted coupled with OFGEM being involved to re-allocate customers to suppliers of last resort (referred to as “Solars” within the industry) created and unusual situation where some suppliers completely withdrew from the market temporarily as they did not wish to take on any new business until the market began to stabilise. This, in turn, limited consumer’s choice of suppliers and products. By way of example in the height of the chaos I spoke to a business who had been quoted a renewal price for their electricity and gas which was 86% higher than the previous 12 months. Thankfully I was able to help them mitigate this increase after fully evaluating their premises, usage, and options.

What to do if your supplier goes out of business

If your supplier ceases to trade, then you may get a warning letter from them or perhaps an introductory letter from a new supplier advising you of your former supplier’s demise and advising that OFGEM has passed your business to them as a supplier of last resort.

This is your call to action – DO NOT simply accept this transfer for the following reasons:

  • You are no longer in a contract
  • The new supplier will not honour the rate you agreed with your previous supplier
  • You will often pay prejudicial standard tariff rates
  • You do NOT have to stay with the allocated supplier
  • USE this limited opportunity of time to speak to an energy broker sand ask them to look at the whole of the market and find you a fresh supplier and contract.

What happens to energy prices in 2022 will largely depend on many of the same issues coupled with how cold a winter we continue to have. Given what has happened it is unsurprising that business owners are reluctant to tie-in to a fixed longer-term contract when prices are so high. This, understandably, is a great concern for care sector businesses who are typically larger users of energy – particularly where they have multi-site premises or handle their laundry in-house.

They key to making savings in your future expenditure is in understanding your usage – if you can MEASURE what you use then you (or a competent broker) can then analyse your usages and suggest where/how improvements may be made.

This is where the services of a good broker are essential. Finding an energy consultant who can help you make savings or, at worst, mitigate the increase in your expenditure is essential. It is important to remember that there is no cheap, poor quality or sub-standard electricity or gas – it’s the same product coming through the same wires and pipes – the only difference is in how much you’ll pay for it.

The following points are worth noting and may well help you to save money going forwards:

  • Brokers are often able to undercut energy your existing supplier’s renewal prices.
  • Brokers can look at the whole of the market to help you source the best available contract(s) for your business.
  • Energy brokers all receive the same prices from suppliers so the main difference in their prices is how much margin they add on to your kWh rate. A larger broker with hundreds of staff will have significantly more overhead and thus may potentially not be as competitive as a smaller broker who can provide the same services, often more personally.
  • Even if you have an existing broker, it is prudent to get an alternative quote to see how competitive, or complacent, they are in sourcing your energy.

Having attended several care sector conferences (and my being a preferred supplier to Scottish Care) and having the opportunity to speak to a number of care sector businesses from single premises to 50+ across the UK it is apparent that the topic of energy usage, prices and the resultant impact this overhead has on their businesses is now more relevant than ever. The effective measurement of your usage and obtaining quality advice and options is now more relevant than ever.

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