With Britain still gripped by the chilly winter weather, most people have the heating up high to keep their homes and workplaces warm. But business owners and householders alike are thinking twice about their energy use, since electricity and gas bills have soared over the last five years. So great have energy costs become for many SMEs that some fear the extra expenditure is hindering their growth and even putting their businesses at risk.
All of the big six energy firms – British Gas, EDF Energy, npower, E.ON, Scottish Power, and SSE – have hiked their prices in recent months. Almost 55 per cent of UK small businesses said that the price of utilities was their greatest rising business cost in the last quarter of 2013, according to the Federation of Small Businesses (FSB). Some have expressed fear that this will prevent growth this year, since many say they’re unable to pass on the added costs to customers.
Some battles have been won on behalf of struggling SMEs. The FSB has campaigned successfully to bring about the end of rollover contracts, which locked small firms into utility agreements that could run for up to four years. The membership body estimates that more than four million firms will benefit from the change. But business groups were disappointed that while the Chancellor, George Osborne, cut an average £50 from domestic fuel bills in his recent Autumn Statement, he failed to address the problem caused by high energy prices for SMEs. EEF, the manufacturers’ organisation, points out that energy-intensive companies are seeing their margins being squeezed by rising energy costs, which, in turn, affects investment.
Experts suggest SMEs shop around for the best deal or a new supplier, and price comparison sites such as uSwitchforBusiness and MakeItCheaper are a good place to start. Make sure you know your contract renewal dates to be prepared as the end of your contract term approaches. And don’t be swayed by attractive introductory offers – check the tariff across the life of a contract to avoid a nasty shock when initial sweeteners expire. SMEs could also do well to look beyond the big name suppliers and to consider one of the smaller players, such as OVO Energy, Ecotricity, or Good Energy. These enterprising entrants to the energy market are offering some of the most competitive deals around.
But the fact remains that comparing the vast range of energy tariffs is confusing and time-consuming for even the most informed of consumers. Domestic customers have benefitted from recent pressure applied by the Government to make tariffs more transparent, but the energy industry has yet to make comparisons similarly easy to search for business owners.
There are some steps that SMEs can take to reduce their electricity and gas consumption, as well as their overall fuel costs:
- Accurately measure how much energy you use as a business to be sure that your bills are based on actual use rather than estimates. All SMEs are scheduled to be installed with a smart meter by 2020, units that accurately track consumption and allow for automatic readings without the need for an on-site meter reader. If your business doesn’t already have a smart meter, contact your energy supplier, which should agree to fit a new meter free of charge.
- Install a high efficiency condensing boiler to minimise energy waste. Consumer group Which estimates that the new generation of boilers convert gas to heat with wastage of less than ten per cent, as compared with the 40 per cent wasted by older boilers. This could equate to up to a third off gas bills for users.
- Lighting, office equipment and air conditioning systems should all be checked to ensure that they run as cost effectively – and environmentally soundly – as possible. Low energy light bulbs, officially known as light-emitting diodes (LEDs), can save up to three-quarters of the energy used by a conventional light bulb. Using high efficiency strip lighting or putting lights on timers or sensors could also save SMEs a lot of money over the average year. When buying new computers, photocopiers and other electronic equipment check their energy efficiency rating, and turn items off when they’re not in use, rather than leaving them on standby. The Carbon Trust also estimates that replacing old-fashioned refrigeration and air conditioning systems with modern, energy friendly models can save between 15 and 20 per cent of running costs.
- SMEs might also benefit from the Government’s Green Deal, which sends an assessor to a business to determine what energy saving improvements may be made, and then offers a loan to cover the cost of the changes.
- Educate your staff. The Carbon Trust offers advice on how to encourage employees to save energy in the day-to-day running of your business.
Many businesses complain that they haven’t the time to research and make changes to their energy supply. But they should be in no doubt that they’re missing out on significant savings if so. E.ON estimates that manufacturers can cut bills by 26 per cent by employing more energy efficient practices; pubs, clubs and restaurants could save 34 per cent; and retailers could be better off by as much as 35 per cent.
If your complaint is with your energy supplier itself, be aware that you have many of the same rights as an ordinary consumer if you’re a micro-business, which means that you could use regulator Ofgem’s complaints handling process. Any SME that has evidence of being treated unfairly by their energy firm can contact the Energy Ombudsman and could be eligible for compensation. Further help may also be available through the watchdog Consumer Futures.
Most businesses are resigned to the fact that their gas and electricity bills will remain high, but many could be doing more to save themselves money and to run their operation more energy efficiently. Consider seriously where you might make improvements and cut your consumption. Take advantage of any green initiatives that may help your company be more environmentally responsible and cost effective. And tackle the mass of tariffs out there to make sure that you have the best deal for your enterprise and energy use. Savings can be made, staff behaviour can be changed – and your SME could be greener as a result.
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