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Become a power player
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Hopefully you're screwing your diesel supplier down to the last tenth of a penny, but are you quite you as ruthless when it comes to energy for your buildings?
Words: Brian Collett / Images: Shutterstock Energy consumption has become a huge item on the expenses list, which makes the need to find good utilities deals more pressing than ever. Yet most businesses stay with their supplier year after year, accepting price hikes without question, and never considering alternatives, While businesses continue to spend more than they need to, utilities consultants warn of the pitfalls in contracts and annual renewals.
The managing director of makeitcheapercom. Jonathan Elliott, laments: "Only about 5% to 10% of small and medium-sized enterprises are savvy. Utilities are going to become an increasing cost as prices rise, yet they can be cut with a little effort.
"There is no reward for loyalty. You wouldn't buy petrol from a garage if you knew it was available at a third of the price down the road. Amazingly, that doesn't come into question for the vast majority of businesses when they are buying their energy."
What's more, adds Colin Beake, the managing director of Utility Options, the importance of picking and choosing is greater considering there is less competition now.
Call in the consultants
The causes of this inertia are understandable. Smaller traders often cannot spare the time to read small print and shop around, and a few are even lethargic about it all. All the more reason, then, to hand over the searching and negotiating to the experts. say consultants.
When handling a customer's request for a good deal, consultants will first study the contract. All contracts have a notice period before which a decision to switch has to be taken. Some suppliers impose a 90-day notice condition.
Unless the consumer makes contact with the supplier in time, the contract. with its higher price, is renewed. This type of contract, known as an 'evergreen', is lethal, says Beake. "In particular, the '90-day notice people' are the dirty tricks brigade."
Even large businesses with dedicated purchasing officers can benefit from consultancies, says Beake. "They can't get as good a price as we can. It's like driving in the dark — they don't know where the potholes are."
The differences between suppliers are highlighted by Jeff Wealands, the technical director of Utility Auditing. Last year, the top rate was 72% higher than the bottom. "If suppliers can extract more profit out of the customer, they will," he says. "But we can help. We do £250m worth of contracts every year. We have £40m worth of business with npower alone, so we have the means to barter."
Another hopeful sign is that 60% of British Gas business is done through consultancies. "This forces them to be competitive," says Wealands, "and a consultancy can put forward a clear case."
Andre Simpkin, operations director of the CostMaster consultancy, sees "the chips always stacked in the suppliers' favour". In spite of this, CostMaster reports 19% average savings for its customers. Partly, says Simpkin, this is because a supplier reduces prices when it knows a broker or agency is negotiating.
Managing your utilities
One option is for a longer contract, possibly a three-year deal. which allows a customer to budget for some time.
Elliott. however, has recently dealt with customers who entered into five-year contracts and were paying "staggeringly low prices" in the fifth year. In such cases, the renewal offer can deliver a shock by doubling the price at least.
Richard George. managing director of the Saveonyourbills consultancy, says customers are so vulnerable that they should send all correspondence to their suppliers by recorded or registered delivery and record all conversations with them.
Elliott warns that renewal notices are often cunningly disguised so the customer will not immediately realise the price is being jacked up.
To produce more savings, some consultancies bolt on management services, which enable customers to make best use of their energy.
Birmingham Chamber of Commerce, which now has a one-stop utilities shop offering purchasing and environmental guidance, estimates that, on average, businesses waste up to 20% of their energy.
CostMaster provides a management service, which includes checking that received invoices are correct.
Some business may prefer to consult bodies such as Energywatch, which advises on snags to look out for and grades suppliers according to the number of complaints it receives about them, or the Carbon Trust, which has information on tax concessions available for buying energy-efficient equipment.
Organisations for small businesses are constantly dealing with enquiries about the cost of electricity and gas, and some consumers may choose to consult them first. The 210,000-strong Federation of Small Businesses offers general advice, and the Forum of Private Business, which has 26,000 members, gives a similar service and refers price inquiries to Utility Options. •