Price Caps in the Commercial Energy Sector?
Martin Lewis has done a wonderful job of keeping the UK updated when it comes to consumer advice regarding the price-caps, which exist to serve the domestic / home energy market.
The price-caps in the domestic energy sector are ultimately designed to protect customers and especially the vulnerable when it comes to tariffs, product pricing and fixed term contract options.
In the domestic world, the price cap limits how much a supplier can charge a customer for their energy rates.
One of the big issues Focus Energy are coming across, is that domestic pricing caps will ultimately limit the profitability the suppliers can make which will then put further pressure on the suppliers to increase business tariff costs even further! This is all happening at a time when Business electricity & gas prices had already hit record highs in the UK.
There are NO price-caps in the commercial energy sector.
What does this mean for you?
The UK Energy Market – Our reliance on Europe
As most of us now know, the UK is heavily reliant on imported Gas. The map below gives a very simplified overview of how the UK imports gas and relies on additional imported Liquified Natural Gas (LNG) to boost stocks.
To make matters worse, the UK has had a rich history of gas production in the North Sea which had always helped to reduce our reliance on the level of imports we needed, however, with the expense of maintaining the production and storage facilities, we have seen some facilities completely shutdown. The Centrica-owned Rough Storage Facility just off the Yorkshire Coast, was a damming example of this back in 2017.
(The North Sea Gas is owned by a private company and therefore does not solely supply the UK but takes orders and contracts from many European countries).
With almost 10% being generated via imported electricity and over 21% of our electricity being via gas-production, it’s easy to see just how delicately poised the national grid is at present – in short, the UK doesn’t have any real methodology to protect itself against rising fuel costs.
Allowing your organisation to fall onto out-of-contract or variable rates in the current climate simply isn’t an option.
Suppliers Exiting the Market
In 2021, Focus Energy saw 26 domestic energy suppliers exit the energy market and cease trading. These include names such as Bristol Energy, Bulb Energy (placed into special administration) and Toto Energy. The sad news regarding Bulb Energy sent shockwaves around the energy industry.
Within the business side of the energy industry, the very popular Contract Natural Gas (CNG) ceased trading at a time when they had built up a fantastic reputation and a business which held in excess of 41,000 commercial energy customers!
The removal of these suppliers from the UK Energy market is a real reminder of just how volatile prices are at a wholesale level and also underpins the challenges suppliers are facing at present.
Focus Energy – Where can they add value?
Focus Energy are here to provide unbiased advice which allows you to make informed decisions regarding the procurement of your energy services and management of non commodity-costs.