HOW many practice owners or managers or company bosses pay enough attention to their electricity and gas bills?
Energy consumption has grown into a huge item on the expenses list, so that today the need to find good utilities deals is more urgent than ever. Yet most businesses stay with their supplier year after year, accepting price hikes without question and never considering alternatives.
Business continues to spend more than it needs to while the utilities consultants continually warn of the pitfalls in contracts and annual renewals.
Jonathan Elliott, managing director of Makeitcheaper.com, 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.”
Mr Elliott firmly tells those who are reluctant to change suppliers: “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 buying their energy.”
What is more, the importance of picking and choosing is greater now as there is less competition, says Colin Beake, managing director of Utility Options.
Inertia understandable
The causes of the inertia are understandable, of course. Smaller businesses often cannot afford the time to read small print and shop around, and a few are lethargic about the whole thing.
All the more reason, say the consultancies, to hand over the searching and negotiating to the experts.
When handling a customer’s request for a good deal the consultants first scrutinise the contract. All contracts have a notice period before whch a decision to switch has to be taken. Some suppliers, including British Gas, impose a 90-day notice condition. All must send the customer a letter stating the notice period is approaching – and some letters do not arrive.
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 Mr Beake. “In particular, the 90-day notice people are the dirty tricks brigade.”
A dirty trick adopted by some suppliers, he says, is to object to a transfer on the grounds that the account is in debt. However, the debt is normally an amount that has not been billed, so the customer has had no opportunity to pay. This causes a delay, during which the customer may have to pay a premium rate.
The consultant usually cancels an existing contract in good time when he has the relevant information. At the same time he seeks out a better deal, and one advantage of moving to a new supplier is that first-time contracts often give the best terms.
Colin Beake emphasises that even large businesses with dedicated purchasing officers can benefit from consultancies. “They can’t get as good a price as we can,” he says. “It’s like driving in the dark. They don’t know where the potholes are.”
Care homes are classic victims, says Mr Beake. They should be on a day, night, evening and weekend rate, but many are placed on the expensive tariff for 24 hours every day.
He tells of a care home set up in two semi-detached houses. The home had two meters, so there were two standing charges, and both were on the expensive day rate.
The differences between suppliers are highlighted by Jeff Wealands, technical director of Utility Auditing. Last year the top rate was 72% higher than the bottom figure. “If the suppliers can extract more profit out of the customer they will do so,” he says. “But we can help. We do £250 million worth of contracts every year. We have £40 million 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 Mr Wealands, “and a consultancy can put forward a clear case.”
André Simpkin, operations director of the CostMaster consultancy, sees “the chips always stacked in the suppliers’ favour”. In spite of this, CostMaster reports saving 19% on average for its customers. Partly, he says, this is because a supplier reduces prices when it knows that a broker or agency is negotiating.
An option being preferred is a longer contract, possibly a three-year deal, which at least allows a customer to budget for some time. It could even save money if prices continue to soar, should external factors such as the oil price and demand from developing economies change significantly. “It’s a little like crystal ball gazing,” he says.
Renewal shock
Jonathan Elliott 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 at least doubling the price.
The injustice of utilities prices has so infuriated Richard George, managing director of the Saveonyourbills consultancy, that he is compiling a dossier of worst examples in collaboration with energywatch, the information service funded by the government.
Mr George says customers are so vulnerable that they should send all correspondence to their suppliers by recorded or registered delivery and tape all conversations with them. He warns: “British Gas is one of the more naughty suppliers. It has denied receiving some notifications and usually offers a high price on renewal, often almost double the rate.”
Mr Elliott adds that renewal notices are often cunningly disguised so that the customer does not immediately realise the price is being jacked up.
To produce more savings, some consultancies bolt on management services, enabling customers to make best use of their energy.
Colin Beake points out that sometimes the cost of replacing old machinery is quickly covered by the efficiency of new equipment.
Mr Wealands gives the example of a supermarket customer where the cleaners arrived at 4am and turned on all the lights, even those over the escalator, because one switch operated them all. They were still burning when the staff started to arrive at 7.30am. “The place was like a Christmas tree!”
Utility Auditing persuaded the retailer to spend £500 on a new switching system that soon paid for itself in electricity economies.
The Birmingham Chamber of Commerce, which now has a one-stop utilities shop giving purchasing and environmental guidance, estimates that on average businesses waste up to 20% of their energy.
CostMaster, meanwhile, provides a management service that includes checking that invoices are correct. Some businesses 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.
Small business organisations 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.
Water
Advice on water supplies is more limited than for electricity and gas because the industry is not deregulated.
Nevertheless, Makeitcheaper.com has a water service which checks that businesses are being charged the right amount for drainage and sewerage. “Ten per cent of bills are a little wrong,” says Jonathan Elliott.
Another part of the service is checking that taps are working properly – and advising that the automatic flushing of urinals during non-business hours is money down the drain!
A subsidiary of Chess, the telecoms consultancy, offers an installation that limits flushing to when it is needed so that water and money are saved. Customers include Buckingham Palace!
