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Small Businesses and Energy

Bridget Holmstrom - Saturday, January 24, 2015

Small businesses and energy inflation


Research shows that although small business owners are very concerned about the cost of energy, a significant proportion of those business owners do not take any action to monitor their consumption of gas, energy or water.  More importantly they are not aware of what proportion of their overall costs these utilities represent.  

Furthermore, it seems that 10% of all small business owners do not know who in their organisation is responsible for purchasing energy and reviewing their consumption.  

It is important to note that energy inflation over the past 10 years is significantly more than is the average inflation rate.  Indeed since July 2005 energy prices have increased by 76% where as the all items index shows an increase of 28%.  The consequence is clear, energy is becoming an increasingly important part of the cost structure of all organisations.

All experts report that it is of fundamental importance that businesses, and individuals, actively review their energy contracts to ensure that prices offered by competing suppliers are checked and the best price taken.  Contrary to popular opinion, it is not difficult to change suppliers provided the right process is followed.  Small business managers may be concerned that they get it wrong or there is insufficient time in the day to find the competing prices, follow up, identify the best price and then ensure that the conversion goes through.  

Business owners who are concerned about following the process have various options available to them. They could talk to a cost manager who will undertake to do the work for them, manage their contracts, terminate supplies as necessary and negotiate new prices.  There are many of such individuals around.  Alternatively business owners can use energy brokers.  As with most services many energy intermediaries are very good and there are others that are not competent and in some cases downright dishonest.  

It is also important to remember that all of these intermediaries will cost you money either through an invoice to you or via an additional cost on the unit price of the energy.  There are some, but not many, energy supplies that can be obtained solely through third party intermediaries (TPI's) and are not available to business managers.

What is important is that the business owner does not ignore energy but understands their consumption profile, supplier, contract terms, conditions and important dates.  Making sure that the best prices are obtained means that the business owner will see financial savings and an improved position on the profit and loss.