Energy price cap – what does it mean for your organisation?

Posted on the 22nd August 2022

Last month we welcomed Utility Aid to our Suppliers’ Suite. Utility Aid is the UK’s largest energy broker for the not-for-profit sector and provide a high-level service to manage and maintain portfolio’s covering procurement, Bureau services, Full Account Management, Historical Audits and Carbon Reporting and Net Zero planning.

The team over at Utility Aid are our guest bloggers this month and have put together a blog with everything you need to know about the energy price cap and how it will effect your organisation.

Take a read:

Increased Price Cap- Price caps do NOT apply to Business Energy!

As we continue to navigate through the energy crisis, it is important to keep up to date with the latest developments. From 1st October 2022, OFGEM will be implementing another increased price cap. This is after the decision to change reviews from every six months to every three months, to allow OFGEM to respond quicker to the fast-paced changes in the market. You may think that your business is protected by this price cap, however, the price cap does not apply to commercial premises including charity buildings. There is no price cap on business energy, which means that suppliers can increase their out-of-contract rates by as much as they see necessary to cover their increased costs!

What exactly is a Price Cap?

A price cap is brought in to restrict the maximum amount of money suppliers can charge in England, Scotland, and Wales for each unit of energy. This is governed by OFGEM- the office of gas, electricity and markets. One of the reasons that the price cap has been increased several times in recent months is to try and support suppliers with the rising wholesale cost of energy and to try and prevent suppliers from liquidation. Not only does a price cap support suppliers, but also supports consumers from short-term price changes. However, one sector it fails to support is businesses and charities.

What will be the outcome of the Price Cap?

The increase in the price cap will mean that the average household will begin to pay more than double the current average for their bills. Whilst this will cause more pressure on consumers currently battling their way through the energy crisis, it has the potential to cause serious concern for businesses and charities that do not plan accordingly. Price caps do NOT include commercial properties including charities. This means that it is likely that suppliers will try and put their increased wholesale costs directly onto business energy customers. This means that the suppliers can begin charging a much higher rate than you are currently paying if you are not locked within a secure contract. If you do not have a contract with your supplier, they can charge you a variable rate which is prone to constant changes, especially during this period.

How can you protect your Business/Charity from these variable prices?

The best way to do this is to ensure that your business energy is locked within a secure contract, to ensure that your supplier cannot charge you a variable rate. By doing so, you will be locked within your contract and only charged the rate you predetermined before signing the contract. With the current market climate, these predetermined prices may seem high, but you have the reassurance from the locked-in contract that you will not be paying any higher than the rate you confirmed. Whilst these times may seem very uncertain, a secure contract will help to reduce the stress of the October price cap increase, and the unpredictable price cap reviews that will take place over the coming months.

Domestic Tenants for Housing Associations

Domestic tenants living in housing associations may not be included in this price cap increase. If the housing association procures its tenant’s energy through a supplier, often in bulk, and then charges its tenants for this energy within their rent, the domestic tenants are then viewed as living within a commercial property as the invoices will be under the name of the housing association, and as a commercial entity it is not covered by the price cap regardless of who the end consumer is, not only this, but the £400 Energy Bills Support Scheme will not include housing associations due to the same reasoning, and there is currently no method for the tenant to access this funding as they have no relationship with a domestic energy supplier.

We can help!

Whilst we cannot tell you if this is a long-term or short-term change, we can, however, be with you every step of the way and support you. If you are struggling, are worried or completely overwhelmed by the recent months and the changes they have brought, please get in touch and we can discuss your options and help to find the best resolution we can for you.

If you’d like to get in touch with Utility Aid to find out how they can help, click here to complete the referral form and a member of the Utility Aid team will be in touch.

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