Emily Groves - why the appliance of science may not stop you being an April Fool
13:50 22 March 2012
In terms of popularity, science appears to be at its zenith.
The likes of Prof Brian Cox are never off TV, and more of us have heard of the Large Hadron Collider than the latest winner of Big Brother.
One thing science has never been very good at is predicting exactly what’s round the corner.
As physicist Niels Bohr said “Predicting things is very difficult, especially the future”.
So as we can’t predict the future, we try to take steps to cut our exposure to unforeseen detrimental events.
Hundreds of businesses have adopted a similar sensible approach. They try to minimise exposure to risk through steps like insurance, safety procedures and budgeting – especially when it comes to unavoidable items like energy supply.
Many businesses opt for a fixed-term, fixed-price contract. They may not know what the future has in store but they can at least predict their energy payments.
Right? Not quite.
As of April 1 – sadly it’s no joke – there will be a significant hike in UK energy costs.
We all know the cost of energy is rising. At the time of writing, oil hit $125 a barrel and with demand for liquid natural gas also increasing – the costs are only heading in one direction.
At the same time non-energy costs are also soaring. Non-energy costs, also known as third-party costs, are those not directly related to the wholesale energy and normally contribute 30-40pc of your energy bills.
They include the renewables obligation (aimed at encouraging generation of electricity from eligible renewable sources), the feed in tariff scheme, transmission and distribution costs.
Generally, these costs are expected to increase each year and they are factored into the contract pricing by energy suppliers. However, our ageing UK energy infrastructure needs replacing and the government has set strict renewable generation targets.
This work won’t be cheap and this year Ofgem announced significantly higher than expected increases to third-party costs.
From April 1 some parts of the UK will see increases of 50pc to their distribution and transmission costs but East Anglia will fair slightly better with rises of about 15pc.
Sensible businesses may have taken steps to shield themselves against fluctuating energy prices by opting for fixed-term, fixed-price energy contracts. However, this still may not exclude them from a price hike as some energy suppliers will pass the increases on to their customers even if they are in a contract.
Haven Power, the Ipswich-based business electricity supplier, has written to its customers explaining it will be passing on these increases to customers in fixed-price electricity contracts.
While the rises are not to be welcomed, the fact this company is trying to be open and honest with its customers, should be.
Rumours are circulating that other suppliers will also pass on charges, but may not be as forthcoming with a warning to customers.
Bohr was right, we can’t predict the future, but on April 1 energy price rises are going to happen. If you are unsure whether this will impact your business check your contract status, speak to your supplier and seek advice.
Emily Groves is managing director of independent energy management company Indigo Swan.