UK businesses are being encouraged by the country’s largest non-domestic energy supplier to review their supply contract and take greater control of technology which allows for deeper energy insight. The call comes as new P272 regulations come into force.
While large firms have long been metered and settled on a half hourly (HH) basis, the energy regulator, Ofgem, has mandated that 160,000 smaller firms be brought into HH metering and settlement by 1st April 2017 under a new rule called P272. The industry is suggesting that businesses could face higher electricity prices at peak times, presenting both a risk and an opportunity for cost management.
Ultimately, Ofgem and government aim to bring all businesses into half hourly metering and settlement in a bid to create a more responsive power system that is able to react to supply and demand price signals.
The change is designed to enable businesses to engage with the power market.
For now, Ofgem is attempting to soften the transition by flattening time of use tariffs on the distribution network, so that businesses are not stung with peak ‘red’ rates that in some cases can be 100 times higher than ‘green’ rates.
However, some costs, such as the Triad transmission system charge, as well as the capacity market charge, are driving up the price of consuming power at peak times over winter. Moreover, non-commodity costs, including networks, environmental levies and balancing costs already represent more than half of the power bill.
According to British Gas Business, that means businesses newly exposed to half hourly metering and settlement costs should think carefully about how they manage those rates.
“All of those non-commodity elements are going up because the system is moving away from centralised thermal plant towards renewables and is more complex to operate,” says James Pearson, head of pricing at British Gas Business.
“Non-commodity costs could keep going up for the next five, 10 and possibly 20 years,” he suggests, “and if people get on the wrong side of that, then they could face higher bills.”
But if firms start taking ownership of the data enabled by HH metering, “they may be able to isolate poorly performing kit and, over time, work more flexibly to lower their bills,” says Pearson.
“It is not going to suit everyone, but if their energy spend is above a certain percentage of total overheads, then it is something businesses should already be considering.”
While some organisations will have limited operational flexibility, half hourly metering data is also the starting point for overall demand reduction, or energy efficiency.
Pearson says this is where suppliers can help, in terms of a pricing conversation – such as whether businesses want exposure to peak costs or would rather pay suppliers a premium to manage the risk – as well as an overall demand reduction and demand response conversation.
“Half hourly data allows you to dig deeper into your consumption. You don’t have to do anything with it, but it provides a currency,” says Pearson. “If you use it properly there are savings to be made – and that is where suppliers can help, both in terms of supply contract and ongoing energy strategy.”
British Gas Business provides businesses the opportunity to dive deeper into their data through its new Panoramic Power platform, bringing users real time insights into their energy use at a device level. Through its parent company, Centrica, British Gas is also helping larger energy users to unlock new revenue streams through demand side response.
To find out how British Gas Business can help save you money through your energy procurement strategy, data insights or operational flexibility, call us on: 0845 070 3720. For further information on managing your business’ energy more generally, visit www.britishgas.co.uk/business
This is a sponsored article created by The Energyst in partnership with Centrica.