Haven Power, the business energy supply arm of Drax, has warned that firms may not yet realise the costs of government plans to protect energy intensive industries (EIIs) from energy subsidy schemes.
Chairman Peter Bennell believes suppliers should be more transparent in communicating price rises to customers – and about the implications for fixed price contracts.
While the support package for EIIs was originally mooted as a tax, it has since been shifted to energy bill payers, with the cost smeared across both domestic and business users.
Cornwall Energy estimates that the cost component of power bills relating to renewable power subsidies could increase by as much as 7%.
“We expect the exemptions for energy intensive users and imported renewables to reduce the charging base for the renewables obligation, feed-in tariffs and CfD FiT by about 7% when fully in force from April 2017,” says Robert Buckley, a director at the consultancy. “As these costs are collected on a per unit basis by suppliers, charges to other users will be higher than otherwise (they will be rising anyway) by 7%.”
Bennell believes this price increase remains off the radar for some firms. Furthermore, he says that an increase of this proportion could potentially lead to suppliers re-opening contracts to recover costs from customers, even with those products which are claimed to be completely fixed.
“There is a concern to those businesses that don’t understand what’s in their price. They should understand their contract and what’s included. If it’s fixed price, can the price change? It can be a long time after the event that the supplier comes back for more money,” he said.
From April 2017 Haven is reflecting the charges in its bills with the add-on charge incorporated. Bennell said businesses should not be afraid to push suppliers to state their intent.
“These changes come at time when wholesale energy costs have been falling. As a result customers may not challenge suppliers’ offers as thoroughly as they do in a rising market. This could lead to unpleasant surprises if suppliers haven’t factored in market changes such as EII into their offers and I would urge customers to firmly establish how their contract will treat these charges.”
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Major energy users say they cannot match processes to energy price spikes
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If you’re on a fixed price contract with EDF Energy, don’t worry. We’ve done the numbers and have the EII cost associated with the proposed exemption scheme covered in your existing price. This is a new cost but we stand by our “It’s fixed” commitment. Further detail available here: https://www.edfenergy.com/large-business/buying-energy/energy-intensive-industries