Be smart with your business energy profile

Demand response is relatively new to some people but it's actually been around for a while.

If you consider the breakdown of each element of your energy bill (see our guide on pass-through costs) you will see that energy is now only 60% of your bill

It's built on the way that you are charged for your energy. It's complex and involves trying to pass on the right amount of cost to each business based on how much energy it uses at different times of the day, whilst taking into account the cost of getting energy to that area of the country at that time of the day.

If you simplify some of the terminology and remove the following.. DUoS, TNuOS, AAHEDC, RO, FIT, CCL (see our definitions in our guide section if you want to know about these) you would be left with the wholesale price of energy only.

Since the difference between the wholesale price and the price you end up paying beyond the meter is the cost of getting it to you at that time and the profit paid to the energy supplier.

If you consider the breakdown of each element of your energy bill (see our guide on pass-through costs) you will see that energy is now only 60% of your bill and the rest is the cost of getting it from where it is produced to you via a supplier.

This 40% can either be passed on to you I.e. Added to your energy bill, as and when you use it, or it can be fixed by the supplier up-front, based on an estimate to cover the likely charges that will be passed on to the supplier.

It's worth noting that down the passthrough route you are taking the risk (as to how much your energy bill will ending up being) whilst on the fully inclusive route the supplier takes the risk (since if they underestimate one of your charges they pick up the bill). Over time, as these 'pass-through' elements of the energy bill have increased so have the stringent terms and conditions of the energy suppliers> understandably they are looking to cover themselves for increases in these pass-through costs.

The sort of thing to expect when looking at energy contracts now is that you will need to know what elements of pass-through costs are included and which are excluded. You'll also need to know whether they are included on the basis that the increase is not restricted I.e. If one of the elements increased by more than a certain amount would the supplier look to reconcile. So a fixed price energy contract isn't always what is 'says on the tin' but more what it says in the terms and conditions.

Since when you use your energy dictates the bill that lands on your desk skewing your demand to times of the day when the pass-through elements are less, and dropping demand during TRIAD charging periods will significantly lower your energy bill.

The policy to do this will need to be set across the organisation and a clear ROI case considered for doing this. Consider all of this alongside purchasing your energy, and your exposure to volatility in the market to yield the best results. For more information email nick@amberenergy.net.