So the costs to administer EMR will easily be washed out? The proposed additional 0.008p/kWH tax is hardly the worst thing we've ever seen.
The EMR itself is looking to add around 2-3p/kWH but add in increases in our old friend CCL, the tax bill on the CRC EES, and you have to look to the sky's and thank China for some poor economic data and a mild winter!
The bearish energy prices fell into the 40's for the first time in a long time and it wasn't just the prompt that fell to it's knees. The whole curve was down and it was good to be able to see the woods through the tree's. It's been a while since we've had such favourable energy buying conditions but it wasn't long until the western fog swept in from Ukraine.
Even with some shake up over supply issues the markets, whilst typically volatile, have remained lower than their opening points on new years day 2014.
However, this is merely a blip in a rapidly rising market (from a point of use point of view). That is, the electricity price could fall of a cliff and drop to the marginal point to produce (where the generators would switch off if the price fell any lower) and still we would see the energy price rise considerably over the next few years.
The reason for this is the Electricity Market Reform; our governments move to low carbon sources of energy supply. Forget the arguments for and against this move and just consider this fact; the price of energy to a business in 2018 will be 30% higher than it is in 2015. Sure I've made a few assumptions, namely that the regulations will be passed in the house on 2nd and 22nd July respectively (but I assure you the chances of this not happening are slim! What other choices does the UK government have at this stage? It's a bit late to start changing things again- although I suppose we have heard that before with the feed-in-tariff scheme).
On Wednesday DECC announced that a bunch of renewable projects had been awarded investment contracts and this were modelled around a guaranteed CfD price (so it's actually already happening).
My real concern here is that marginal businesses where margins are slim are going to be exposed dramatically by these price rises. Any business where energy is in their top 3 cost lines on their P&L is going to suffer and will likely go out of business, if they are competing with a US firm, who has seen their costs halve (as the cost of energy dropped off dramatically with their shale boom).
The mixing point of Carbon Taxation is getting pretty ludicrous and for it to be sustainable we too need to be digging for shale (now!). Knowing with our slow UK democracy this is never going to happen any business who values their position needs to look to energy efficiency and renewables.
Reduce your demand, squeeze your base-load, take advantage of any interest free loans, bid for the capacity trials in London, incentivise your building users to join your journey to lower energy consumption, and make your business renew-able i.e. make it a business that is able of living past the higher energy costs in 2018.