Energy crisis: a pathway forward

The impact of higher energy costs on the hospitality sector has been crippling. We are still to fully comprehend the long-term effects, but a reported 250,000 jobs are at risk following the government’s decision not to extend its Energy Bills Support Scheme beyond 31 March 2023.

UKHospitality Chief Executive, Kate Nicholls OBE, said: “This crisis has suffocated businesses over the past year, causing thousands to fail and forcing many more to take drastic measures to afford extortionate energy bills.

“A £12 billion increase in energy costs in a year is almost incomprehensible and, frankly, unsustainable for much longer. The transition to a continued, but significantly reduced energy support scheme does not provide much comfort for anyone, especially with the £7.3 billion price tag it comes with,” Nicholls said.

Looking Ahead

We know that many British Sandwich and Food to Go Association (BSA) members have found themselves locked into energy contracts at unrealistic rates. To try and help address these issues, the Association has linked up with Brownlow Utilities – an energy consultancy that has a track record of helping businesses within the food, manufacturing, processing and retailing sectors. Indeed, the chairman, Shaun McClarnon, was part of the team that set up energy competition in the UK in 1990 and has spent a lot of his career involved in the food and hospitality sector.

Much like mortgages, energy contracts appear to be a minefield of difficult short- and long-term decision-making. While there is no quick fix for the current energy difficulties many face, the lesson to be learned is that it pays to plan ahead. Nevertheless, McClarnon says there are ways companies may be able to reduce their costs and even claim refunds on historic bills.

Questionable Practices

“As a business, we help people get the energy purchasing right, dealing with all the contract negotiation and registration, then validating bills to make sure they’re all in order –while dealing with any government legislation that comes with it,”

McClarnon said. “Most of our current clients have been managed through the past 12 months and beyond, because we had a long-term strategy for them.”

McClarnon is also scathing of some of the intermediaries operating in the energy market. When costs hit all-time highs in September 2022, at 71.5p/kWh and 26.6p/kWh for power and gas respectively, he said some third-party intermediaries (TPIs) and energy consultants exacerbated the turmoil.

“You’ve got a lot of amoral providers in our industry. The market spiked and has come back down, so what’s happened is that businesses

A Helping Hand

Although prices are starting to fall, the cost of electricity and gas is still three times higher than two years ago. Sadly, it is unlikely that they will ever be as low as they were pre-pandemic, but there are actions businesses can take to reduce their energy costs.

Contracts: Don’t leave it until the last moment when your contract is due for renewal. Plan ahead and look at all the options well in advance, so you are not forced to accept poor terms.

Agent commissions: Some TPIs hide their commission within their client’s energy rates. Conduct due diligence around excessive charging.

Check bills: There are a surprising number of errors in billing – and these provide an opportunity to claw back some of what has been paid historically. Brownlow offers a service to analyse past bills, which costs nothing, unless they can get money back – in which case they charge an agreed percentage.

beneficial government schemes to provide respite through this period,” McClarnon said.

Brownlow are offering this service on the basis that businesses will only pay if historic or potential savings are achieved – with a pre-agreed percentage of those savings.

Association members can access this service through the Members Hub of the BSA website at sandwich.org.uk.

ENERGY CRISIS TIMELINE – KEY DATES

Jan 2021: Following Brexit, UK Emissions Trading Scheme (UK ETS) replaces the UK’s participation in the EU ETS, leading to price volatility. Increase in energy demand due to colder than average winter.

Sep 2021: Prices soar postCovid, as travel and hospitality spike huge energy demand.

panicked last year, so TPIs and consultants took advantage of that position. They’ve tied people into a three-year price, which was cheaper than going for one-year, but has left them worse off now – locked in with nowhere to go.”

Compounding the issue, those that actually control the energy supply are looking to exit hospitality. “Elements of our [energy] industry haven’t helped,” continued McClarnon. “Because of the amount of companies going bust in the sector, certain suppliers won’t even offer contracts to these people. It takes three months to disconnect somebody – and in that time, a business could be exposed to further financial vulnerability, so suppliers are much more risk-averse.”

Energy tax discounts: Check whether your business is eligible for assistance under the Climate Change Agreement (CCA) scheme which has opened for a short period, allowing those eligible to gain relief on the Climate Change Levy (CCL) they pay on their energy.

Audit usage: An energy audit can identify ways of reducing consumption and opportunities to save, helping to meet increasing environmental, sustainability and governmental obligations.

“ What we are suggesting for clients now is that we effectively do a free energy clinic. They send in their energy bills and contract position, then we examine what we can physically do about that contract right now. If there’s nothing, there may be historic bill audits where we can get some money back – perhaps there are

End of Dec 2021: UK suppliers struggle – 28 companies close their doors, affecting over two million customers.

Feb 2022: Conflict between Russia and Ukraine causes supply difficulties.

6 Sep 2022: Liz Truss becomes PM; Kwasi Kwarteng Chancellor – Energy Price Guarantee announced.

25 Oct 2022: Rishi Sunak new PM; Jeremy Hunt Chancellor –govt launches Energy Bill Relief Scheme (EBRS) for business consumers.

Jan 2023: UK govt announces scheme to replace EBRS called Energy Bills Discount Scheme (EBDS), comes into effect 1 April. (Source: safe-energy.co.uk)