Consider your energy contract renewal options and TCR's impact on your choice.
31st August 2023
Am I on the right type of contract?
Business should NOT feel pressured into signing anything in haste or for a fixed, longer term. Rather, you should be looking at your options now and choosing a contract type that meets your needs financially and strategically, whilst managing your appetite for risk.
Fixed v's flexible energy contracts
FIXED- A fixed price contract allows your business to agree a set price or all inclusive rate for its gas and electricity on the day the contract is signed. This agreed fixed price lasts for duration of the contract which typically runs for roughly 12 to 24-month periods and occasionally up to 36 months.
FLEXIBLE - In volatile energy markets, prices can rise and fall unpredictability. Hence, if managed correctly, a flexible procurement contract or arrangement offers you a great level of freedom and allows you to optimize your energy spend in a dynamic fashion. This helps you take a longer-term outlook on your energy spend, achieving competitive energy rates by fixing and unfixing tranches of energy progressively.
Traditionally energy suppliers would only offer flexible products to businesses who consume 5,000,000kWh a year and above. However, Brownlow has made this an opportunity for all. Last year, Brownlow set up several flexible energy ‘baskets’ specifically for customers who simply couldn’t afford the fixed price contracts offered. So far, we’ve managed to save all the businesses within the basket an estimated £50 million for the first two years versus the cost of their collective volume at the market prices when the basket started.
Currently, we manage over 250 flexible customers. Moreover, we have had incredible success with our flexible purchasing strategy, having maintained low rates for long term gas and electricity portfolios, even achieving negative rates for several clients!
What is TCR and how does it impact my business?
Many people are talking about the new acronym on the utility block - TCR! But what is it and how will it affect my business’ energy bills?
The Targeted Charging Review (TCR) is an Ofgem initiative set up with the aim to modernise the electricity network and ensure the fair allocation of Transmission (TNUoS) and Distribution (DUoS) charges for businesses and consumers. These charges can account for 16% of your electricity bill.
The reform will see DUoS and TNUoS charges linked to a business's Available Supply Capacity (ASC). Depending on the available capacity, organisations could see significant increases to their bills because of the new charging model.
Also, companies who currently subscribe to a flexible contract to avoid triads are expected to be severely impacted by the TCR. It is imperative to understand that the charges will not be made transparent on your bill and could be hidden within your standing charge.