A Good Supply of Energy

By Tyler, Geoff | Management Services, July 1995 | Go to article overview

A Good Supply of Energy


Tyler, Geoff, Management Services


I had intended to write this month an update on energy management systems and their applications, but when I compared my initial research with the content of my article in the issue of April 1992, I found surprisingly little had changed.

Overshadowing it all was the liberalisation of the gas and electricity supply markets and the opportunities for management services' expertise to add benefits to the purchase of energy.

The editor, therefore, allowed me to take one foot off the technology plinth just this once. Isn't that nice of him?

The gas and electricity supply markets are well along the road to total liberalisation, albeit to different timetables -- which is itself a source of some confusion. It seems, however, that a large minority of companies has not yet taken advantage of the ability to shop around.

Indeed, the term 'large minority' is necessary only because virtually all the top sized users, whose freedom came first, are now playing the market. Take out those and the word majority can be used in this context.

Buying energy in the form of oil and solid fuel has always been a straightforward, unregulated purchase, of course, no different from buying any other raw material. The business puts its requirements out to tender and negotiates the best possible price from the most reliable supplier.

It is useful to note, or to include in the brief to one's buyers, that the best areas for price saving are long-term call-off contracts, and automatic re-fill agreements. However, both rely on a detailed knowledge, gleaned from management services expertise, of the week to week, even day to day consumption rates and accurate forecasts thereof. For all but the smallest companies, buying electricity and gas supplies can now work in similar vein.

Electricity first

For a year now, users of more than 100 kilowatts -- roughly an annual spend of L11,000 -- have been able to shop around all the regional electricity companies and negotiate individual contracts. Even the 100KW threshold should disappear in 1998 and all users, even domestic consumers, will be able to buy electricity from any supplier. (Incidentally, for those who went this route last year -- or were discouraged from doing so -- I hear that the billing and settlement system problems experienced have now been solved.)

Companies which do not meet the threshold limit -- though I doubt any readers come into this category -- can make savings by better exploitation of the standard tariffs. Brian Kelly of Norweb was among those who suggested commercial customers do not do this as well as they might.

Tariffs include price savings for daily/nightly off-peak usage covering several different time periods. Other 'maximum demand' tariffs can offer a further saving if the company's usage pattern is more accurately definable assuming it has been analysed in the first place. Though I now have to say that headline electricity prices appear to vary little between suppliers, please do not stop reading.

There is only so much discounting, in fact, which suppliers can do with margins eroded by competition. But a company's needs vary from day to day, from hour to hour and savings can be made in the detail of the negotiated deal and in support services.

For example, many users assume their negotiating stance has to be based on the consumption at each site which uses enough electricity to come off the tariffs.

This is not only reported to me by several electricity suppliers as the major cause of buying reticence, it is completely untrue.

It is the company, local authority, whatever, which is the customer and the electricity consumption from all such sites can be added together to determine whatever bulk discounts can be wrenched. That may mean one invoice to one address but any problems with that can be avoided by having an analysis of consumption from the supplier's meter records.

According to Brian Kelly, 'Business Customers can also benefit from things like computer-based energy usage appraisal services which help to pinpoint more areas for economising and for energy efficiencies. …

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