ISO Logo

Our Insights

Blog Image

BCR Associates’ view on current volatility in the energy market

Date March 10th 2022 by in Category Energy

Tensions between Russia and Ukraine are having an extremely negative impact on the UK energy market and due to currency index volatility and high price of oil, the price of both gas and electricity is extortionate at present. Due to this extreme market volatility, most energy suppliers are struggling to provide quotes at the moment and the pricing that we are receiving from our supply chain is very expensive. As such we would not recommend that businesses sign long-term contracts at this time.

Advice for those with an imminent energy renewal

Across the board, many suppliers are struggling to offer quotes, even renewal quotes. Normally in a crisis, suppliers will try to honour renewals but, suppliers are not even doing that at present. We are acutely aware of the difficulties that this may be causing for those that have imminent renewals due. For example, those that are looking to renew for a 1st April 2022 renewal date, would, in normal circumstances, need to confirm any new contracts with a new supplier this week. As suppliers are unable to quote, you may go onto out of contract rates for a short period of time which may leave you exposed. Whilst we understand that this is stressful, please be assured that as a BCR client, we are in regular contact with the incumbent supplier for each renewal and we encourage you to keep in contact with your Energy Consultant who are monitoring the situation closely.

Please be aware that unfortunately, in current market conditions there may be an influx of calls scaring you into signing a contract. Even if you are at the end of your contract, please be assured that you would NOT lose supply, contrary to some scaremongering tactics that we are hearing. We strongly advise you not to panic or do anything impulsive and to make sure that you check the terms and conditions in your contract closely before you sign anything. Please be aware that a quote that is considerably lower than other prices that you are seeing is likely to be too good to be true, it is unlikely to be a fully fixed contract and potentially a pass-through* contract. This means that suppliers would be able to claw back any Terms and Conditions such as Volume Tolerance** and charge amounts that you are not expecting later down the line.

How we can help

As we are presently at the height of the market and we are unsure how long this period of volatility will last, we will find alternative solutions to protect your business until such time that the market softens, and we can secure more appropriate rates. We would consider short-term contracts of differing lengths depending on the individual client need and we will take advantage of our supply chain connections to negotiate the back dating of contracts. We want to avoid clients being on out of contract for a long period of time and as a rule we are recommending that for clients with a renewal due now until September that we arrange a short-term contract and hedge to see how this short-term volatility pans out. We would continue to manage the renewal and wherever possible we will secure fully fixed contracts so that you know upfront the full cost of the contract.

Reasons not to go on out of contract rates where possible:

  1. You will be vulnerable to any cost increases that the supplier imposes, or risk being charged for anything stipulated in Terms and Conditions such as Volume Tolerance.
  2. Suppliers would be able to reconcile and claw back monies – this can occur sometime after the out of contract period is over.
  3. It makes it lot easier for other suppliers in the marketplace to take over contracts.
  4. You are not protected from further market volatility (a fully fixed short-term contract will mean that you are at least fixing costs for the contracted period).
  5. It does not protect you against the unpredictable market conditions, by using BCR Associates to manage your contract, we will be the first to be able to resolve any contracting issues.
  6. You won’t have a dedicated consultant monitoring prices and managing your purchasing strategy to secure more favourable contracts.

Don’t be alarmed if you can’t get a contract, rest assured that we will secure a contract as soon as we are able, so please stay in touch with your Relationship Manager.  

Get in touch

How we can help you to mitigate rising costs:

Whatever happens, costs in general are going to increase (according to analysts at KPMG, inflation could be as much as 8-9% by the Summer) and your immediate energy costs are sadly going to rise. The below is our advice on how we can help you to save money or recoup costs on your bottom line:

  1. Make sure that you know what type of contract you are on so that you have advanced knowledge of all costs related to your energy supply – BCR will review your Terms and Conditions and check that all is in order.
  2. Understand how much energy you are using and where you might be able to make savings – our energy management system will help you to measure usage and plot peaks and troughs so that you can identify any wastage.
  3. Look at ways to reduce consumption and improve efficiency – as costs are so high and continue to be so, the only true way to save on your energy costs is to use less.
  4. Consider tax relief opportunities – as we approach the financial year end for many, it may be worth submitting an application – we can put you in touch with experts that can advise you on the potential success of any R&D Tax Relief, Embedded Capital Allowances, Land Remediation Relief or Stamp Duty Land Tax Relief applications. Typically clients receive any rebate approx 12 weeks*** after submission.

Don’t feel you have to navigate the challenging market on your own – talk to BCR Associates about how we can work with incumbent suppliers and agree a plan of action and assess your buying strategy as changes in the marketplace happen.

Get in touch

*A pass-through contract is where only the wholesale cost is fixed and all other non-commodity costs are pass-through on invoice, these are subject to being reconciled if suppliers have forecasted incorrectly and you may incur costs that you may not have budgeted for.

**A Volume Tolerance clause in your contract relates to a pre-agreed consumption level for which you may be charged should you use under or over the agreed amount.

***Subject to change and variable on a case by case basis.


This entry was posted in Energy and tagged Energy pricing, Energy strategy, Market Update by . Bookmark this permalink.

Leave a comment