What do the energy suppliers actually do?

It is a well known fact that the gas and electricity markets in the UK are dominated by the ‘Big 6’:, in order of size, British Gas, Npower, SSE, Scottish Power, E.On and EDF. Between them they control 95% of the UK’s market share. Without getting into too much detail about who are they and the rights and wrongs of a controlled market, let’s look at what they do. For the purposes of this article we will refer to electricity because pretty much every house in the UK is connected to the electricity grid but many are not connected to the gas grid.

The people we pay our bills to are energy distributors. This should not be mixed up with ‘District Network Operators’. The DNOs are the owners of the various parts of the grid but not necessarily the people you pay your bill to. Confusingly, the DNOs often act as energy distributors as well. So if you are in the Central Belt of Scotland, your DNO will be SSE. However, your energy distributor may be any one of the above.

If you have changed electricity supplier recently you will have noticed that no bulldozers came and ripped up your drive to lay new gas pipes or cables. This is because it all comes from the same place. SSE and British Gas do not have rival cables in the ground to connect your house up to! The most important thing then to understand is that the energy ‘suppliers’ do not actually supply you with anything. It is simply an administrative exercise. The DNOs control the network; you take in the electricity; the meter tells everyone how much: the DNO bills the energy supplier and the energy supplier bills you (with a mark-up, of course!)

So there you have it: what do they do? Not much really. Next blog will be looking at how to beat them!

Is energy efficiency important for your business?

The answer to this question is almost certainly yes for one reason or another but the real question is whether you can do anything about it. To answer this, you must look at what kind of business you are.

Do you have real estate? If so, it certainly requires heating and electricity. Where these are used, they could probably be used more efficiently. Turn down your stat, turn off lights overnight, don’t allow computers to be on standby. All the usual things

Do you use a LOT of energy? Maybe you’re in manufacturing or the food industry or another energy intense industry. If so, you could do all of the above and still shell out thousands every month. If you’re spending a load of money on electricity and have a decent roof space, you should consider solar panels. This is particularly the case if lots of your energy use is during daylight hours.

Maybe you run an online business from a little office which sells gizmos and energy bills aren’t a big deal. Energy efficiency is though. If you sell goods online which need to be delivered to an address then energy will be consumed in the delivery. Done inefficiently, this will result in higher costs for you and in turn your customer. Some transportation companies offer a pick up scheme which basically tracks its vehicles and people can go online and say they need this small item picked up from x to go to y. If it’s doable they’ll pick it up and take it to the next place. This means that the return journey isn’t wasted for the delivery guy and the deliverer gets their parcel there for a lower cost.

Maybe you’re an on the road salesman. Have you considered an electric vehicle or a hybrid? There are now loads of places these can be charged up and most of them are free! If you have access to solar you can even charge up your car at your own home for free!

When you open your eyes to this, you will see that any way in which your business uses energy can almost certainly be done in a more efficient manner. Just look at what you’re spending and think of ways to reduce it.

6 ways to beat the ‘Big 6’

When we are advised about how to save energy on our bills, all we usually hear is “change your supplier.” This is totally unhelpful advise because there is a closed shop of suppliers and its in none of their interests to make our energy any cheaper. Unless we take radical steps to understand we will never be able to beat the Big 6.

The ‘Big 6’ energy suppliers do not actually supply energy: they just do the administration for the District Network Operators. So they buy the gas and electricity from the DNOs then bill you with a marked up bill for the same amount. This helps us work out how to beat them:

 

  1. Your gas or electricity bill is made up of two parts: the daily standing charge and the price per kWh of gas or electricity. A standing charge you will get charged for every day no matter how much you use and the unit price is metered and you get charged for what you use. Usually every deal will be high in one or the other. When you pick your supplier this is the rule of thumb: if you do not use much gas/electricity then choose a deal with a low standing charge and high unit price. If you use a lot of gas/electricity choose a deal with a high standing charge and a low unit price.
  2. There’s not just 6 of them! This may come as a surprise but there are actually many companies who do the exact service as British Gas and the like, they just don’t have anything like the advertising budgets and only really exist online. Some of my faves are Flow, Utility Warehouse and Ecotricity. You may or may not get a better deal but at least you’re spreading the wealth!
  3. Provide your own. Renewable energy sources such as solar (pv or thermal), biomass and heat pumps are a great way to get yourself off relying on the ‘big 6’. Battery storage for solar pv will help even more.
  4. Never get them to install your boiler! Or any other big company for that matter. A good rule of thumb for construction work is that the installation company size should be proportional to the size of the project. If you’re replacing your boiler, this is a small job. If you’re building a home this is a big(gish) job. A big company doing a small job will never do it with as much care and attention to detail as a small, well-reputed local installer. All these little guys have to trade off is their reputation, not a massive advertising budget. What’s worse, if one of the big 6 install your boiler they will definitely push you into an emergency cover programme which you don’t need (all decent boilers come with breakdown cover). Go out into your street, look for a van, write down the phone number and give them a call!
  5. Turn the stat down. To turn an old-fashioned phrase around, you pay for what you get. Same is true for energy. If you’ve got all the lights on, TV blaring and heating blasting. you will use a lot of energy. Of course, the energy companies will pretend that they want you to be more energy efficient but that’s like Cadburys saying people shouldn’t eat chocolate. A little bit of care and self-discipline around the house will really keep your costs down and eat into their profits.
  6. Sign online petitions to get the government to act: http://action.compassonline.org.uk/page/s/end-the-big-six-energy-fix

It might not be much but every little helps!