UK: SME - Power shopping.

UK: SME - Power shopping. - Energy efficiency is a global environmental concern but, for most small businesses, cost remains the overriding factor. Savings can be realised with a little effort, says Jim Davies.

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Last Updated: 31 Aug 2010

Energy efficiency is a global environmental concern but, for most small businesses, cost remains the overriding factor. Savings can be realised with a little effort, says Jim Davies.

As an irresponsible, occasionally profligate, youth - not so many years ago - one of those nostalgic phrases I distinctly remember ringing in my ears was: 'How many times do I have to tell you? Switch the lights off in your room when you go out.' Not that my father was some kind of rampant eco-warrior. Far from it.

I like to think these outbursts were prompted by the razor-sharp businessman in him that could never quite sleep. In fact, he was just keeping a beady eye on his quarterly electricity bill like any other thrifty householder.

He's certainly not alone. According to research conducted by the Energy Savings Trust, which was set up as part of the Government's action plan in response to the 1992 Earth Summit in Rio de Janeiro, 'saving money is by far the strongest motivator for the householder to use energy efficiently, over and above environmental concerns'

In a small/medium business context, where margins are tight and running costs need to be kept to a minimum, potential cost savings are, or at least ought to be, an even greater incentive. But perhaps because heating and lighting are generally taken for granted in a work context, attitudes are surprisingly blase: 'I just plug in and play,' says Kasper de Graaf, managing director of Assorted Images, the design company, where the banks of Apple Macintosh computers tend to keep the office warm all year round anyway.

Whether businesses take any direct action or not, they should all soon be reaping the financial benefits of recent deregulation of the gas industry and the final deregulation of the electricity sector, which, after various computer hiccups, is scheduled for June 1999. It is estimated that even now prices have fallen by about 20% in real terms as competitors new and old jockey for position in the marketplace.

But as yet, switching suppliers isn't as straightforward as it might be. 'Some suppliers put a lot of effort into marketing themselves, but then find they can't back up their promises with service,' confirms Harris Rosenberg, a utilities management consultant. 'They buy a certain amount of power at a price, then find they are inundated with calls which they aren't geared up to handle.'

Garage owner Grenville Isham has been experiencing such difficulties. On and off since 1991, he has been plagued by roadworks immediately outside his premises. The dis-ruption is driving his customers away. In fact, he goes so far as to claim that his business in Castle Gresley, Derbyshire, has been 'put to the torch by (certain) utilities companies'. Naturally enough, given the grief they've caused him, he is keen to place his allegiance elsewhere, but so far hasn't been able to source alternative suppliers in his area. 'There are plenty of different telephone companies offering deals,' he observes, 'but I find it frustrating that it's so difficult to change the rest of (my utilities).'

In theory, however, businesses should be able to buy their gas (and soon their electricity) from anyone they choose.

OFGAS, the gas regulator, has a list of over 60 approved industrial and commercial suppliers nationwide; OFFER, the electricity regulator, recommends about 40 suppliers. 'Some are better than others,' observes Rosenberg, who reckons that it's probably wiser to stick to the larger firms, which are likely to last the course.

If you feel you might benefit from a change and are in a position to switch suppliers, there are common-sense steps and precautions you should consider before taking the plunge. First, you should ask yourself the fundamental question: 'Will it be it worth my while?'

'If your annual gas bill is £500 or less it's not worth the time and effort phoning 70 companies to compare prices,' reasons Rosenberg. 'However, if you're talking about a couple of thousand a year and it doesn't take you too long to find a deal which is meritorious, then why not?'

Even if you decide to stay put, it may be worth checking your tariff, which may well have come down in the past few months. Your supplier isn't obliged to inform you of any change, and indeed is probably banking on the fact that the majority of customers will just soldier on oblivious.

But once you've enquired about your tariff, your supplier is obliged to provide correct, up-to-the-minute advice. It is estimated that one in every 10 customers is paying more than required, so it is worth a quick phone call to confirm your position.

The biggest problem for the small consumer, continues Rosenberg, is that of transparency. 'You've got to be sure you're comparing like with like,' he says. Some suppliers may quote a bald unit price per therm, while others may include standing charges, usage charges and so on. Read thoroughly all the sales and marketing literature they provide, especially the small print. If they are installing equipment as well as supplying the commodity, you can expect to be locked into a contract, which is fair enough. Look out for all the hidden extras - not only extra costs but also extra benefits you may be entitled to if you ask for them.

Once you have decided which company provides the service that best answers your needs, be cautious of what you're signing yourself up for. Most gas contracts should have a 28-day notice period but some are longer.

You don't want to find yourself tied to a two-year contract, which seems attractive at the time but decidedly less so if energy prices tumble.

LSM Partners, a London-based firm of chartered surveyors which manages a range of different-sized properties, employed Rosenberg to look into the market thoroughly before opting to stick, for the main part, with London Electricity. 'We haven't actually changed supplier, though we were quite prepared to do so,' confirms LSM's Jonathan Miller, 'because after all, it turned out that London Electricity was very competitive. They have a pretty bad reputation, but I think that's more to do with their administration than anything else.'

As for taking on a hired freelance consultant like Rosenberg, who works on a contingency basis for LSM, Miller is a firm believer in getting in an expert to do things properly: 'I wouldn't try to mend my own car any more than negotiate contracts with the utilities companies,' he says.

'Harris watches the market very closely and has good contacts. If he can save us money as well, then I'm all for it.'

Utilities suppliers have certainly had to change their dyed-in-the-wool attitudes. As well as having to become more competitive, they have suddenly found themselves in a rather curious position where, as responsible members of the larger community, they have an almost moral obligation to encourage customers to use less of the product they are actually trying to sell to them. 'They're not doing it entirely voluntarily. It is a statutory requirement laid down by the regulators,' explains Chris Brown, head of public affairs at the Energy Savings Trust. 'But I can see there is a certain irony there. Having said that, some are more open to savings schemes than others.' Members of the Energy Savings Trust, which oversaw a £44 million investment programme in 1997/98, for example, include the likes of SWEB, PowerGen, ScottishPower, National Power, NORWEB, Calor Gas and many more, all of which are actively involved in local and national schemes aimed at achieving greater energy efficiency.

SWALEC's pioneering dairy-cooling project, which was instituted across 300 farms in South Wales, is one such scheme. An initiative developed jointly with the Farm Energy Centre, this provides free energy-efficient pre-cooling equipment which uses a heat-exchange process and has cut the cost of cooling milk by up to 50%.

It also happens to improve the quality of the milk produced. Not surprisingly, given this level of success, nine other electricity companies are now running or considering launching similar projects.

Oddly enough, conceiving, implementing or advising on energy-saving schemes can in some instances actually become a viable business in its own right.

The Hockerton Housing Project, a kind of eco-community based just outside Newark in Nottinghamshire, has used its experience of building and living in what it is claimed are the most energy-efficient houses ever constructed in the UK, and perhaps even Europe, to create employment for its members.

The earth-covered Hockerton complex houses five families and was designed by Robert and Brenda Vale, at one time the country's leading exponents of 'green architecture'. The soil on the roof provides wonderful natural insulation, while the south-facing glass frontage traps the warmth of the sun, which is then shunted through the rooms using a system of clay pipes. Clay tiles are preferred to carpet as flooring material because they conduct heat effectively, windows are double or triple-glazed. More heat is provided by the occupants and everyday electrical appliances. The houses use 90% less energy than more traditional dwellings.

Rainwater is collected and filtered for washing and drinking, organic vegetables are grown, and an artificial lake doubles as a mini sewage farm.

The idea is that the community will soon become self-sustaining and, if planning permission goes through for a proposed wind turbine, Hockerton could actually contribute to the National Grid.

'You don't need to go to the extremes we've gone to to achieve very real benefits,' explains Nick White, who threw in a job with a multinational company, and a three-bedroom terraced house in Welwyn Garden City, to move his family to Hockerton. 'We're developing a trading company based on sustainability and looking to incorporate the principles here in a number of other developments. By making it less extreme, you make it more accessible. There is a level of compromise, but it's a way of getting more people involved.'

For most SMEs, improving insulation, installing double glazing, fitting low-energy light bulbs and encouraging a general culture of energy awareness are simple ways of cutting energy bills and of doing their bit for the environment at the same time. Local Energy Advice Centres can offer practical, everyday tips, while bodies such as the Energy Technology Support Unit (ETSU) cater for more specialist needs. ETSU's list of publications reads like an obscure Open University syllabus: Improving the efficiency of electric tumble dryers; Measuring mass flow rates of pulverised coal; Using infrared pyrometers on a stenter for improved energy efficiency; and my personal favourite, Energy efficiency in public houses.

There are also various initiatives worth knowing about, such as the Energy Savings Trust's Lightswitch programme, which offers organisations with up to 239 employees a rebate of up to 50% on installation costs of lighting controls (the maximum is £3,000). There's also a replacement boiler cash-back scheme, which pays small companies and individuals £200 towards the installation of efficient condensing boilers. Retailers have been offered rebates for purchasing temperature controls on warm-air curtains at the entrances to 'open-door' shops, and encouraged to use 'night blinds' on refrigerator cabinets to save energy overnight.

Suppliers, advisory bodies and SMEs alike are realistic enough to concede that energy efficiency will - for some time at least - be driven by potential cost-savings rather than genuine environmental concerns. 'We're conscious of our responsibility and, particularly when we are involved in refurbishments, try to take energy efficiency into account,' says LSM's Miller.

'However, we have to justify the extra cost to our tenants, which isn't always possible. Often the added expense of environmentally friendly products means they don't pay for themselves and we have to honour our other commitments as well.' Even in the longer term? 'Well, unfortunately most tenants, and most businesses, tend to think in the short term.'

Next time your electricity or gas bill lands on the doorstep with its customary unwelcome thud, don't just groan and then do nothing about it until the next one arrives. Being proactive can bring you genuine savings: check out some alternative suppliers, look into the various grants and cash-back schemes that are available, investigate your insulation. Finally, bearing in mind that lighting accounts for 20% of total electricity consumption in the UK, remember to tell your employees to switch off the lights when they leave the room.

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