Rising business energy prices

Are Business energy prices set to rise?

Energy prices are soaring. And there is no real indication that they are going to return to a normal level any time soon. With global gas prices being very unstable, it is difficult to say what might happen in the near future. Whilst the wholesale cost of gas has dropped in April 2022, that doesn’t bring a huge relief to the energy market.
This is not good news for consumers, but are businesses suffering the same way?

Current State of Business Energy Prices

As the well publicised news on the domestic energy price cap increases in a bid to protect consumers, the same cannot be said about businesses. Currently, there is no price cap for businesses. With energy prices skyrocketing, suppliers are increasing their prices for businesses on a large scale.
Recently, Business Energy Claims have had clients who are paying close to 50p/kWh compared to the 28p/kWh charged for domestic energy supply. Within the 50p/kWh there was also hidden commission from an energy broker that the client was not aware of, thus inflating the price of business energy even higher. Larger organisations have procurement teams who are sophisticated enough to ensure they are paying the lowest rates available. However, the SME – the schools, the local Italian, the care homes, and such like – are not so fortunate.
Without strong bargaining power, a sophisticated understanding of the energy industry, or how energy brokers make their money, businesses are being hit with higher prices than ever before. Regrettably, this is forcing businesses to either pass on the costs to consumers, adding to inflation, or struggle to make the returns they are accustomed to. A sad state of affairs for both consumers and businesses alike.

Why are Business Energy Prices Rising?

  • Energy prices have risen across the board due to a perfect storm of issues across the world.
  • Hot Asian weather has resulted in more air conditioning consumption
  • Cold European weather has resulted in more heating consumption
  • Lower winter natural gas supplies from the East has lowered the gas stored in Europe
  • Low UK wind resulted in lower wind turbine energy production
  • Ukraine-Russia war resulted in a reduction of supply from the East
  • Stagnated investment in the renewable energy

In addition, there are a number of other technical and geopolitical issues that have left many European countries facing the same problem – expensive energy.
The unpredictability of the events around the world has a great impact on the cost of energy, with the above mixture causing the perfect storm of rising energy prices.

Future State of Business Energy Prices

Regrettably, the future does not look promising for business energy prices. Ofgem has suggested a price cap review every three months. This is to protect against energy companies going out of business. This price cap review does nothing to protect small businesses from suffering. Ofgem goals for the price cap review are to not repeat energy suppliers going out of business and putting pressure on the remaining ones.. Furthermore, Ofgem have also hinted at a price cap rise again in October for consumers, suggesting that prices are set to continue to increase across the board for businesses.
Business energy claims are advocating for SMEs to be better protected from rising energy prices. Introducing a SME energy price cap would bring a great deal to help businesses. However, hidden commissions are not helping and there needs to be transparency on broker fees.. With inflation continuing to grow, and further cost pressures expected towards the end of the year, businesses need greater help and greater protection, now.

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