Power bargaining
No longer are businesses tied to British Gas or a regional electricity company. It is now possible to buy either gas or electricity from scores of different supply companies, and doing so is almost certain to make energy savings. Those wishing to remain with their regional electricity supplier should also attempt to negotiate better prices.
In the case of gas, the Government has ordered British Gas to allow new energy suppliers to use British Gas pipelines. That means that when a new gas supply company tells a hotel it will sell gas at a cheaper rate than British Gas, it pays a gas producer in the North Sea for the gas, pays British Gas a service fee for using its pipes to get it to the hotel and the hotel pays the new supply company.
The good news is that this is not reserved for huge consumers. A customer must consume a minimum of 2,500 therms a year to be able to switch from British Gas. On average British Gas rates, this means that if your gas bill is more than £1,120 a year, you are in the market.
Scottish savings
Individual hotels as well as consortia have begun to take advantage of deregulation. Quick to grasp the opportunity was Scottish Commended Hotels, the 69-strong group headed by Allan Deeson. He explains: "The main reason for switching from British Gas was better price, and for Scottish hotels where energy bills are often our second or third largest cost, the savings are significant."
Such savings are particularly important to member hotels that are converted Victorian houses rather than purpose-built properties with energy-saving devices. They cost more to heat in the winter so any saving is welcomed, adds Deeson.
Another consortium taking advantage of the new opportunity is MinOtel. Eric Davison, purchasing manager of the consortium, says price is not the only issue. "Price has to be allied with quality and flexibility. The independent gas supplier we went with offered a good price as well as great flexibility in invoicing. It offered billing to suit the customer - weekly, monthly or whatever - and we could be billed centrally or at individual hotels."
MinOtel's supplier, ANGI, says the switch involved no risk and no disruption. "There is very little change on site: it is the same gas, the same pipes and the same meters. You simply get a different invoice," says sales manager Nancy Cox.
Unlike British Gas, independent gas suppliers are not obliged to publish their prices so they may vary greatly between suppliers. Each site is priced individually, taking into consideration its geographical location and size of consumption.
Besides a minimum consumption of 2,500 therms, the only other criterion that needs to be met is that all buildings on a site are owned and operated by the same entity and are close to each other.
British Gas remains responsible for all aspects of maintenance and the transportation of the gas. Furthermore, all consumers continue to qualify for back-up service from British Gas.
It is advisable to shop around because different companies specialise in different bands. For example, one company may be able to offer better prices to consumers using more than 25,000 therms, whereas another may offer better prices below.
Another factor influencing price is negotiating skills. Two hotels situated next to each other consuming an identical amount of gas may have very different gas bills because they managed to negotiate different deals. In such instances, consultants may play an important role in bringing about further savings.
Besides being familiar with the market, consultants usually charge a percentage of the additional savings - if no additional savings are made, there is no charge.
Similar changes are taking place in the electricity market. With effect from April this year, the freedom to shop around for suppliers has been extended to consumers using more than 100kW. These suppliers are known as second-tier suppliers.
The procedure for maximising savings is more complicated as there are a number of pricing methods in operation and physical changes, such as new meters and communications links, may be required.
To qualify for the second-tier market, customers must "occupy single premises with relevant demand of over 100kW", says the Office of Electricity Regulation (OFFER). This "relevant demand" is calculated by using an average of the three highest maximum demands over the past 12 months under normal conditions.
It is difficult to state an exact bill size because electricity rates vary according to your load profile. However, if your annual bill exceeds £15,000 you will probably qualify to look elsewhere, although those paying just over £6,000 a year should not discount the possibility.
If a customer wishes to switch from its regional electricity company (REC), it must also have the appropriate half-hourly metering and suitable communication equipment to enable remote readings to be taken at any time. A meter operator is then responsible for the provision, installation and maintenance of the meters - a task often undertaken by the REC as it can offer competitive rates.
Electricity prices may be quoted in several ways. For example, prices may be set at a fixed rate, a capped rate or at varying rates throughout the day. This variety of pricing methods may cause some confusion as the ideal rate for a company depends very much on the nature of its business and its choice of supplier.
Agreements
Unlike the gas market where customers need only sign one contract, a hotel choosing to switch electricity suppliers may need three agreements: a connection agreement with the host electricity company, a supply agreement with the supplier and, if the hotel chooses to use an alternative meter operator, an agreement with the meter operator. However, the transmission process remains the same and the new supplier pays the REC for the use of its distribution system.
The benefits may be significant. Consultants predict average savings of between 10% and 15% although some hotels may achieve savings of up to 20%.
Eastern Electricity, which recently signed a contract with Forte to supply 104 of its sites, won the contract not only on price, but also on the company's flexibility to adopt a new billing procedure. This, according to David Read, Forte purchasing director, non-food, will enable transactions to occur by Electronic Data Interchange.
While there may be many benefits in changing gas and electricity suppliers, interested parties should study the clauses to ensure that any penalties are minimal. For example, in the higher ranges of the gas market "nominated gas consumption" clauses may exist requiring customers to consume a specified amount of gas, with some leeway. If they over- or under-consume, rates are revised and the potential penalties can outweigh the benefits.
