News Blog

Mr. Moffitt’s Profits Times – June 2018

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Air Conditioning

WITH SUMMER APPROACHING, IS YOUR AIR CONDITIONING UP TO SCRATCH?

The Carbon Trust has issued a Heating, Ventilation and Air Conditioning Overview Guide. They say: “Air conditioning can use a huge amount of energy. In fact, air conditioning can increase a building’s energy consumption and associated carbon emissions by up to 100%.” It is recommended that a temperature gap is kept between your heating and air conditioning control temperatures and that you use variable speed drives and free cooling coils. This can produce big savings.

Water Deregulation Review

THE WATER MARKET ACCORDING TO OUR RESIDENT AUDITEL GURU, CHRIS BARRETT:

Over a year has passed since the deregulation of the English water supply market. Deregulation required traditional water companies to split into (a) Wholesalers – management of the delivery of the water and (b) Retailers – essentially billing and customer service. It also allowed other retailers without infrastructure assets to participate in the market. As a result we now have about 25 licenced retailers operating in England.

So how has deregulation gone?

The regulator has been keen to promote the exercise as a success, however in reality the numbers of switchers has been poor.

Less than 5% of the supply points have switched and this is slightly misleading because many of these belong to large multi-site organisations. The number of actual customer switching is more like 3%. Having said that, the number of organisations participating will be a bit higher as some businesses may have opted for new deals with their existing supplier and so avoid any risk in switching.

The market has also reported data problems. Problems with missing Supply Point ID’s and inaccurate usage information is highlighting the poor quality of legacy data as well as hindering the smooth transition from one supplier to another.

Why has take-up been low?

The primary reason is price. In most cases discounts are rarely greater than 2-3%, which when balanced against the potential risk of disruption arising from an unproven change of supplier process, probably seems unappealing.

The low margin is due to the way costs are allocated across the retail and wholesale elements, with only limited margin in the former to allow discounting. Low discount levels do not attract broker activity, which is the primary sales catalyst for switching in other utility markets.

Research has also suggested that awareness amongst the SME sector is low. This is debateable as there was considerable coverage of the changes. The greatest financial benefit comes from administration savings for multi-site companies with a large geographic spread of sites across multiple suppliers, hence the difference between the number of sites and customers that have switched.

What next?

Unless the regulator steps in early to stimulate the market, it seems unlikely that there will be significant uptake until 2020 when the next pricing review is due. Then we might expect retail margins to be increased to give greater scope for discounting.

What action should businesses take?

If your spend is significant then even small percentages may be worth having. If you are risk averse and are worried about disruption to billing and customer service then consider your existing supplier in the first instance as they may be able to offer some discount for minimum effort. If your business has a large number of sites, there can be internal savings having consolidated billing from one supplier.

However, at this point in time there are likely to be far greater savings for business by simply managing water usage better. Auditel can help with this through advice and introduction to water management technologies that can help businesses both save money and contribute to the environment.

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