Farms and rural estates could make significant savings on their energy and heating bills by reviewing supply contracts that have been allowed to run on without being reviewed.
“Over the past 10 years, business users will have seen electricity costs increase significantly,” says Lauren Gibson-Green, head of energy land and property specialists Strutt & Parker.
The government started recording data in 2004 from eight of the largest gas and electricity suppliers in the UK. Since 2007, small businesses have seen an average price rise of 43%, with large industrial consumers seeing a 75% increase.
Ofgem – the industry regulator for the gas and electricity markets – estimates that around 41% of businesses have never switched energy supplier. As a result, those businesses are often on more expensive “deemed rates”.
Deemed rates are typically 40% higher than contract rates. They are a direct result of not renewing expired supply contracts. The average rate of electricity is currently about £0.16 per unit – while the average deemed rate is some £0.25 per unit.
“It is estimated that approximately 50% of farmers and landowners are unaware of the price that they currently pay for their supplies, suggesting that many are paying more than they need to,” says Ms Gibson-Green.
“We were recently asked to review an electricity supply contract for a large dairy unit,” she explains.
“After some comprehensive market analysis, we managed to secure a fully fixed price for three years that saved the farmer more than £6,000 in the first year.”
Ms Gibson-Green says electricity and gas supply contracts are made up of more than just the headline unit price. This means they need careful analysis. Farmers should also be aware of the contract length of the tariff they sign up to, she adds.
“There can be dozens of other charges buried within the rates and that’s before we even consider the non-commodity costs. Varying contract lengths, types and exit clauses all need to be carefully considered before signing up to a new supply.”
Strutt & Parker offers a service to help farms and estates with an annual power bill higher than £5,000 to cut their electricity costs. The business is also able to work with its energy experts to review heating oil, mains and LPG Gas costs.
Other advisors can help farmers get better rates too. The farmer-owned buying group Anglia Farmers offers a best value procurement service for members who use its metered services for electricity, mains gas and non-domestic mains water.
Farmers are advised to be wary of companies which cold-call businesses offering cheaper tariffs.