Elm Group Energy Procurement
12 Aug 2016
You may remember that we consulted on, and entered into, energy contracts for supplies to the communal areas of your estates for a 24 month period with effect 1 October 2014. These contacts are due to expire at the end of September and work has already started with our broker LSI to analyse the current markets. We have deliberately engineered the contract renewal date to take advantage of a tender process during the summer months when we will have the best chance of achieving the most competitive prices.
Over the course of the last 24 months as we have taken over management of new estates, wherever possible (and with savings identified) we have added these new meters onto our existing corporate contract to bring them into line with all of our other supplies. On a number of occasions the savings made have been quite significant.
We remain confident that by working with an experienced, professional broker and tendering all contracts on a group basis our leaseholders and owners benefit from the power of bulk buying. We obtain the very best rates available within a commercial arena but ensure that we achieve domestic rate savings (ie 5% not 20% vat and no CCL – climate change levy). There will always be a standing charge incurred but the unit rate will be considerably lower in comparison and it is usually the meter consumption that makes up the majority of the total costs.
Prior to the main portfolio renewal we thought it would be beneficial to carry out a cost analysis on one of our sites with lower consuming meters. We approached our broker to provide an analysis on the basis that we would negotiate a ‘standalone’ contract for this specific site which had 3 separate meters. Our broker approached 4 of the larger suppliers and figures were based on the actual consumption over the last 12 months billed (May 15 – May 16). The analysis revealed that even with a higher standing charge our current supplier remained marginally cheaper overall and continued to offer value for money for the owners.
With LSI’s help we’ve analysed preliminary data for the whole portfolio from some of the major energy suppliers having determined that each can provide the level of service we require. These preliminary costings are to give us a flavour of the markets as they currently stand and are not actual contract offers. This is the first step in the tendering process and our pledge to communicate fully with our leaseholders. We have sent the analysis data and information to all leaseholders / owners.
Prices do seem to be on a slight upward trend and this is unlikely to change in the short or long term as third party costs (non-commodity elements), which make up over 50% of the actual bill, continue to rise. LSI has advised that for the foreseeable future it’s very unlikely that the wholesale energy price will reduce substantially enough to counter-effect the third party costs, so their recommendation is to enter into a 24 month contract and effectively make savings by ‘fixing’ the non-commodity elements.
We are required to consult with leaseholders if we intend to enter into any agreement in excess of 12 months. However energy prices will only remain available for a very limited space of time so we’re unable to follow the prescribed route for consultation. We have written to all leaseholders / owners advising that on 30 August we propose to request revised prices from the same energy suppliers with a view to agreeing to another 24 month contract, requesting any observations or comments by 26 August. Although the figures may change due to the unpredictable nature of the energy markets we’re confident that similar prices can be achieved. LSI will compile the data, negotiate on our behalf and use their expertise to achieve the best prices available.
A further update will be published at a later date.
Gill Birch // Head of Services