10 Nov 2021
The ELM Group energy contracts came to an end on 30th September 2021 and whilst we anticipated a rise in costs, the contracts offered have seen record increases across our entire portfolio. There’s been plenty of media coverage about the energy crisis the UK is currently facing with the expectation of increased costs across the board. Our experience, and the feedback from our energy consultant, is that of a constantly recurring, upward trend with contract offers being made and withdrawn in a very short space of time – sometimes within half an hour – only to be refreshed at an increased rate and then to repeat the same cycle! Something that’s never happened in the past and which made agreeing energy contracts almost impossible!
One of our ELM Way commitments is to ‘at all times, act with integrity, honesty and transparency’ and we have created this document to provide a full update on our recent energy renewal experience.
We were confident our work over the years with our previous Energy Consultant had placed the ELM Group portfolio in the best position for obtaining the most competitive quotes. All of our supplies (and those that we add to the portfolio as we take on new estates) have a common end date of 30 September, meaning we’re procuring energy in the summer months when prices should be at their lowest. Earlier in the summer and at the start of this renewal our new Energy Consultant summed up the situation ahead of us:
‘We are experiencing some of the highest market prices that we have seen for 4 years. These increases are due to the alarmingly low gas storage levels of the UK which was caused by the freezing temperatures around the world (Asia and America) at the start of the year. Electricity follows gas very closely in the markets, so this has had a big impact on both commodities. Whilst historically we have seen more competitive energy prices throughout the summer months, this year has been different. Even with the warmer temperatures that we experienced recently; we still did not see a price decrease.
As you can see from the graph below, there is a big difference in the storage levels from where we are today to where we were last year. To close this gap, we need worldwide gas prices to lower so that we can import more but we’re not the only country in this position, so the markets continue to struggle. It is the opinion of most traders that we talk to that it will continue to be extremely volatile until at least the end of the year’. Some sites could anticipate increases of anything up to 40%.
Our Energy Consultant has relationships with over 30 energy suppliers, they understand our business and they’re able to recommend suppliers able to meet our requirements. 11 suppliers were invited to tender and we received a combination of 6 ‘green and brown’ offers from EDF, Utilita and SSE, with EDF Green Energy being the most competitive.
Sadly, by its very nature a tender can only compare the overall or average total costs across the entire portfolio and there will always be ‘winners and losers’ within our individual estates. The offer from any supplier is dependent on information from the Distribution Network Operator (DNO) & the National Grid, including the specific meter classification and the actual consumption per supply. For this reason the contract rates will always vary across the entire portfolio and there isn’t (and never could be) an ELM Group standard ‘unit rate’ or ‘standing charge’.
The average price increase for electricity was 28% (with a range between -38.40% and 39.1%) although we identified 29 electricity supplies that were facing significantly higher uplifts from the outset. For these supplies we applied our ELM Way commitment to ‘recognise the individuality of each estate’ and took the decision to create an additional, smaller ELM Group portfolio. As part of the original data had included 12 month, 24-month and a blended price offer from 6 suppliers we had a clear indication on whether it would be beneficial for these 29 supplies to remain with the existing supplier (Southern Electric) or to transfer to the new corporate supplier, EDF. Prices were refreshed and this smaller portfolio comprises a combination of 12-month fixed contracts with both EDF and SSE, dependent on the most competitive rate per estate. Our Energy Consultant will continue to work with us to monitor the markets over the coming months, so that we can look to review this smaller portfolio at the earliest opportunity.
We appreciate increases in costs are never going to be welcome and we work hard with our Energy Consultant to secure the best prices available for our residents at each renewal. It’s fair to say what we faced this year was unprecedented and subsequent updates from our Energy Consultant have reported that the markets continue to struggle, with the situation going from ‘bad to worse’:
‘The energy markets have become even worse than what we’ve seen already. SSE and EDF have now withdrawn from offering any pricing for contracts that start in the next 6 months and there’s a number of other commercial suppliers that have followed suit. Pozitive Energy, for example, have emailed all their clients and voided existing contract rates and are issuing raised unit rates!’.
We would also like to take this opportunity to reassure you that we do not, and never will, accept any sort of commission from our Energy Consultant for their services.