ELM Group’s Annual Energy Update
The majority of ELM Group energy contracts expired on 30 September 2024 and over the course of the previous few months we carried out the work, under the guidance of our Energy Consultant, to arrange new contracts. The ELM Group portfolio for electricity consists of 301 supplies. The gas portfolio is much smaller with just 23 supplies (we also have another small portfolio which is due for renewal in April 2025).
What happened at last renewal?
At our last main portfolio renewal in the summer 2023 we were aware that a new low point in energy costs (April 2023) had been recorded (the lowest since November 2021). There were concerns about storage and supply for the winter period with advice from our Energy Consultant (and the opinion expressed from speculative approaches by various utility brokers) to fix for just 12 months in the hope that 2024 would see further recovery in the markets.
Where are we now?
Below is the main overview as to what’s happened in the markets since our last renewal. There has been a small downward trend in terms of the commodity prices. Commodity prices change on a daily basis and they are impacted by political decisions as well as a variety of factors that affect supply and demand.
The stability of the markets had been caused by two calm winters and a reduction in industrial demand for gas and power across the UK which means a good supply of gas.
The call for a UK election was unexpected and each political party had a different position on net-zero or public ownership in the energy sector. Our Energy Consultants were aware the UK and US elections would have impacts on the markets in the coming months although at the time of procurement it was even more difficult than usual to accurately predict what the impact would be. The long-term situation became much more changeable!
One certainty was that the National Grid’s 5-year forecast of TNUoS tariffs (the cost of maintaining the network) would have a significant impact on the markets – this tariff is due to recover significantly more revenue than before. The increase is partly due to inflation but a large amount is due to additional spending to extend and reinforce the network. This element of the overall cost will significantly impact the standing charges paid for each supply and is unavoidable.
Electricity
In summary, the advice from our Energy Consultant was that the electricity market in early July 2024 was considered attractive and the recommendation was that we should consider the benefits of a 24-month blended approach by agreeing to x2 contracts, each for a 12-month period – effectively securing prices from 01 October 2024 – 30 September 2026. We carried out preliminary observations by requesting tenders from x10 companies (SSE, EDF, Utilita, Corona, British Gas, Scottish Power, Total, Pozitive, EON and Crown – 5 suppliers declined / 5 offered). It was evident from the offers received that ELM’s existing electricity supplier, EDF, remained the most competitive in the market.
By comparing rates offered with the existing electricity contracts the overall ELM Group portfolio made an average saving of 10.35% in the first 12 months and 8.40% in the 2nd 12 months, although as always there are fluctuations on a site-to-site basis. It should be noted that the ELM Group contract offer is dependent on information obtained from the Distribution Network Operator (DNO) and the National Grid, including the specific meter type classification and the actual consumption per supply. For this reason, the contract rates offered will vary across the entire portfolio and there isn’t (and never could be) an ELM Group ‘standard’ unit rate, standing charge or contract offer. Of the 301 electricity supplies within the ELM Group portfolio 217 had a reduction in costs (with a range in the first 12 months between -30% to +60% and the second 12 months between -32% to +73%). It should be noted that ELM has experienced rapid growth over the last 12 months and as we have taken on new business, we have had to incorporate a large number of shorter-term contracts (procured for just the spring/summer months and therefore on more attractive rates) into our main group portfolio. The analysis of the data where we identified the supplies with an uplift of more than £200 p/a was largely comprised of sites we classified as ‘new business’.
Gas
At the beginning of the renewal process our Energy Consultant obtained contract offers to identify how the recent gas markets were offering. For your information:
ELM’s existing gas portfolio was predominantly with EDF & National Gas
We requested initial contract offers from x7 suppliers (EDF, Crown, SSE, Total, Corona, Utilita, YGP)
National Gas confirmed their intention to exit from the ‘business’ market
EDF was the only supplier willing to take on any new business (so could absorb anything that was currently with National Gas)
EDF was willing to offer renewals to any of their existing contracts
All other suppliers declined to offer
Having obtained the market information above it was clear there were few options available for the gas contract renewals. The overall ELM Group portfolio was identifying an average 18.61% increase on gas costs, although similarly the offer varied for each supply and was dependent on the individual meter type classification, consumption data and such like.
Our Energy Consultant arranged to refresh the offers with a view to agreeing a 12-month contract, however, within the timeframe available the offer had increased by 10% with an average uplift at 28.64%. In an effort to obtain best value and, in our belief that we ‘do the right thing’, we took the decision to attempt to direct the data in our favour with some internal changes to the portfolio structure / classifications for billing purposes in the hope the overall contract would become more attractive to the energy providers and result in additional contract offers. Although the process was initially successful, due to constantly changing markets the difference in costs between the top 2 was an overall £11,000 more expensive across the entire portfolio. In short, the exercise had established that EDF continued to offer the most competitive gas prices in the market at that time.
Our Energy Consultant gave strong advice that the contract would need to be signed off imminently as more price increases were anticipated. With this in mind we requested a refresh from EDF on Friday 30 August to sign off on a 12-month contract although behind the scenes our Energy Consultant fed back to the nearest competitors to highlight the large discrepancy in offers and to provide them with the opportunity to re-evaluate and refresh on 30 August too.
What was the outcome?
The approach by our Energy Consultant was successful and we were pleased to see that Crown Gas & Power adjusted their pricing on 30 August and returned as the most competitive and was also more competitively priced than the previous 28% uplift offered by EDF. By comparing the offer with the existing gas contracts the overall ELM Group portfolio would be subject to an average uplift in costs of 24% (with a range between -11% and + 65%) although as always there are fluctuations on a site-to-site basis. 11 supplies will be subject to an uplift of higher than the average although predominantly those supplies have been fortunate to benefit from lower priced and fixed contracts for longer than the previous 12 months.
In conclusion
We are confident that the work carried out by ELM Group and our Energy Consultant will ensure we obtain some of the most competitive rates available for our residents (per supply) at each renewal.
We occasionally receive enquiries from residents comparing prices that are published or available within the domestic markets to those ELM has obtained but we must stress that energy for consumption in the communal areas / common parts of our estates would be classified as a ‘landlord supply’ and therefore subject to commercial or business terms. We have carried out the work to ensure the supplies are recognised for a VAT reduction to 5% (as per the domestic market) and without the application of the Climate Charge Levy, however any unit rates and/or standing charges applied will be dependent on what is available within the business market at the time.
Area Managers and Estate Managers (where applicable) have been advised of the contract costs for specific estates and can provide full information and further breakdown if required. Alternatively, please feel free to reach out to me directly if you have any queries or would like any additional information from our Energy Consultant, contact details can be found at the bottom of this article.
We would also like to take this opportunity to reassure you that ELM does not, and never will, accept any sort of commission from our Energy Consultant for their services. Our Energy Consultant recovers their commission directly from the energy providers and is committed to being entirely transparent in their fee structure and commission arrangement with us and any chosen energy provider. They have direct relationships with all major commercial utility providers, have been previously ARMA ‘utility’ recognised and they conduct their business with an emphasis on transparency, without any tie-in contract with clients, expert supplier negotiation, market intelligence and an ongoing after-sales service.
Gill Birch, Business Co-ordinator
Email: gbirch@elmgroup.org.uk
Tel: 01252 356004
