No Hot Air provides just that: we remove the unnecessary layers of complexity that are the usual context for buying business gas and power for UK business end-users.
Over a third of UK end-users use third parties to negotiate energy contracts. We’d imagine that another third are active buyers with their own energy managers engaging with suppliers to varying degrees, and the other third don’t even bother. That third are very small companies. And will stay that way.
NHO is for energy buyers who want to think for themselves, but sometimes wonder if they don’t know where to start. That’s OK. We’re not judgemental. Everyone’s been there. Unfortunately although every business is an energy buyer, only the largest can afford their own energy manager.
Some businesses have a genuine need for energy consultants, especially those who focus on reducing use as their number one responsibility. If a company don’t have a clue about how much energy they use, has complicated multi-site portfolios with long running supplier issues or has no problem with paying (directly or indirectly, often both) outsiders to resolve key issues that impact profitability, then a reputable energy consultant can be useful.
Few business users need the third party introducers (3PIs) that are nevertheless, a singularity in global terms, of the UK business energy landscape.
3PI’s disagree of course:
- They’ll tell you how they can get a better price through competition. Not that competition has no impact at all.
- They’ll tell you that aggregating your consumption to their portfolio will get a better price. Not in a commodity market. This ain’t paper clips.
- They’ll also tell you how complicated energy buying is. 3PIs owe their existence to arcane rules, inefficient metering and outdated pricing concepts. They have a vested interest in keeping it that way. NHO says it’s easy and uncomplicated.
Many 3PIs are a lot less forthcoming on how they are paid. A 3PI’s reason for existence is to maximise revenue. They do this by getting a part of the value that should be divided between a supplier and end-user. And they often do this in ways that work against everyone’s best interests. Except their own.
One of the easiest ways that 3PIs generate revenue is rampant in 2008: Sign clients at today’s prices for long term deals. Do they do this because they genuinely feel that energy costs will be higher in the future than today and fixing is prudent? Or do they want to have either an immediately larger commission or a guaranteed revenue stream for future years?
Who has the most believable story? A 3PI who has a vested interest in long term prices? Or NHO who say, we honestly just don’t know where prices are going, but you don’t have to pay us anyway?
One pricing option is only offered by the most reputable 3PIs, self confident enough about the value of their work in other areas. That might explain why most businesses are never told about the option of pricing against an index: 3PIs know that they can’t make any money out of it.
Index pricing was once only for the very large energy users, but today most suppliers can offer the option to any user.
At NHO we don’t confuse what happened in the past with forecasting the future. A rear view mirror is not a crystal ball. But we’re open minded and unbiased: If we see a story that tells us that prices are coming down, we tell you about it. Readers don’t have to act on it, nor on the reverse. But on the other hand, they don’t pay us for the information either. We don’t have that crystal ball. But no one needs to cross our palm with silver. We aim to show ways to save energy the old-fashioned way – only use what you have to.
3PIs will tell you at every opportunity about the dreaded R word : Risk. Maybe that’s why they are as hard to get rid of as insurance salesmen. We tell you: Index prices go up and go down. Just like life. Price spikes, however unpleasant, are unlikely to have a major impact on business for anything more than a short term. Fix a long term price and: the price is fixed for a long term.That’s a Risk too. Transparent index prices incentivise enterprises to reduce energy consumption and make efficiency adjustments at times and places where it delivers higher savings and shorter paybacks.
A fixed price may be smart, but if the market turns then the risk is that fixed prices are a significant disadvantage. We just don’t know: but we don’t charge you for the opinion. A fixed price will give you the best price for sure. On that day.Tomorrow? Most energy forecasting is glorified meterology. Will it rain a week on Wednesday? Will your pension go up or down? Most people don’t worry – it’s indexed to the FTSE.
Index prices for energy are the norm in most countries, even for domestic users. Fixed prices are an outdated concept in the UK today – they were born out of the 1990’s. The dawn of UK competition coincided with a collapse in commodity prices. Many end-users mistakenly connected competition with energy price falls. It was mere coincidence. Most countries now have utility competition: but in a world of rising commodity prices, competition is stillborn – < 2% switching rates in the US domestic supply market for example. US, European and Asian consumers can’t see the benefit of paying more to 3PIs to spend more. They are buying energy – not insurance.
Circa 1992/2000 the only way to buy energy was on a fixed price contract. Buyers wanted a guarantee of energy costs when comparing unknown suppliers against the default option of regional electricity or British Gas tariff rates. It wasn’t hard for suppliers to give lower costs in a falling market, and only the largest multi-million pound end-users were offered index prices that performed even better.
But today, the default option is the best option. No guarantees. But no buyer remorse. No second-guessing. The same prices as everyone else. And no extra fees.
In today’s market, what was once a small spend is now a big spend – fixed or index. 3PIs are moving down the value chain to target inexperienced smaller gas and electricity users because at today’s prices they make serious money from fixed contracts – the longer the better. But they won’t make any money telling end-users to use a default option. Even they haven’t figured out a way to make money by telling clients to do nothing.
NHO is advertiser supported. Among those advertisers will be energy suppliers. But they do not pay NHO any commission for your energy use. We think we can make money out of No Hot Air. But not at the end-user’s expense.