4 things most people don’t know about their energy contract

The last 12 months have been turbulent. Many organisations have faced unprecedented uncertainty, with a return to business as usual still out of sight.

The past year of rolling lockdowns – local, regional, and national – has bled into a new year, where we face both economic uncertainty and continued restrictions. Saving money and staying afloat will be the top priorities.

All businesses will have outgoings at a time when income is not guaranteed. Your energy contract is unlikely to be front of mind, but over the course of the pandemic we’ve seen businesses renewing their contracts, rather than shopping around or falling into rollover rates.

Businesses are looking for certainty and stability at a time when it’s been hard to find. Depending on the exact terms of your energy contract, there may still be room for uncertainty.

Now is the right time to familiarise yourself with your energy contract and to look for those charges or elements that could have an impact on your business.

Increases in Third Party Costs

The total cost of energy comprises lots of various charges. Only around half of the final cost of your bill comes from electricity. The rest comes from third party costs (TPCs).

These costs – also called non-energy or non-commodity costs – include the costs of energy distribution and transmission, grid balancing, and environmental charges like the Climate Change Levy. These charges are paid for by energy suppliers, who then charge end users.

Customers on pass-through contracts will have these costs charged directly. Customers on fixed contracts should look closely to see which of the costs are fixed; some may not be.

Haven Power expect third-party costs to rise this year due to COVID-19. The pandemic created difficult circumstances for the energy network, making it more expensive to manage the grid. You can find out more about the impact of COVID-19 on the energy network here.

The additional costs incurred as a result will be passed through to suppliers.

Charges will increase to cover this cost. Some organisations that used less electricity during the pandemic may find their bills have fallen by less than expected, while customers who worked throughout the pandemic may find their bills are higher than usual.

To find out more about how third-party costs might impact you over the coming year, download Haven Power’s latest TPC guide.