Why CCL (Climate Change Levy) is Increasing

Why Is CCL (Climate Change Levy) increasing?

Depending on your supplier you may or may not have been advised yet about the increases in CCL that comes into effect on 1st April 2019.

Climate Change Levy (CCL) was originally set up as a form of taxation to encourage the more efficient use of energy and thereby reduce carbon dioxide emissions. This year’s increase represents the biggest increase seen since the introduction of the tax in 2016 as demonstrated in the table below.

Climate Change Levy main rates

Taxable commodity Rate from 1 April 2016 Rate from 1 April 2017 Rate from 1 April 2018 Rate from 1 April 2019
Electricity (£ per kilowatt hour (KWh)) 0.00559 0.00568 0.00583 0.00847
Natural gas (£ per KWh) 0.00195 0.00198 0.00203 0.00339
LPG (£ per kilogram (kg)) 0.01251 0.01272 0.01304 0.02175
Any other taxable commodity (£ per kg) 0.01526 0.01551 0.01591 0.02653

 

So why the huge increase?

To simplify the complex burden and administrative headache to users having at least 1 settled HH meter and using 6,000 Megawatt hours or more currently registered under CRC ( Carbon Reduction Commitment) it was announcement in the Budget 2016 that CRC would cease with the last report being submitted by the end of July 2019 and the final surrender of allowances in October 2019.  As CCL was already a simple form of taxation currently in place at this time measured on individual usage it seemed the most logical way to recoup the tax revenue lost by closing CRC .  Unfortunately, that now means all businesses will be eligible for the CCL increase and not just those that were registered under the current CRC obligation.

But why am I now paying a higher CCL charge when I never qualified for CRC payments?

Whilst some would argue that doesn’t seem fair, it is based on every businesses usage and therefore could be argued that this represents a lot fairer system, in the fact that larger users will be contributing the most based on their output usage and smaller users will be affected minimally.  CCL is purely a taxation for businesses, and this does not affect individuals and domestic use.

Definition of Domestic:

  • school and university residential accommodation for students and pupils
  • homes for the elderly and disabled
  • monasteries, nunneries, and similar religious communities
  • children’s homes
  • hospices
  • self-catering holiday accommodation
  • houses, flats or other dwellings
  • supplies to community heating schemes
  • armed forces residential accommodation
  • caravans
  • houseboats

Unfortunately this is an increase that will affect every business unless you fall into the exemption category of having Gas and Electricity supplies that are eligible to be charged at 5% VAT,  A Business using energy generated from renewable resources, A Business using electricity generated from qualifying CHP (combined heat and power)source, Businesses using energy in metallurgical and mineralogical processes.  In addition, if you have a CCA (Climate Change Agreement) in place then you will be eligible for discounts of up to 90% on electricity and 65% discount on gas of the CCL charge.

The best way to reduce your CCL charges is to reduce your consumption for your premises and to ensure you are aware of all charges when procuring your energy contracts. Monitoring your energy consumption is the starting point for an energy reduction program. If you would like further clarification on CCL or indeed would like to reduce your consumption either directly or in line with a CCA agreement, then please contact Flame UK on 0115 896 5460 and we can discuss various consumption reduction programs with you.

Choosing the Right Energy Contract

What type of energy contract should I have?

Energy is a necessity, and everyone must have it to operate their business.  It can be a big chunk of a business’s spend normally ranking within the top 3 expenses and needs to be reviewed effectively to ensure the business is not only on a competitive rate but also the right type of contract.

There are many types of businesses, consumptions, meters etc. across the industry which can contribute to how a decision is made and what contract is best. There are many factors to take into account like budgets, requirements, systems, and even political unrest i.e. Brexit for when a contract is agreed.

It is difficult to know what type of contract to go with due to the uncertainty of the market, however, if you can make informed decisions that are right for your business it helps to make the procurement process a lot easier.

The contract types are below and how they tend to work;

Fully Fixed

This is the most common and suits all business types looking for security and will have their prices fixed throughout the duration of their contract regardless of how long the contract length.  The suppliers build in an element of risk into the overall unit rates to ensure the rates are viable and sustainable.

This type of contract will protect you against any mid-contract price increases and provide full budget certainty for the duration of your contract. This does not necessarily mean your monthly payments will be fixed as this is determined by the kilowatts used.

Fixed (Partial Pass Through)

This works in a similar way to the fully fixed option however, the prices can be changed at any point if a certain threshold is met or there are extreme bullish movements within the wholesale markets. The thresholds/ terms will be set by a supplier as to when the prices change and any increased is passed on to you.  It is always recommended to get a firm understanding of exactly what has been set which can include any number of the third party charges and varies from supplier to supplier.

 

Pass-Through

Pass through contracts differ from the fully fixed/fixed options as it is only the duration and the wholesale commodity cost of the energy that is fixed with the remainder of the price (third party costs) being passed through to the end user at cost rather than the fully fixed contract as these charges are higher as there is a risk factor built in to them. With the pass-through contracts, the third-party charges as variable and can change at any time so there is only a commodity cost budget certainty for the business.

The passed through / third party are listed below and can vary from supplier to supplier;

  • AAHEDC – Assistance for areas with High Electricity Distribution Costs
  • BSUoS – Balancing Use of System charges
  • CM – Capacity Market
  • CfD FIT – Contracts for Difference Feed-In Tariff
  • DUoS – Distribution Use of System Capacity
  • DUoS – Distribution Use of System Excess Capacity
  • DUoS – Distribution Use of Systems Fixed
  • DUoS – Distribution Use of System Reactive Power
  • DUoS – Distribution Use of System Unit
  • FIT – Feed InTariff
  • Meter Rental
  • Metering & Meter Reading
  • RO – Renewables Obligation
  • TNUoS – Transmission Network Use of System

Flexible

Flexible contracts have become a more popular tool to manage risk in electricity purchasing.

Compared to a fixed contract which has the cost essentials locked in for the contract, including the commodity cost, a flexi contract doesn’t have the energy part included when the contract is signed.

Non-Commodity Costs can be Fixed or Pass-Through in a Flexible energy contract, but the energy pricing is done throughout the duration of the contract – you will always be supplied energy and you have the ability to set the price of your energy through trading. You can buy at times the market is looking favorable according to your knowledge/expertise.

This is typically for businesses on a very large scale who usually have a dedicated employee/department overlooking the whole operation.

There are many factors before agreeing on a flexi contract, the main ones you’ll need to decide are;

  • Duration
  • Portfolio management – you can add and remove meters.
  • Energy purchasing – Exactly how you are going to buy the energy
  • Non-energy costs – Fixed or Variable?
  • Billing

There are also deemed contracts/variable contracts or ultimately no contract in place at all which means typically you’ll be paying above market average prices for your energy and need to be looking to agree one of the above which will depend on your business type and energy purchasing strategy and adversity to risk.

Within each contract type, each supplier offers multiple variations and options, so it is important to have a strong knowledge of each suppliers’ products as you are unable to make an apple for apple decision without this.

Whatever the contract, our experts can help you – just call 0115 896 5460.

Brexit, what happens to the energy market?

Brexit, what happens to the energy market?

Every day we are now all too familiar with the words “deals” and “backstops” being mentioned with the Brexit media coverage regarding business preparation. As a business we are asking ourselves should we be doing something now?

Most of Great Britain’s energy market links with Europe are bundled up in the wholesale market. The Internal Energy Market which is Europe’s solution to harmonising the wholesale energy market was created during the last 5 years.

European Codes were introduced such as the Trans European Replacement Reserves Exchange (TERRE) and with it the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT), which placed obligations on reporting changes in supply and demand patterns that may influence wholesale prices.

In these very uncertain times most of the communication from Ofgem has related to REMIT contingency arrangements in the event of a no-deal withdrawal.

In December 2018 Ofgem published a letter informing parties that it will continue to monitor and enforce the integrity and transparency of the wholesale market. Within 4 weeks of exit, all participants entering transacting trade orders will be required to register with Ofgem.

In addition, the Regulator has consulted with the industry throughout 2018, leading to its recent January consultation.   This examined the consequential license modifications in the event that the UK leaves the EU without a deal. It is still the plan that the Withdrawal Agreement will be implemented (allowing for an orderly transition), and that the proposed changes will only be enacted in the event of a no deal.

It is highly likely that energy markets will experience anxiety and uncertainty and therefore volatility during this time of unchartered territory and usual market Trends would be likely to be eradicated by the uncertainty with increased costs incurred when signing a new contract.

Whilst the market is still stabilised pre Brexit we would strongly recommend having a review of your current contract to give you the ability to forward signing a new contract ahead of the predicted volatility forecast.

Whether your current contract is due in the next month or next year we can still forward purchase now on fixed contracted rates to start at that time, giving you the peace of mind in these uncertain times.  Please contact one of our energy experts on 0115 8965460 who will be happy to help and guide you.

 

Image credits

Creator:ANDY RAIN

Credit:EPA-EFE

Choosing the right Energy Supplier

How do I choose a good Energy Supplier and find the right contract?

It can be a minefield when it comes to choosing a good energy supplier for your business, with more energy suppliers to choose from how do you make the right decision? Here are a few simple ways to make the process simpler and easier.

Top criteria for your selection process

  • Which supplier is offering the best rate?

In your selection process in choosing an energy supplier, you should look at which supplier has the lowest rate. Having a recent energy bill to compare what you are currently paying for gas or electricity against what the supplier is offering is a great start in your selection process.

  • What contract length works best for your business?

Energy suppliers offer a full range of contract lengths. These contracts range usually from 6 months to 60 months as a standard, don’t forget that bespoke end dates can be arranged if you want to look at aligning your contracts.  Dependant on the wholesale market sometimes longer term contracts can be more cost effective than shorter alternatives, due to many factors (I will be writing a blog specifically on this subject soon), but don’t forget to factor in your time!

  • What contract type works for your business?

There are different contract types varying from fully fixed contracts to partial or fully pass through contracts.  Each supplier has slightly different names for each contract so it can be confusing, but the underlying factor is establishing whether your costs are fixed for the contract period or not! Its not to say that either are cheaper parse, you must factor in your consumption when looking at standing charges, those with very low consumption can often be better off with a higher unit rate.

  • What terms and conditions are the best?

It might be fine selecting a supplier that offers good rates and the contract length you want, but what happens when it comes to the terms and conditions?

You need to look out for excessive late payment fees, being penalised for over or under consuming the energy consumption you are contracting and other charges that may not be included in your unit rate. If your planning any energy efficiency projects that will reduce your energy consumption drastically then look out for take or pay!

So once you have satisfied yourself with all of the above credentials. Looking at supplier reviews can be a good indication of service levels and will give you the most recent comments and concerns experienced by their current customers.

  • Most important of all……Get a team on your side!

To simplify the whole process a good energy broker will be able to provide you with the knowledge needed to make that informed decision and advise you on every aspect of choosing the right energy supplier and contract for your Individual business needs.

As a broker we are very selective when it comes to the energy suppliers we work with, and whilst we work with a full range of suppliers ranging from the big six to some suppliers that only work with brokers, there are still a few that do not meet out strict accreditation process.

We regularly assess our suppliers based on rates, customer service, supplier terms and conditions and general reliability and position in the market.  As this is an ongoing process it gives you the peace of mind of only being placed in contracts with reputable companies.

No one wants to be placed into a cheap energy contract only to find 6 months later that the supplier has gone bust, energy prices have gone through the roof and you are left with no alternative other than to sign a new contract at a lot higher rates.

 

For further information and find out which energy supplier would be a good fit for your business please contact our energy experts on 01158965460.

 

Connect or follow me on LinkedIn for regular insight and news.

Pam Knight

Student Power

Students brought traffic to a standstill outside Parliament on Friday 15thFebruary. They were among thousands of students across the world to take the day off school for a climate change strike.

It is said to be the first in a series of escalating actions, with the next strike date set for March 15th as part of a globally coordinated action.

Driven by what they see as an alarming lack of Government leadership on climate action over previous decades, young people say they are determined to highlight the need for positive change to avert the impending climate breakdown.

The strikes are inspired by Greta Thunberg, who, aged 15, put climate change firmly in the spotlight after skipping school to demonstrate outside the Swedish Parliament. She said her actions were a bid to get politicians to “…prioritise the climate question, focus on the climate and treat it like a crisis”.

The IPCC Special Report on Global Warming of 1.5°C, warns that humanity has just 12 years to avert catastrophic climate change. It’s a stark headline that has re-energised the environmental movement and prompted tens of thousands of students to act.

The UKSCN (UK Student Climate Network) said “The messaging is clear, we need to act now to ensure current and subsequent generations have a future to look forward to”

 

 

Should I use an Energy Broker for my Business Energy?

When you’re running any business, depending on the sector, most of your time is taken up making sure your business is doing what it should. Whether that’s managing people or selling products, there’s some things that you shouldn’t have to worry about. The lights being on or the office being warm is one of those things. The Energy world can seem very complicated and figuring out which of the hundreds of suppliers to go with can be a nightmare. At Flame UK we take away that headache for you by doing all the leg work for you. Not only will we search the entire market, but we’ll use our expertise and experience to get you the best possible deal. Here are a few reasons why using an energy broker, like Flame UK, will benefit both you and your business.

YOU’LL SAVE MONEY

The main reason any of us change our energy tariff is simply to save money. The last thing you want to do is waste money unnecessarily. Using an energy broker is a easy way of ensuring you get the cheapest deal you can. Thanks ties with a large number of gas and electricity suppliers and constantly monitoring the market, brokers can always tell you what the most affordable tariff for you is.

YOU’LL SAVE TIME

Running a business take up huge amount of time and dedication. Researching various suppliers and what they have to offer just takes up time you don’t have. Using an energy broker, however, makes the entire process quick and easy on your part. The broker takes care of all the time-consuming parts for you, gathering quotes and handling all the paperwork that comes with switching.

YOU’LL HAVE ACCESS TO EXPERT KNOWLEDGE

You may know little about energy and the energy market and you may even feel daunted by the prospect of searching for a good deal. If so, an energy broker is exactly the kind of middle man you need. Energy brokers are gas and electricity experts; they’ll be able to answer any questions you have and break down all the jargon into terms you understand. They’ll make sure you know everything you need to know about the tariff you choose to switch to and how much money it will save you.

YOU’LL UNDERSTAND YOUR OPTIONS 

There are a lot of different energy providers. You may know about the big six, but can you name many others? The suppliers you know about and would think to get a quote from aren’t necessarily the ones offering the most competitive prices. Through an energy broker, you may be introduced to a supplier you’ve never heard of which offers a tariff that is ideal for your requirements. You may even know exactly how much choice there is and feel overwhelmed by the number of energy providers and tariffs out there. An energy broker can narrow down the options for you and summarise why certain ones are best suited to your business.

YOU’LL GET ALL THE HELP YOU NEED IN THE FUTURE

Your relationship with an energy broker doesn’t end once you’ve switched your tariff. A good broker will be there when your new contract ends, ready to make sure you keep getting the best tariff available to you. This means that arranging your energy contracts in the future will always be as fuss-free as possible.

Speak to Flame UK today about your energy needs and we’ll find the best deal on the market for you and take care of everything else. Call our experts on 0115 896 5460 or email Sales@flameuk.co.uk