Continuing to purchase energy in the same way you always have could cause you some serious financial damage in the coming months and years.
How would you feel about a 5000% increase in your standing charges? A quadrupling of your capacity charges? These types of increases are happening in the market right now and you will get hit by them if you don’t make changes.
So, why are we seeing these seemingly crazy increases in charges for fixed-term energy contracts and how can you avoid them?
The Impact of Non-Commodity Costs on UK Fixed Energy Contracts
The latest event to cause problems in the energy markets, particularly as far as pricing for fixed contracts goes, is Ofgem’s Targeted Charging Review (TCR).
Whilst this was conducted with all best intentions and will likely achieve its goal of creating a more equitable spread of grid maintenance costs, it has created a tidal wave of uncertainty within suppliers, causing prices to rocket.
These days, the price you pay on your energy bill is only around 50% based on the actual wholesale cost of the energy itself, with the rest composed of a variety of non-commodity costs. A portion of these non-commodity costs cover the price of access to the UK electricity grid network, and it’s these which are affected by the TCR.
Currently, suppliers know that these costs are all going to change and they’ll need to pass these changes on to consumers. What they don’t know is the level of these changes. Therefore, many are estimating the impact with a healthy risk margin.
So, if you’re going for a fixed energy contract any time soon, you’ll likely have these costs, loaded with risk, integrated into your charges.
The Solution: Partial Passthrough Contracts
There is an alternative. A partial passthrough contract will remove all of the risks for both the supplier and yourself, providing assurance that you won’t be subject to speculative risk charges and that you’re getting the best value energy deal.
If you don’t know what a passthrough contract is or how best to compare offers to find the best deal for you, contact Harvest Green, and we’ll be happy to help.