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Keep your cool with contracts

Author: James Markab
by James Markab
Posted: Feb 25, 2015

So, you’re on the way to securing the energy rates that are best for your business and now you can sign on the dotted line and get on with the day-to-day running of your business. Right? Well, not exactly, because there can beone more mountain to climb in the complicated relationship that can exist between independent business and energy supplier – the contracts. Often more confusing than the rates and tariffs, they can be a tricky aspect to negotiate, often fraught with complicated and jargon heavy minefields. For this reason, more and more people are turning to energy consulting firms. Their job is to leverage the market position and use acquired expertise to secure optimal contract terms that are most favourable for you. Usually, instead of using just contract expiration dates as the sole driver for energy procurement, they are able to identify strategic sourcing opportunities by constantly monitoring market dynamics to identify the best possible purchase opportunities. A key ability that a consulting firm should demonstrate is the ability to see energy opportunities and trends before they occur and capitalise on them before they disappear.

Typically, an energy consulting firm advise on the following things for a client:

  • Liquidation standards
  • Data operations
  • Rate analysis
  • Energy risk management
  • Budget development
  • Market intelligence

Energy contract negotiation, like any other type of negotiation, is a practiced skill. Equally important is extensive knowledge of the types of energy contracts and the clauses that are included within.

Things that can be negotiated within a contract:

  • Payment terms - fixed term or monthly indexed agreements
  • Fixed or indexed pricing options
  • Direct purchase from public and/or ‘green’ suppliers
  • Environmental impact options
  • Credit conditions
  • Cancellation rights

There are also different types of contract depending on the business, such as deemed contracts and the Micro Business contract, which OfGem is currently working on to put in place by December 2014.

What is a deemed contract?

  • A deemed contract is normally in place when any type of customer moves into new premises and starts to consume gas, electricity, or both, without agreeing a contract with a supplier.
  • A deemed contract may also exist where an existing contract comes to an end but the customer continues to consume energy.
  • Around 10% of micro-businesses are on deemed contracts. It’s vital that they are aware that prices on these contracts are on average 80 per cent more than rates charged in a negotiated contract.
  • If you are a business customer using energy on a deemed contract, the supplier cannot prevent you from switching to another supplier, for any reason or at any time or require you to give notice before terminating the contract and charge you a termination fee.

The contract stage of the journey that a business embarks on to achieve the most efficient energy sales levels can be a long winded and complex one. It is well worth conducting research, knowing your rights and fully understanding particular clauses, particularly ones that may save you money at face value but cost you more in the long term. If in doubt, the best way to feel confident about your contract is to use the help of an expert consultancy firm who can save you time by taking care of all things legal.

Source:http://onlinedirectuk.blogspot.com/2015/01/how-to-run-successful-business.html

About the Author

Author writes various articles and blogs about the Business Energy that suggestions about saving money on your electricity bill.To know more about your Energy Broker.

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Author: James Markab

James Markab

Member since: Dec 26, 2014
Published articles: 2

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