36 | Inside Housing | 00 Month 2015 00 Month 2015 | Inside Housing | 3736 | Inside Housing | 13 November 2015 13 November 2015 | Inside Housing | 37

IN ASSOCIATION WITH STC ENERGY QUESTION AND ANSWER

Why should housing associations be paying more attention to how they procure energy for communal areas? From April 2016, social housing rents will drop by 1% each year, for the next four years. This will undoubtedly require housing associations to look more closely at their budgets and find ways to reduce costs.

Utility costs are a substantial part of their expenditure, hence an opportunity to save money. A more strategic and transparent approach to energy procure-ment and accurate consumption data can result in better supplier contract offers and significant overall savings. Should energy procurement decisions be made on price alone?In our recent energy procurement sur-vey, 69% of respondents prioritised low-est price when procuring energy con-tracts, whereas only 7% put customer service first.

However, it’s not all about price – some suppliers may be cheaper but do not pro-vide good customer service and may not invoice accurately. This could end up costing more in time spent dealing with queries and incorrect billing.

Are housing associations getting value for money, for themselves and residents? Housing associations have a duty of care to provide good services and value for money to their residents. In spite of the focus on value for money, 40% of our survey respondents did not know how much they were paying for their energy broker’s fees. This confirms my fears that some housing associations are not getting value for money.

Housing associations should be aware of all the elements that make up their energy costs, from the unit rates to

and invoices can be very complex and difficult to understand and it is inevita-ble that undertaking this process in house will result in billing errors being missed and possible overpayment on your energy bills.

Just like using an accountant to prepare your tax return, validating utility invoices is a specialist process and in my opinion requires professional software and the expertise of trained energy analysts.

Validation software will detect more billing errors than a manual process. Also, with the introduction of more non-commodity charges being added to invoices, validation is becoming more important. In most cases the savings made here will more than pay for the validation service. What can landlords do to make energy costs more transparent to residents?There is certainly more that landlords can do, such as providing copies of origi-nal utility invoices online. What concerns me is that 45% of housing profession-

energy brokers’ fees. Some brokers’ com-mission fees can be as high as 10% of the energy cost.

We’ve all seen energy prices drop recently. How can housing associations take advantage of this? Housing associations can benefit from low energy prices, but they do have to adhere to certain legislation and imple-ment the right strategies for their sector.

Section 20 of the Landlord and Tenant Act 1985 is the main obstacle here, as a consultation period may have to be implemented if the contribution from any one lessee exceeds £250, or a quali-fying long-term agreement where the contribution from any one lessee exceeds £100 in one financial year. This makes placing long-term energy con-tracts difficult and can risk missing out on low energy prices.

There are strategies that can overcome these limitations, and an energy broker that understands your sector should have the expertise to recommend the most suitable solution. Is there really any room to make savings, over and above simply paying less for the energy consumed?Yes, there is. One way to ensure you’re paying the correct amount for your energy is by fully validating invoices.

This entails checking over 50 elements on the invoice, ranging from the dates, meter readings, unit rates to all the non-commodity charges. Non-commodity charges can be complex and range from the cost of delivering the electricity to your meter, to government-supported renewable energy schemes such as the Feed-In Tariff.

I was surprised to see that 47% of our survey respondents validated utility invoices themselves. Suppliers’ tariffs

Written in association with:

als surveyed said it would be difficult to provide invoice copies.

With the recent expansion of the Right to Buy scheme, landlords may see more requests for information about energy costs. I believe that implementing a sys-tem that makes copies of utility invoices available online is the way forward.

Most professional energy brokers should be able to offer an online service to download utility invoices with a few clicks.

What different models exist for procuring energy, and how can landlords decide what is right for them?There are traditionally two types of energy contracts, fixed and flexi-ble, although a flexible option would create challenges when complying with Section 20.

With a fixed contract you secure a price for the term of the contract, while with flexible contracts you make pur-chases during the term of the contract.

In my opinion, choosing the type of

In light of cuts to social housing rents, Alan Little, business development manager at STC Energy, explains how revising energy

procurement policy can help landlords cut costs

Purchasingpower

“A system that makes copies of utility invoices available online is the way forward.”

How do you predict energy procurement will change in the next five years?At the moment, an energy invoice is made of 45% commodity charges (gas and electricity) and 55% non-commod-ity charges. The non-commodity charges proportion is expected to rise to 70% in the next five years, as additional taxes and charges are brought in by the govern-ment to help pay for the country’s energy infrastructure and renewable power, specifically electricity market reform charges.

Although gas and electricity costs are currently very low, your bills could still be affected by the increase in non- commodity charges. ■

contract depends on whether you have an appetite for risk or require budget certainty. From my experience most housing associations prefer a fixed-term contract that provides budget certainty. What sort of energy brokers’ fee can landlords expect to pay?Traditionally, commission-based fees are included in the unit rates on an energy invoice and are affected by energy usage. This means that an energy broker’s fee could increase if we have a cold winter.

A fixed fee will not be affected by energy consumption and will provide better budget certainty, which will ulti-mately make all energy charges and bro-kers’ fees transparent.

What I found interesting was that 40% of our survey respondents did not know how much their energy broker was charging them.

This confirms my suspicion that com-mission fees are not transparent. Energy brokers’ fees should be in the region of 0.5%-1% of the energy spend.

Biography

Alan Little is a seasoned energy expert and

business development manager at STC Energy. With over 15 years’ experience in the energy industry, Mr Little’s expertise covers both procurement and energy bureau strategies, with an in-depth understanding of the social housing sector.

“Forty per cent of our survey respondents did not know how much their energy broker was charging them.”