The government must provide more clarity to suppliers to ensure companies on flexible contracts are given sufficient support this winter, a major UK energy firm has warned.
Anthony Ainsworth, COO of Npower Business Solutions, said AM City that “time is running out” for suppliers to put their systems in place to support their customers in accordance with the energy bill relief program.
While he was “super supportive” of the package, which he said would ensure businesses would remain competitive and jobs would be protected, Ainsworth argued that Npower “still needs to see the finer details” on the how companies with flexible contracts will be protected.
Otherwise, it would be difficult to get them into support measures in time for November.
This would mean that energy consumption this month will not be discounted, with companies swallowing very high bills for longer than expected.
The energy boss explained: “Time is running out because we have to update our systems and test those systems. To make this work for October consumption, the government needs to move forward fairly quickly this week, so providers like us can make all the system changes we need.
Flexible contracts leave companies exposed
The energy bill relief program will protect companies on fixed-term contracts with a cap on unit pricing for the next six months.
This was set at £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas, which is significantly lower than current wholesale price rates.
Suppliers will then apply these reductions to the bills of all eligible business customers, with the government compensating suppliers for the reduction in wholesale gas and electricity unit prices.
Energy specialist Cornwall Insight predicted the package would cost around £25bn, but that is highly dependent on wholesale costs, with Investec predicting the overall price could range from £22bn to £48bn.
For companies with flexible deals with variable tariffs, the rebate will reflect the difference between the government backed price and the wholesale price, but will be subject to a ‘maximum rebate’ of £345/MWh for electricity and of £91/MWh for gas.
This rate is considerably higher than fixed term rates and, according to Ainsworth, does not take into account the nuances of the commercial vendor market.
Comparing it to the Household Support Scheme, he said: ‘There’s huge complexity in the type of contract and the offering, which means it’s not that simple to say, ‘Oh, here’s the program that we are going to put in place for the next two years.
Flexible contracts allow companies to buy energy in a way that takes into account the ups and downs of the wholesale market, rather than a fixed price.
This typically involves following the wholesale market and purchasing smaller amounts of energy over the life of a contract.
The benefits are that it can allow companies to be more reactive with their energy consumption and choose how far they want to buy energy in the future.
However, it also leaves companies exposed to huge gas price spikes and market volatility, which have characterized the energy market over the past 18 months with the collapse of 30 suppliers and record highs. bills.
Six months of assistance will not be enough
Npower was acquired by Big Five provider EON UK three years ago, with two million residential and business customers transferring to the parent company in 2021.
Its business solutions offering, which has retained the Npower name, has 20,000 large industrial customers – supplying 30 terawatts of electricity – including many customers under flexible contracts.
Ainsworth revealed that the company’s teams are very actively engaged with the Department for Business, Energy and Industrial Strategy (BEIS) to resolve any operational issues by providing support.
Along with concerns about support for customers on flexible rates, he argued that the sooner the government established support available after six months, the easier it would be for businesses.
The government confirmed its intention to review the package and the future measures envisaged after three months.
He said: “They talked about supporting the most vulnerable businesses and industries, but without any definition of what that might be. So we’re really keen to engage with BEIS on that and what a longer term support program might be.