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NFER Sept 2020
NFER Sept 2020

How to Control your School’s Energy Spend

August 27, 2019, 11:30 GMT+1
Read in 8 minutes
  • Many schools have been able to manage their own utilities payments for a while now – but are you truly in control of your highest cost behind wages?
How to Control your School’s Energy Spend

Have you ever waited until the last minute to renew your energy contract, only to find that you now have limited options available and little time to decide?

Let’s step back and consider the options available to you well ahead of time, which could involve one of five different approaches. The first is that your Local Authority (LA) or a public buying organisation will have an agreement with a supplier through a framework that you can access.

Alternatively, you could look to a trusted association such as the ASCL or ISBL and access the mini competition frameworks that they provide.

The third option is to secure the services of a consultant specialising in the education sector that has a compliant process you can obtain access to.

Should you be below the OJEU threshold for compliance, you could potentially use one of the many commercial energy brokers that will likely be hassling your school, MAT or LA on a near daily basis.

Or you could fall back on option five, begin contacting a series of energy suppliers and handle the energy procurement process yourself.

How free are you?

The prospect of leaving your LA’s existing energy agreement is one that remains clouded by myth – the notion that you can’t is simply incorrect. However, you will need to carefully consider the timing around when to provide your notice of termination.

Surprising though it may sound, many less scrupulous LAs and providers attempt to make this process extremely difficult, and will try to tie you into notice periods of up to 24 months.

Make sure you thoroughly check the terms you’re currently signed up to, lest you end up doing a whole load of work only to find out that you’ll have no choice in the matter for a further five years!

When it comes to your search for an alternative contract, your first key consideration will be whether to go with a fixed or flexible contract.

The process of deciding will involve having to address a whole series of different questions, but in its simplest form, I’d suggest seeing this choice as similar to a mortgage arrangement – fixed for a specific period, or variable in a way that will follow broader market trends.

The important difference, of course, is that prices for energy are much more volatile than the Bank of England’s base rate.

In terms of payment methods, there are ultimately only two options available for organisations wanting to operate with integrity. You can pay a fixed fee agreed in advance for the services provided, or else you can pay a ‘per kWh’ commission that’s added to your unit rate and paid by the energy supplier.

Either way, you ought to be happy that you’re getting value for what you’re paying.

Be super productive

For busy school leaders and business managers, the most productive use of your time will likely involve enlisting experts who can do the administrative heavy lifting for you. Your job should be to understand the essentials of what you need to know, and what issues and problems you should look out for.

All suppliers, brokers, consultants and PBOs will purchase energy off the same wholesale market. If the price offered by one of them therefore deviates by more than a few hundred pounds, there’s likely to be something wrong with the offer itself, the calculations made, or indeed the size of the entity’s commission fees. Any and all analysis must be based on the total cost, including all charges – not just the p/kWh rate.

A classic tactic that’s often deployed here is for individuals to provide ‘pass through’ contracts. Under the terms of such contracts, notable charges will initially be left out, only to be passed on later.

At the same time, the capacity or availability costs won’t be included – or inconsistent if they are – and there can often be sizeable discrepancies on standing charges.

What you can rely on, however, are the pressing deadlines and pressure to act that you’ll encounter throughout the process.

While it’s true that energy prices are pretty much only valid for one day at a time, this shouldn’t affect a provider’s recommendations to you, and it certainly shouldn’t be used an excuse for forcing you into a particular decision.

Sure, the price they offer you today might technically be higher tomorrow, but by the same token, it may well be lower. In any case, the contract offer to you as a customer will still be available to buy – it certainly won’t be the case that they can’t offer you anything the following day.

Finally, watch out for the old trick of calculations made on the basis of different consumption rates. Make a point of noting all the rates that suppliers are offering you, and apply them to a single, consistent pattern of energy use.

That way, your analysis will actually provide a true like-for-like gauge of what each supplier is willing and able to provide.

In practice

Zenergi recently assisted a school that was under pressure from its LA to make a rapid decision regarding its electricity contract, with little prior notice and no indication of a contract price for the forthcoming period. Zenergi responded promptly, feeding into a governors’ meeting with useful information.

It was ultimately decided that the best outcome would be for the school to exit its existing electricity contract with the LA.

Zenergi’s offering was some 6.5% cheaper than the school’s previous arrangement, resulting in immediate savings, but also a number of ‘hidden savings’ in the form of assistance with managing the relevant contracts, invoice validation and detailed reports concerning the account as part of the company’s Positive Energy Pack service.

Extract maximum value

Don’t fall for the ‘car insurance’ mentality of prioritising price above all else, getting it done at the last minute and failing to engage with the company you’re partnering with – the latter will prevent you from seeing what else you might be able to get out of them.

Below are examples of some areas that will create genuine value, be it in terms of time and resources or returning funds to your budget:

Bill validation
Because it’s surprising just how many bills from suppliers are incorrect

Visibility of costs
After all, how can you be expected to manage something that you have no control over?

Contract and supplier management
Many reading this will doubtless understand how valuable it can be having someone deal with energy suppliers, so you don’t have to.

Since many schools don’t even adhere to simple energy compliance, or else overpay for things like Display Energy Certificates, you need to make sure you don’t fall foul of legislation

Refurbishment projects
Try leaning on your energy partner and seeing what they can do to help you when, for instance, refitting LED lights or obtaining funding

Graham Cooke is CEO of the education utilities consultant Zenergi.

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