05 April 2024
More than many other sectors, social landlords are being negatively impacted by specific challenges which many may not be aware of until it is too late, causing both unwelcome surprises and problems in procuring a new energy contract.
Here we look at the three main challenges that are facing the industry and may be stopping your organisation from achieving the best value from your energy contract:
Meeting the metering challenge
The often-quoted mantra is “what gets measured gets managed;” and this was in large part the government’s intent when mandating the rollout of smart meters (SMET) to support the achievement of Net Zero commitments and the management of a greener energy grid.
As of January 2022, all suppliers now have binding annual installation targets to roll out to their remaining non-smart customers by the end of 2025. Suppliers face several regulatory sanctions if they fail to hit their targets, which can include significant fines, a ban on selling new supply contracts and ultimately the suspension of their supply license. As of the end of June 2023, the planned rollout now covers 58% of all meters which leaves a worryingly high percentage that still needs to be addressed.
Whilst smart meter rollout may not be at the forefront of discussions when considering a new energy contract, the issue is starting to have a material impact on organisations.
Feedback from both suppliers and housing associations has highlighted a particular challenge in accelerating the rollout across the social housing estate. Gaining access to the buildings and areas where the meters are can be a challenge, having contact information for the people needed isn’t always available and coordinating the various teams that are involved can be time-consuming. All of this means that energy suppliers are becoming more reluctant to contract with housing associations as their low SMET rollout impacts the suppliers’ ability to hit their targets.
As a sector, this is becoming a growing issue and is having a real impact on suppliers’ willingness to offer contracts, which can affect how much housing associations are paying for their energy.
Focus on debt management
Not paying energy bills on time might not be a conscious decision on the part of the housing association but if this is not a priority it is becoming a real problem for suppliers. It is also important to have effective estate management that keeps control of meters on your energy contracts and makes sure that billing is received. Often meters might not be billed, and debt accrues without the housing association knowing about it.
From the supplier’s perspective, the sector provides a real opportunity as they are generally big energy users however they are gaining a negative reputation for being bad at paying their bills, which makes suppliers very wary of starting new contracts. Because of this, when the time comes to start a new contract, many will be reluctant to do so if debt management has not been taken seriously.
As well as the risks involved in finding a new contract, within all energy contracts will be clauses relating to the management of debt. If housing associations don’t pay close attention to these, they may find themselves in a situation where they are put on out-of-contract rates so this issue can have a real impact on energy bills.
Spending the time to take stock of what your debt management situation is now, well in advance of your contract ending, will give your organisation enough time to correct any issues and a better chance of gaining the best contract possible. Debt also affects the ability to get credit in the future. If you carry debt or regularly pay late, suppliers’ credit insurers will just refuse credit and make it impossible to attract new prospective suppliers.
To achieve the best results, procurement takes time!
By far one of the biggest issues facing housing associations when it comes to procuring new energy contracts is that not enough time is given to the process with many leaving it far too late to be able to achieve the best results.
More than most sectors, housing associations have complex multi-site estates that are difficult to manage and keep track of. Onboarding the estate can be a time-consuming and complicated process and often this is not considered when starting a tendering process. By not allowing enough time for this process to be completed, an organisation is risking the success of a new contract, start dates can be delayed, errors can be made in the rush, and in worst-case scenarios, consultants simply won’t tender for the contract if they cannot fulfil the request in time. This can severely impact your organisation’s ability to access the best in the market and will have a negative impact on the overall outcome of the contract.
Starting late also leaves little time to resolve any lingering issues, such as debt management and SMET rollout, which as discussed, have become real sticking points for energy suppliers.
As a result, the only option remaining is to stay with an incumbent energy supplier which doesn’t give access to the market and the best prices.
To give your organisation the best chance of getting the right energy contract, the process should start at least 12 months before the end of your current energy contract. This process can start by simply talking to consultants and working through some of the opportunities and challenges that your individual organisation faces, and the wider sector as a whole. Depending on the outlook this then gives enough time to work through those challenges and gives the best chance of securing the best price.
Points of focus:
Whilst smart meter rollout, debt management and the timing of tendering might not be the first things you think of when starting a new energy contract process, we have seen that these challenges are starting to have real-life implications on the contracts that can be achieved when the time comes. Prioritising time to focus on these issues now will mean that you are best placed to achieve the right contracts when the time comes, which in the long run can save an organisation millions of pounds over the life of a contract.
For more information on how we can help your organisation with its energy management strategy, contact us at enquiries@inenco.com or call 08451 46 36 26.