PSO Levy to increase by up to 85% on 1st October 2014 – Is your Business ready to offset the increase?

<br /> Declan Quinn

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Declan Quinn

If you are a business leader / owner responsible for a medium or large electric supply for your company, you may have seen the recent communication from the Commission for Energy Regulation (CER).

The CER has just announced that from 1st October 2014 the electricity PSO Levy will increase by up to 85% for medium to large businesses. Conversely, if you pay for a smaller supply you may be experiencing “PSO apathy” and be thinking these increased charges don’t affect me. Think again; small users will see their PSO levy increase by up to 71%.

What is PSO?

The Public Service Obligation (PSO) was introduced in Ireland in 2002 post implementation of competition in the electricity market. Purpose of the PSO levy being to compensate ESB Networks for the additional costs incurred in their endeavors to produce electric from peat and other environmentally friendly (wind, hydro & CHP) forms of energy.

What is the relationship between PSO levy and Maximum Import Capacity (MIC)?

The foundation of the PSO levy charge is the Maximum Import Capacity (MIC). The MIC is calculated based on the total electrical load installed at your premises and the timing of this load. In non-technical terms, your premises MIC is like a contracted order between your business and ESB Networks. You are telling ESB Networks to always make available your MIC requirements. These requirements are determined as the upper limit on your total electrical demand. The MIC needs to be high enough to meet demands of the business.

Regulator’s role in determining PSO Levy?

The Commission for Energy Regulation (CER) determines annually what the next year’s PSO levy will be. The key question for businesses is why do we have to incur such a large increase this year and what are the drivers for this increase?

  • Lower wholesale electricity prices. Average wholesale prices have dropped by 11% from original forecast. The means that electric generation plants will need more PSO revenue to cover their costs.
  • Increased generation of renewable energy. Hence more PSO revenue is needed to cover cost of generation

How will the PSO levy increase apply to my business?

There are two business categories affected by the increase in PSO levy.

  1. Small commercial customers with an MIC <30kVA. For this group the PSO levy will be €18.47/month as opposed to current €10.82 / month.
  2. Medium and large energy consumers with an MIC >30kVA. Medium and large customers will now pay €2.85 / kVA as opposed to current €1.54/ kVA.

Note:– for medium and large electric consumers the MIC and PSO charges can account for up to 11% of your monthly bill at current rates. Under the new PSO levy from 1st October 2014 the new charges will now account for on average over 14% of the monthly bill. In monetary terms, let’s assume you have a medium supply with an MIC of 350kVA. For your business the annual cost increase will be €5,500 (i.e. the business must find an extra €458/month to fund the increase in PSO levy).

In short the PSO levy charges are unavoidable; they are essential to pay for investment in renewal energy. However, there are ways to reduce the impact of PSO levy increase on 1st October 2014.

  1. Use Less Energy. An obvious answer – surprisingly overlooked by most businesses.
  2. Review your MIC. When was the last time someone measured your actual electrical load requirements v’s your planned loading and contract to ESB Networks?
  3. Perform and Energy Audit. Energy audits can identify some “low hanging fruit” which could potentially reduce your loading. This would then lead to reduced MIC and would lower the businesses’ PSO charges.

When was the last time you reviewed and took action with your electric fixed charges like PSO and MIC?

As Winston Churchill once said, “ I never worry about action, but only inaction”.

Inaction is not an option when your energy costs are rising. Contact me to discuss your options to try and offset this increase.

 

Energy Management

Energy Management is a crucial part of any organisation and more and more are really getting up to speed with this area as a means to reducing their spend. Like any account, be it big or small, it needs to be managed carefully. From tendering, to measuring, establishing results and reporting. The problem some face is that the resources within their organisation are not easily available to carry out such ongoing activity. They also are not up to speed with current industry practice and developments. That is where Auditel can help. We can be your outsourced energy management consultants.

From Energy Audits to tendering and account management you can have it all with no full time salary additions or extra drain on present resource. Our ongoing training and market knowledge ensures you get the latest technology in helping you to reduce your emissions, carbon footprint and your costs.

You Can Cut Your Oil Heating Costs

Are there any real guarantees in this world? Well, I’ll let you decide on that one. But, I do know that if you’re spending €10,000 or more annually on oil heating – we should talk.

Businesses across Ireland are switching from oil to biomass for one very good reason. Typically, you will save upwards of two thirds of your current cost of oil. And, with the Auditel cost management approach, we can help you work through an ESCO (Energy Services Company) to give 100% certainty over your heating costs for the next three years. During this period, the ESCO will install and maintain all required physical plant, provide total energy cost stability and do this with no capital outlay on your part.

After an initial no cost meeting we can present to you a simple, one page business case outlining current costs, projected costs, savings and project payback time.

Given the ever increasing costs of oil heat, is there any reason not to explore this impressive and sustainable cost saving measure? Contact us to book your free Business Health Check

When did you last tender your energy contracts??

When did you last tender your energy contracts?  Ok, so you have never tendered them. We can tender these for you and achieve anywhere from 8 to 12% reduction in rate and we will analyse your capacity charges to make sure you are not paying for capacity that you do not need. If we find something we can share the saving. If you are on competitive rates and we do not find a saving, our tender analysis will be free to you.

What have you got to lose?

Well if you do not tender you stand to lose on what you would have saved by having mus tender.

Auditel are doing this every day for our clients and we are achieving these types of savings.

Energy and Communications Savings Opportunities

When we look at our energy and communications invoices, do we actually understand the make up of the account or do we just look at the invoice total and move on. We say to ourselves “I must reduce the spend on that soon”. Does that soon ever come around? Or does a supplier fall in through your door some day with this fantastic offering that you just can not refuse to take? You sign up for a twelve month contract again! And after three or four months you are looking at the invoice total again and wondering where is this “fantastic offering”? Where are those savings?

Can you ask yourself these 4 questions?

  • Do I completely understand packages and bundles on my mobile account?
  • Do I completely understand my landline charges and how to secure a package most suited to my call pattern to reduce cost?
  • Have I ever had an energy audit completed to ascertain how I would reduce my energy usage and reduce cost on my energy?
  • Do I have my energy supply tendered to suppliers to achieve the best rates available?

If you have answered no to two or more of the questions above then it is more likely that your competitors might have the edge on you in controlling their costs ! Do you really want a situation like that?

We can call to your office free of charge and we can go through what you could be missing out on and how Auditel can help you reduce your costs. This meeting is free and our fee’s are structured on shared savings so our clients are on a gain from day one.

There is no excuse to not have the best available tariffs.

 

Concerned about Energy Costs? You Should Be

Escalating energy costs have become a major headache for Irish companies of all sizes. Over 60% of electricity is generated by natural gas sourced from the U.K. and the weakening Euro has elevating the cost of electricity production in Ireland over the recent years. The rising cost of capital has also forced increased transmission and distribution costs on the market (expect another 7% increase in October). In a market place where inflation is running at an all time low, such a rise in a non-core cost eats directly in to bottom line profitability.

How can Finance teams combat this rising cost?
By actively managing both energy unit cost and consumption, organisations place themselves in the best possible position to minimise this cost factor.

Sounds easy? Maybe not.
Within Irish organisations today, in-house resources for managing non-core costs have become increasingly stretched. To become familiar with the market players and the industry terminology used is time-consuming and ultimately distracts from essential core activities. Deciphering “DUOS” charges, “TUOS” charges, “SEMO” charges, Capacity charges, Multi-tariff rates, etc. etc. is a minefield and requires expertise not normally found in finance departments. Comparing rates from competing suppliers has become increasingly complicated and selecting the “best deal” requires in-depth analysis.

So what is the solution?
By outsourcing the management of energy cost, the following benefits will arise.

  • Ensures lowest possible cost for energy purchase
  • Ensures strategic management of energy consumption
  • Releases in-house resources to concentrate on core activities
  • Allows peace of mind, in the knowledge that this cost is being actively managed by experts

Sounds great, but what is the cost?
Auditel can provide this service on a contingency basis with no direct cost to the client. Payment is made through shared savings with no upfront fees. We can take over management of your energy costs today and your organisations bottom line can improve immediately. If there are no savings, then there is no cost. So the question instead of being “Why?” becomes “Why not?”

The Impact of US Oil Independence

Gas StationThe US focus on increasing it’s energy self sufficiency due to the rising level of production of gas, from sources such as shale, existing field tight gas, blended ethanol and other renewable sources will in turn impact on world oil and gas prices, commodities and the value of the US Dollar and other currencies.

The EIA reports on the US dependence on imported petroleum liquids declining by more than 1 million barrels per day by 2020, with the fracking production of gas to increase US reserves to around the 100 year level.

It is anticipated that Australia will become the largest energy exporter in the major industrialised economies with the potential to ship LNG, coal uranium and oil to the Asian economies

With the US not as dependent on Middle Eastern crude, China and Europe, along with Japan, Korea and India could become major users. But with the value of the Dollar on the increase, oil prices will not necessarily rise as many projections forecast, while renewables are therefore likely to remain uncompetitive and need subsidies for longer.

Article source: British Investment Digest
Photo courtesy of FLICKR user: Jurijus Azanovas

Businesses can save up to 80% on their energy bills

Auditel, the UK and Ireland’s premier cost management consultancy, generate savings for organisations over an enormous range of business expenditure. Last month, they added yet another opportunity to reduce both cost and energy – LED lamps.

The quality and performance of LED replacement lamps has come a long way in the last few years. Their hugely improved light quality and low energy consumption means that businesses can save up to 80% on their energy bills by installing LED lamps in place of their existing halogen or incandescent bulbs.

ENERGY SAVING
In the face of ever-increasing energy costs, companies are searching for ways to save energy. Increasing insulation, upgrading boilers and self-generating power can be expensive and disruptive to the business, often with a slow return on investment. Simply replacing existing lamps with LED is fast, easy and highly effective. For example, a typical halogen spotlight that uses 35W of energy can be replaced by a 6W LED, leading to energy and cost savings of an impressive 80%.

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Energy – A Burning Issue

How Financial Directors can Regain Power Over Rising Energy Costs Impacting Their Organisations’ Profits

Wholesale energy prices have soared in the last six months as high oil prices continue, the Middle East is uncertain and the nuclear disaster in Japan causes concern. The major energy providers have passed these price increases on to their business customers. Many face energy bills which could be 50% higher than they were paying only two years ago.

In June 2011, the FT and The Economist Business Barometer Research found that leaders foresee the biggest risks to their businesses to be rising costs of oil, commodities prices and interest rates. This prompts greater scrutiny of their profit margins and higher expectation for financial directors to perform in challenging times.

In July, after a second major British energy supplier announced double-digit tariff increases, RWE npower reported: ‘Three hundred major and small energy user companies counted energy as a top risk concern, next to sales and legislation, in their Business Energy Index 2011. Only 66 percent said they had a strategy to manage it.’

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Watch your back bills

Talking to a couple of our consultants this week it’s becoming clear that all the major energy companies are keen to claw in every penny they can in these hard times, which is why they have set up teams whose remit is to go back over business energy bills for up to 6 years. We’ve seen a number of cases in which these teams are generating new bills for old, and claiming tens of thousands of pounds from their business clients. The good news is that these bills are frequently wrong for a wide range of reasons so, if you know what you’re doing, you can get them reduced or even cancelled. At Auditel, of course, we do know what we’re doing and have good contacts and relationships with all the major energy suppliers so have had great results for our clients caught in this trap.

For example, one of our clients, the owner of luxury holiday home parks, received a £57,000 back bill for one site dating back to 2004, when they acquired it. A thorough investigation revealed a number of billing and administration errors which, when coupled with some tough face-to-face negotiation with the supplier,  brought the invoice down to £21,000, an overall reduction of 63%. Another, food distribution, client received a final bill for a site they had moved out of 15 months previously. The bill was demanding just over £32,000 based on the fact that the energy company had misread the meter for the 5 years our client was in the building. However, after much  time-consuming negotiation we were able to halve this demand.