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What's happening to energy prices?
With Energy Costs rising rapidly, we asked industry expert  Steve Silverwood from ECA Business Energy for more information on the likely effects to accident repairers who consume a large amount of energy in the repair process.
Current Market
 
The UK’s wholesale energy markets are at record highs,  this has been caused from a global surge in gas demand and  following a cold winter which left UK gas storage facilities depleted.  Whilst the UK has its own has supplies they are not large enough to cover the total UK gas demand, we import gas from mainly via Norway but we also get some gas via Europe/Russia.  The gas flows imported into the UK has had restrictions due to maintenance over the last few months and higher demands for Gas across Europe.
 
We have also seen a drop in renewable generation in the UK (especially in wind generation) therefore we have had to generate more power via gas fired power stations and because gas prices are high it has a knock on to electricity prices.  We have also seen a fire at major power cable (interconnector) that bring power in from France so the power imports are lower than expected.
 
These factors affect both electricity and gas.
How will it affect bodyshops?
 
The  increase refers to the wholesale cost of energy, wholesale costs make up around 35-40% of an energy bill, the rest is made up of non-commodity charges which includes levies, transportation, distribution etc.
 
The bodyshops will be affected if they are currently out of contract or have contracts due for renewal in the coming months. If they already have a contract in place then they won’t be affected by the price hikes until the end of their current contract.
 
Sites that have supply contacts coming up for renewal in the next 3 to 6 months will  see significant increases in their energy costs.. At the current market levels body shops could be seeing increase of over 100%
 
To put this in context, a typical bodyshop could currently have an annual energy spend across gas and electricity of circa £50k, dependant on their contract and status this could increase to over £100k in the current market conditions.
 
If a commercial energy supplier goes out of business then Ofgem must appoint an alternative provider, the bodyshop won’t be without a physical supply.
What should bodyshops do?
 
First thing is to find out their contract status with their current provider. It their contract renewal date is beyond 6 months then the recommendation is to take no action currently but diarise to review the market on an ongoing basis.
 
If their contract is due now or they are out of contract then they should get in touch with their broker / consultant or the supplier direct to discuss a short, medium and long term strategy. This strategy will depend on the individual circumstances of the bodyshop but the more options they consider the better.
 
If a bodyshop is having difficulty in paying their energy bills, they should talk to their supplier / broker immediately to agree a plan moving forwards, suppliers are entitled to cut off supplies for non-payment as a last resort.
 
The bodyshops should now be thinking about energy reduction strategies and look to reduce their consumptions as much as possible and longer term think about self-generation, i.e. solar, wind etc.
For a free non-obligation review of your current situation and options, please contact;

Steve Silverwood
T: 07778349087
E: steve.silverwood@ecabusinessenergy.com
Find out more about ECA Business Energy.
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