Managing agents will soon be able to choose their electricity suppliers. But there are issues to be resolved before switching companies, says Tony Galloni
Managing agents are about to have additional energy buyer responsibility added to their job description. This is because the first wave of deregulation in the electricity industry (in 1994) affected only a minority of premises – primarily the large consumers whose annual bill was over £12,000. Between now and the end of the year the deregulation process moves into its final phase as every business is given the choice of where to buy their electricity.
For managing agents this is an important step. The ability to handle confidently the effects of electricity deregulation will be an increasingly important skill. Their clients will want to be sure that they are getting the best value while managing agents will aim to capitalise on the more cost-effective administration available.
So choices have to be made. “Switched-on” managing agents will regard deregulation as a chance to gain significant advantages for their clients from the opportunities which are on offer from the various public electricity suppliers (PESs). Others may decide that it is just a complicated headache of options to evaluate and negotiations to conduct. Either way, electricity deregulation cannot be ignored.
The figures prove it – electricity prices can account for up to 10% of building management costs. Managing electrical supply efficiently will produce big benefits on the bottom line.
Simon Spence, divisional director at Richard Ellis, says that energy buying is likely to be the key issue for procurement managers during the next 12 months.
“Energy has always been important,” explains Spence, “but because of the decisions which can now be made, it is especially significant. The cost implications could be tremendous and we are taking it seriously. We have been collating information for a few years, in preparation for deregulation, and now is the time to make use of that information in the best interests of our clients.”
The single most important development for managing agents is that, following deregulation, it will be possible for them to bring all their sites, however big or small and no matter whereabouts they are in the country, together under one contract with one of the PESs. This in itself will increase the buying power of managing agents and yield benefits through streamlining administration and reducing costs.
Or at least it will do if you choose the right supplier. This is a decision that managing agents have never taken before. It will take time before the critical data are made available or properly understood by the industry. What no one wants to do is to rush into contracts with suppliers offering superficially attractive deals.
Even so, one immediate consequence is that managing agents will need to have a tighter grip on the sites they manage and the amount of electricity consumed. As matters stand, many managing agents are somewhat fuzzy about this level of detail. After all, without competition or choice there has been no great incentive to keep a detailed track of the figures. That will now change and most managing agents will appreciate any assistance they can get.
London Electricity has responded by offering a data aggregation service that will help managing agents by giving them a profile of each of their sites.
Starting the process
The switch to deregulation is to be staggered both regionally and locally so that new areas will be opened up progressively from September 7 until March 1999.
Phase one will see the choice of supplier being made available to half-hourly-metered and maximum-demand customers, as well as 10% of customers by postcode in each regional electricity company’s area. In phase two, the remaining business customers and a further 30% of domestic customers will be deregulated by postcode area.
But don’t get too preoccupied with the complex timetable of the transition period. By the time we get to June 1999 the whole country will be deregulated. And it is worth bearing in mind that some IT and administrative products now on offer to managing agents will enable them to pull together all the sites in their portfolio as each area deregulates.
It is also worth taking time to talk with potential suppliers. The more you get sorted out at this stage the less room there is for confusion later on.
So go on. Think about it now – and make sure deregulation works for you.
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Make the right moves |
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What general advice can be offered in the run-up to deregulation?
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Tony Galloni is head of business marketing at London Electricity
