How to avoid choking on your coffee next April
Here’s a puzzle: you have a deal with your local barista where you pay the same price per cup for the first ten coffees you buy in a month. You will also pay the same for any after that. Your bill at £2 a shot shows £20 for the first ten coffees and £4 for another 2… a total of £24 for the month. This is all very straight forward and good for budgeting.
Then, one day you come in and the barista tells you that your bill for the same amount of coffee will go from £24 to £38 – a 58% increase. How come? Time for a new barista or is it more complicated? Find out here…
In the scenario, prior to the pricing structure change, you are paying the same price for every cup of coffee – whether you buy 10 or 30 per month. The change that the barista has implemented is that there is now a cap on the amount of coffee you can buy per month to account for coffee bean restrictions from their suppliers. In this example the barista has set the cap at 10, with every cup bought above this per month moving from a price of £2 to £6. You’ll probably start drinking less coffee (if you can) and your budgeting will take some managing.
Coffee & Electricity
Replace the cost of coffee with your actual electricity costs in your business today and the principles behind this scenario take on a very real and potentially costly turn; Alastair Gets, Argand Solutions’ Lead Analytics Engineer explains:
“This is all about DCP 161, which is new legislation that is being introduced by Ofgem from the 1st April 2018. It will affect all UK businesses that have half hourly supply – and unlike finding another barista, there is no getting away from it.”
“Exactly how businesses are affected will depend on many factors and will vary from location to location, but the main consideration is that businesses will incur additional costs when their electricity demand exceeds their agreed ‘Available Capacity’ level; this level is typically arranged between each business customer and its electricity supplier.”
The Critical Cost Factors
Stepping back a little: the majority of businesses that use half-hourly metering receive an invoice for their electricity that shows two distinct categories of consumption; the “available capacity” and the ‘excess capacity”.
For many businesses the electricity in both categories is charged at the same unit price, but this is set to change in April 2018.
From this date customers exceeding their available capacity will pay more; in other words, businesses will have to pay a higher rate for each kVA that falls within their excess capacity – and this is a serious issue as the cost for this demand could increase by a factor of three times current rates – leading to a potential additional 1% to 2% on energy bills.
What to Do
The question is: can businesses shop around or is it more a question of taking action to mitigate the effect? Alastair Gets has some advice:
“You need to understand your bill, so take a look right now to see if you have a break-down between available capacity and excess capacity. If you do then you need to consider the implications. At the moment, the charges for both of these will often be the same – effectively a discount on excess charges, but that’s what’s going to change. In any event, just pick up the phone and speak to your supplier to find out where you stand; you may want to ask them if it’s possible to increase your available capacity, or if they have other suggestions.”
“You may also be able to reduce the amount of electricity capacity that you use from your supplier. Generation through solar and wind, for example, and battery storage are options that would decrease the imported demand. In addition, “load shifting” – moving demand to reduce peaks – along with behaviour change, can also help. Another option is power factor correction which can reduce the peak apparent power – the coffee cup equivalent. Even if you have looked at some of these options already the business case will shift in favour of demand reduction technologies as from April 1st 2018. It may well be worth looking at these again in light of the new charges.”
The bottom line is that many UK businesses will face higher energy bills come April 1st2018, so there is not that much time to look at all the options. If you would like to find out more about how DCP 161 may affect you and what your options are, just give us a call. We can meter, measure, analyse your demand, and suggest how best to manage your power consumption in the future. However, whatever you do, don’t wait for your April bill to find out how much this will cost your business.