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December

What does Brexit mean for your energy bill final

Published: Friday 07 December 2018

By Ella Hendrix

Whilst judgement  day  for  the  UK  leaving  the  EU  bounds  toward  us  at  an  increasing  pace,  it appears that answers to the long list of changes that will occur post-Brexit are stuck in neutral, not  least  for  the  impact  on  energy  prices  this  side  of  the  Channel.  And  with  a  House  of  Lords committee recently claiming that Brexit will cause less efficient energy trading, a hesitancy over European  investment  in  UK  energy  infrastructure,  and  shrink  the  UK’s  influence  on  energy regulations, the impact on prices will be less than ideal.
 
Through recent times, Britain and the EU have become ever more interconnected on energy, with the UK having become increasingly reliant on Europe for its energy supply. The EU Energy and Environment  sub-committee  posits  that  around  40%  of  the  UK’s  gas  supply  comes  from European  pipelines,  with  around  6%  of  its  electricity  coming  from  France,  Holland  and  Ireland alone. And whilst this has not posed an issue in the past, the UK’s departure from the single market could place this frictionless trade at risk.
 
From a business’s perspective, a rise in energy costs could have a major influence on how they perform, with energy costs often being a large part of their yearly expenditure; the average UK business currently spending around £4,000 on their energy bills yearly. And although figures show that business pay much smaller average unit rates than domestic customers, with VAT three times higher than that of domestic customers, with the Climate Change Levy on top, energy starts to get very expensive.
 
Electricity Bill - Halo Financial
 

What could Brexit bring when it comes to the UK’s energy?

To begin with, power companies and industry bodies agree with the House of Lords that avoiding imposing tariffs or barriers on energy being traded across borders would be beneficial.
 
Because of the UK’s reliance on its four existing interconnectors (cables that connect the UK’s energy grid to foreign countries’ grids), and the expectation of eight more to be introduced in the coming  years,  tariffs  or  barriers  would  be  passed  down  the  supply  chain  and  would  see consumers paying increased costs.
 
The UK is currently part of the EU Emission Trading System, which puts a price on carbon through trading of emission permits. Were the UK to leave this system, there’s no clear answer to what would  replace  this  mechanism  causing  uncertainty  with  regards  pricing  thermal  generation.  As chief executive of Energy UK, Lawrence Slade, puts it: “The lack of certainty around the future carbon-pricing mechanism as well as the rules underpinning the cross-border trade of electricity and gas create risk, and risk has a price.”
 
On top of that, whilst gas and power will still be able to flow through the interconnectors following Brexit, a sharp exit will heighten the risk of energy supply shortages in the UK and Ireland during certain emergencies, such as cold  snaps  or  unplanned  outages. Due to less reliable supplies, this would require an increase in demand for power from other member states and would push up energy bills.
 
However,  because  of  legal  rules  with  the  Union  put  in  place  to  ensure  harmonising  and  faster trade, further down the line the rules that the UK is currently tied to would sever and tariffs that would likely arise from this would create further consumer costs.
 
To counteract - what would appear inevitable - rising energy costs, businesses will need to look at what they can do now to make sure they are ready for what Brexit may bring.
 
The first thing that businesses should be looking to do is finding an energy tariff with a good fixed price.  Business  energy  tariffs  are  often  fixed  so  they  would  pay  the  same  for  energy  for  the duration of their contract, which can be for periods of between one month and five years. 

Whilst  this  can  mean  paying  a  higher  price  when  energy  prices  fall,  taking  the  word  of  most information  outlets  and  experts  currently,  this  is  an  unlikely  event  in  the  months  and  years surrounding Brexit.
 
Looking  to  reduce  your  business’s  energy  bill  can  even  be  done  through  smaller,  more  simple means, by minimising energy output. This can be through turning computers off outside of office hours, putting office lights on a timer, and switching to energy efficient and A-rated appliances. Measuring the energy efficiency of properties is carried out by obtaining an EPC rating. EPC providers EPC For You have stated that:
 
“With the new Minimum Energy Efficiency Standard laws (MEES) which were introduced in April 2018, it would be useful for property owners to get an update on their energy ratings and if they make the new standard”
 
Removing older windows with more efficient, and better-glazed replacements can also be part of the solution.
 
Some  companies  have  even  introduced  incentive  schemes  for  employees  in  a  bid  to  create greener workplace habits in exchange for tangible rewards.
 
Developing a minor contingency plan could certainly help in preparing businesses for what’s on the horizon, and the forecasted effects of Brexit on the energy costs of businesses may be more manageable than trying to ride the wave of uncertainty.

For expert guidance on what happens next, contact your Halo Financial currency specialist, watch the latest rates and keep an eye on our news updates.