The commodities market, like the stock market, can be highly volatile and is prone to great shifts. Electricity rates tend to have a greater level of stability due to the fact that quantities are generated as opposed to recovered such as with gas. Supplies of gas are dependent upon the successful confluence of so many contributing factors that a single fault can result in low supplies for the Britain and therefore higher prices. In the last week alone Britain has seen two spikes in gas prices; on Thursday, due to maintenance on pipelines in Norway, and on Friday, due to an unplanned outage at the St Fergus gas terminal. As a result of each incident the price of gas rose by a total of two pence per therm (a rise of 0.0682 p/kWh). Though this doesn’t sound like much, if you consider that a medium to large care home or hotel can consume between 100,000 and 400,000 kWh of gas in a year this could be an increase in cost of between £6,820 and £27,280.

  This week Ofgem, the governing body for the UK energy markets, announced proposals for greater proection for small businesses against high energy costs. These proposals will “[…]widen the number of small businesses that benefit from its existing safeguards to ensure contract terms are clear”. The extension of these rules would help provide cover to a further 150,000 businesses that “typically spend up to £10,000 a year on each fuel”. In addition to the expansion of what is classed as a ‘microbusiness’ Ofgem has also proposed “[…]that all bills and statements that small businesses are sent also show clearly when the contract ends[…]”. It is common practice in the energy industry for accounts to be ‘refreshed’ if they do not hand in termination notice during the correct window before their contract ends. If a customer is ‘refreshed’ then they will be signed in to a new contract for a year on significantly higher rates. For business customers this is an entirely legal practice but by increasing the awareness of smaller businesses to this fact, such as making their contract end date clear on their bills and statements, Ofgem are hoping to reduce the likelihood of this occurring. As a final push Ofgem is “also planning to clean up the practices of some energy brokers by developing an industry-wide code of practice for them[…]Ofgem is progressing its case for acquiring powers from Government to take enforcement action against broker who mislead business customers”. It is a known problem in the industry that some brokers use high pressure sales tactics as well giving misleading information to maximise the profit they can make. These are significants steps by Ofgem to create a fairer market for smaller businesses who can suffer greatly from addtional running costs.

  In a recent statement made by Prime Minister David Cameron the Government have made clear their support for the proposed changes prepared by Ofgem concerning the domestic energy market. Prime Minister David Cameron said: “Even in these tough times when we’re having to take the difficult decisions needed to fix our economy, we’re doing everything we can to help hardworking people and families. That’s why I made a personal commitment to help get energy bills down – and I’m delighted that Ofgem are taking that forward. The package announced today is a huge step towards energy bills that are more fair for everyone. This is about putting people before profits. It’s about pensioners being better able to heat their homes in winter, and families better able to cope when the bills arrive. “Our aim is that consumers will get the best possible energy tariff – no tricks, no loopholes – and we will use the powers we gained in the Energy Bill earlier this month to make sure this happens. The Bill will support this package, and make sure that all energy customers are put on their supplier’s lowest variable rate unless they choose otherwise.” The plans by Ofgem aim to introduce the following, amongst other plans, to the domestic consumers: “Four “core” tariffs to cut the baffling array of tariffs currently on the market. That will actually mean four tariffs per fuel type (electricity and gas), which would apply to each payment type.” Consumers on ‘Dead’ tariffs will be moved onto one of the new tariffs unless the customer requests otherwise or their current tariff is providing them with “value for money” “All tariffs have a standing charge and unit rate”   In addition to the above points these plans will also safeguard consumers in fixed contracts from changes to tariffs mid contract as well as preventing them from being “rolled-over” should they fail to hand in a notice of termination for their current contract. Ofgem is also keen to rebuild the trust in energy suppliers by encouraging suppliers to actively help their customers to find the best possible tariff for their usage. This will include personalised consumption estimates to make finding cheaper tariffs easier as well as simplifying any information suppliers provide to customers. Ofgem and the Government are now approaching the final stages of statutory consultation that will hopefully lead to them implementing these ground breaking changes to the domestic energy market. They are optmistic that the consultation period, which ends in March, will conclude positively and enable a smooth execution of the suggested changes that will then come into effect in the summer.

  A recent study published by the National Snow & Ice Data Centre in Boulder, Colorado, has shown that Arctic sea ice is 80% less than it was 30 years ago. The significant melting of Arctic ice has caused a surge in the cold water brought about from the regular melting and freezing of this ice. This increase of cold sea water has intercepted the jet stream from the Southern Hemisphere which brings warm oceanic currents past us. These currents are what maintain are more balanced seasonal weather system and in the past have prevented us from enduring the extremely cold winters that Canada is exposed to even though we are on the same latitudinal lines as Canada. As more cold water enters the ocean the jets streams are more likely to be interrupted which could lead to significantly colder winters as well as increased chances of flooding and droughts. As we are all aware the current trend of cold weather has extended well beyond the usual seasonal months, this has been demonstrated in the sustained snow storms that could potentially continue into April. Excluding areas such as the Pennines, the Highlands or the Peak District regular snowfall at the end of March is practically unheard of.  The relentless snowfall has placed a continued strain upon public services such as buses and trains as well as causing many disruptions to roads and motorways leaving some areas almost unreachable. As well as the strain it has potentially put on businesses by forcing temporary closures it is the possible long term impact through rises in energy costs which is also being felt. As early as January Steve Holliday, Chief Executive of National Grid, said: “In any scenario, it is hard to imagine that the costs of our energy are going to be lower than they are today. “It is not the real world. People should be honest with consumers. Energy costs are going up. “The challenge for the Government and industry is how to keep those cost increases as low as possible.” In keeping with these comments the persistant cold weather has lead to an increase in energy consumption which has in turn forced a general increase in the cost of gas and electricity. There are now also fears that Britain has become too reliant upon gas and oil imports from countries such as Russia, Norway and Qatar. This was further emphasised during the closure of a natural gas supply pipeline from Belgium where the cost of gas rose by 50% on the day markets from 100p/therm to 150p/therm. The markets then stabilized at 100p/therm once the pipeline was reopened but this is still above the average cost of gas for this time of year which normally sits at around 60-70p/therm. With increasingly dramatic fluctuations in temperature, a greater reliance on imported energy and an unstable economy it is unlikely that any of us will avoid the bite of rising energy costs. Without a long term, sustainable solution the energy market will continue to be volatile without ever abating. Now is not the time to continue wasting money on perpetuating what will eventually be a defunct industry. Energy companies should see this as an opportunity to invest in a green solution, a solution that can allow Britain to be an independent energy island able to produce enough electricity for it’s own needs.