Energy Market Reform (EMR) aimed at overhauling the UK’s power generation is likely to hit small and medium-sized firms hardest when it comes to price rises, according to the Energy Advice Line.
Julian Morgan, managing director of the price comparison, switching and advice service for energy users, said the package of measures designed to ‘keep the UK’s lights on’ had now come into effect and would likely impact SMEs the most.
“We expect the EMR to have a significant impact on price rises over the next ten years, as suppliers need to spend £110 billion on new-generation infrastructure,” Mr Morgan said.
“In the short term, some suppliers have confirmed that 0.1p/kWh will be added to the price of energy in 2015, and these increases are likely to rise gradually but significantly over the next decade as investment increases.”
Mr Morgan said large intensive energy users such as those in the steel, cement and paper industries, would benefit from exemptions of between 50 and 100 percent of any energy price rise resulting from the reforms.
But he said offering big businesses cheaper power meant that smaller firms not included in the exemption, and households, could be left to pick up the tab.
“As ever, small businesses will have to be vigilant and clever when it comes to buying their energy and controlling their usage,” Mr Morgan said.
“The only way to keep bills down in this market for the foreseeable future is for firms to really take control of their energy supplies and be smart when it comes to choosing a supplier.
“This means using a reputable and impartial service like the Energy Advice Line to compare the market and switch suppliers regularly to stay ahead of the curve and avoid price hikes.”
The EMR is a package of measures designed to replace retiring nuclear and fossil-fuelled power stations that have reached the end of their working lives. New low-carbon generators are also needed to help meet Government environmental targets.
To encourage investment in low-carbon generation, the government is offering "contracts–for–difference" (CfD) whereby qualifying projects are guaranteed a minimum price for their electricity.
Another key mechanism will support lower carbon power generation, such as wind farms, as well as providing security for those who ‘keep the lights on’ by keeping their plants available as back-up for times when renewable sources are unavailable.
The government acknowledges the measure will contribute to higher electricity prices but says the increases will be less steep than they would have been if no action were taken.
The Energy Advice Line is a consumer champion and an independent price comparison and switching service for householders and small and medium-sized businesses. The service enables consumers to quickly and simply compare electricity and gas prices, and to switch to the best available deal on the market.
The service also offers free advice and a contract management service, including alerts to remind business consumers users when their fixed-term energy contracts are about to end.
For further information, visit www.energyadviceline.org.uk