Businesses may have to pay millions for unused electricity during lockdown
Hundreds of businesses that have been tied into electricity usage agreements could be forced to pay millions of pounds for electricity they have not used since coronavirus lockdowns were introduced in March, Co-op CEO Steve Murrells has warned.
Data from Co-op Power reveals its members could have paid more than £1m combined for unused energy at closed sites, based on contractual agreements with some previous suppliers.
The energy co-operative sees its members, which have an annual buying power of £200m a year, buy together to lower wholesale costs.
“We know first-hand that the pandemic has put extra pressure on businesses,” Murrells said. “Whether that’s focusing on colleague wellbeing and job security, serving customers safely, supporting communities or just purely surviving. For many, this has meant unforeseen investments being needed just to remain in business.”
“Being blindsided by unexpected costs from an energy provider at such a critical time could be the breaking of a business, putting our high streets and the communities they serve at further risk.”
As the largest cooperative power firm in the UK, counting Roadchef, Nationwide and the National Trust among its members, the group uses a “no take no pay” policy to ensure its customers only pay for the energy used over the period.
The National Grid reported that the UK’s demand for power dropped by as much as 20 per cent during the peak of the lockdown in April, yet many businesses were still paying for energy they were not using.
David Roberts, Co-op Power managing director, added: “Take or Pay, also known as Volume Tolerances, are standard contractual clauses which live in the very small print.”
“Also, the actual charges for unused energy are rarely made clear to the client as they receive their invoice. The costs might appear discreetly, be hidden within other charges or not be itemised out. So, a business could be paying for unused energy without even realising it,” he said. “Some suppliers agree to spread the cost of unused energy across future years, but usually on the understanding that the client renews their contract. This means that many are repeatedly locked into an energy agreement which doesn’t always work for them, in fear of paying a massive penalty.”
Co-op Power buys 100 per cent of its energy from renewable sources and has invested in a series of UK wind farms. In October, Ofgem ordered seven energy suppliers to pay £34m for their failure to meet targets under the Government’s renewable obligation scheme.
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