Small and medium-sized enterprises (SMEs) in North Wales and Merseyside are in for a shock literally and financially as new research warns that their electricity bills could soar nearly £19,000 higher than those of businesses in London.
According to Cornwall Insight's latest Business Energy Cost Forecast, a professional services firm or a medium-sized office in these regions is expected to shell out an eye-watering £161,000 annually on electricity making it the most expensive in the country.
That's 8% more than the national average of £148,000 and a staggering 13% higher than the £142,000 average paid in the capital.
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So, what's behind this energy price chasm? Cornwall Insight points to Third Party Charges (TPCs) the often-overlooked costs that go beyond just raw energy and supplier fees.
These charges cover vital infrastructure maintenance, security, and development, and they make up about 60% of energy bills.
With energy contracts up for renewal this April, businesses across these high-cost regions will likely be shopping around for better deals to avoid being burned by rising expenses.
TPCs fluctuate by region, thanks to the pricing structures of Distribution Network Operators (DNOs), who manage electricity distribution across the UK. This creates a frustrating postcode lottery, where businesses in some areas pay significantly more than others.
One hotly debated fix? Zonal pricing—a system where electricity costs are based on local supply and demand.
Areas with high energy production and lower consumption would enjoy cheaper rates, while those with less generation and high demand might pay more.
Supporters like Octopus Energy believe this system could help businesses in high-cost regions catch a break, but skeptics argue it could introduce even more market complexities.
Even Ofgem's CEO, Jonathan Brearley, has weighed in on the conversation, hinting in a recent podcast that leaving the current system untouched is "not credible."
Dr. Craig Lowrey, principal consultant at Cornwall Insight, urges SMEs to stay informed and take action to avoid being blindsided by price hikes.
"With many contracts up for renewal in April, now is the time for businesses to review their energy strategies, explore switching opportunities, and consider efficiency measures to help ease rising costs," Dr. Lowrey advises.
Understanding how energy bills are structured and being proactive in seeking cost-cutting opportunities could make all the difference.
With the UK government currently exploring market reforms, the hope is that a more balanced and fair pricing system will emerge in the near future. However, SMEs in North Wales and Merseyside will have to brace for what could be another electrifyingly expensive year.
