How to beat rising green taxes and utility bills

Donald Maclean

Accurate measurement is key to controlling your energy costs. By Donald Maclean, managing director of Audits Unlimited.

Why should accountants in industry be concerned about utility costs and their carbon footprint? First there is the economic argument. Given that most commercial organisations spend between 5% and 10% of their annual budget on utilities, any savings can go straight to the bottom line.

Second, organisations are under increasing pressure on the environmental front. Government targets for reducing global warming are impacting on businesses through such vehicles as the UK's Climate Change Levy (CCL). Also companies themselves are realising that, to be responsible corporate citizens, they need to take environmental issues seriously.

The CCL is a tax that has been applied to the cost of energy consumed by businesses and other organisations since April 2001. Many organisations in ‘industry exemption schemes’ (allowing discounts of up to 80%) found it quite easy to comply with the CCL targets in the first few years. However more demanding targets have now been set and organisations need to scrutinise their energy usage to see how these can be met. Failure to meet targets may mean they lose their industry exemptions. With the current price levels this loss would be much more painful than in 2001 when energy costs were relatively low.

The UK government white paper on its new Emissions Trading Scheme (May 2007) sets clear parameters. Larger organisations consuming more than 6,000 megawatts of energy (or spending more than £500,000 a year on energy) will have to reduce energy consumption or purchase credits. It is likely the scheme will be extended to smaller organisations in due course. Like the CCL, it will be another tax designed to encourage energy efficiency.

Overpayment is common

Few accountants have the time or resources to analyse every utility bill in detail. Yet as many as 80% of UK businesses could be paying too much for their electricity, gas, water, liquid petroleum gas (LPG) and telecoms. Since wholesale electricity and gas prices doubled in 2005, energy prices have become a prime focus for businesses and other organisations.

One way for businesses to save energy is monitoring and targeting. This can be done by keeping track of all bills, taking regular meter readings and noting how they change when energy-saving measures are introduced. It is necessary to measure existing energy costs accurately every day for two or three months so that you can identify your energy profile. Once you have established that baseline, you can analyse the data to identify inefficiencies and set targets for lower energy consumption.

Two other main factors affect what you pay. You should know which suppliers are most keen to supply your particular energy profile and how to present your energy data to potential suppliers.

Monitoring consumption

Having accurate data is vital. New devices have come on to the market called smart data loggers. These are sensors that can provide real-time data on your electricity, water, gas and LPG consumption. This data is transmitted to a central computer for analysis. This can flag up any anomalies in consumption and highlight areas where savings can be made. Reports produced by the system will make it easy to see if equipment is being left on overnight or if thermostat settings are wrong. Also gas and water leaks can often go undetected for long periods resulting in large bills at the end of a quarter. Smart data devices can automatically spot such anomalies and immediately alert the user by SMS or email.

If you have an accurate record of your energy consumption history, you will find it easier to obtain competitive quotes from gas and electricity suppliers. This is particularly true of non half-hourly electricity and gas supplies where detailed and accurate data is usually not available. It is different for half-hourly electricity supplies. These usually have current transformer meters that record consumption every half hour then transmit the data daily to a website via a modem.

Non half-hourly sites usually consume less electricity and their meters are not usually connected by modem to the supplier. Hence the meter has to be read manually. Since the meters are at best read once a month by the user and the dials can be hard to read, mistakes can be made. Suppliers will read the non half-hourly meters about once a year. Therefore organisations with this type of meter often find themselves relying on inaccurate data and estimated bills.

By reducing your overall consumption of energy and water, you can help reduce your carbon footprint. The primary carbon footprint of a business is measured as the amount of energy and water it, and its employees, consume during a year. This is then converted into tonnes of CO2 emissions. It will take into account gas, water and electricity consumption as well as transport costs.

Simple steps can help

Most organisations are entitled to free energy surveys which are carried out through the Carbon Trust. Such surveys can identify possible savings and recommend ways in which they can be achieved. There are also soft loans, enhanced capital allowances and grants available which could help you with purchasing approved energy saving equipment.

There are several steps that your business could take almost immediately – often at no or little cost – to improve energy efficiency and reduce bills. These include establishing an energy management team and simply switching off equipment when you’re not using it. According to the Carbon Trust, offices waste £6,000 on average each year by leaving equipment such as computers and lights on over weekends and bank holidays.

A first step could be to review your supplier. Many claim to provide ‘greener’ electricity. You could also install an on-site source of renewable energy such as wind turbines, heat pumps, solar panels, or biomass boilers. If your company uses a lot of water it is worth considering a rainwater harvesting system. This collects rainwater in large tanks which is then filtered and can be used for flushing toilets, washing hands or in production processes. There are many smaller energy conservation measures such as boiler controls, draught-proofing, insulation, variable speed drives, voltage optimisation and energy efficient lighting. You can also offset your carbon through measures such as planting trees.

Whatever you choose to do, the key word is measurement. If you can keep an accurate eye on consumption, you stand a good chance of being able to cut your bills. And that’s something we can all be pleased about.

Further information
Carbon conversation
Carbon footprint

August 2007

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