Non-Commodity Costs: The 30% Shock Ahead
Over the past few weeks, we’ve been engaging with trade associations and their members to understand the real-world impact of rising electricity non-commodity costs.
Through a series of short, 15-minute impact assessment calls, several common themes have emerged, many of which have left business leaders surprised, and in some cases, concerned about what lies ahead.
1. How much are electricity costs increasing?
While the exact numbers vary depending on the business and contract structure, the trend is clear: electricity costs are on the rise, with increases typically falling between 10% and 30%.
Several factors influence this variation:
The quality and timing of existing energy contracts.
The number of meters under a contract; larger, multi-site setups are seeing higher increases, particularly in transmission costs.
Contract structure: especially for businesses on pass-through agreements, where changes in non-commodity costs are felt immediately.
2. Are businesses prepared for these changes?
The short answer: not really.
During our impact assessments, it became clear that even among larger organisations, awareness of upcoming cost increases is worryingly low. Many finance directors, CFOs, and business owners we spoke with were unaware of the scale and timing of the changes about to affect them.
To put this in perspective:
The average business we assessed spends around £900,000 per year on electricity.
The average annual impact of rising non-commodity costs was approximately £162,000.
For those on pass-through contracts, these increases will begin to take effect as early as April next year, leaving little time to plan or budget.
3. What should businesses be doing now?
Preparation starts with understanding. The first and most important step is to know your numbers—how these changes will affect your specific sites, contracts, and energy usage.
Here are some immediate actions to take:
Book an impact assessment: whether with us or your existing energy consultant, get a clear view of your exposure.
Review your contract structure: understand if you’re on a pass-through or fixed arrangement.
Check your TCR banding: are you classified as low, high, or extra-high voltage? Knowing this can help identify opportunities to reduce your KVA or even downgrade your supply voltage (in some cases) to lessen the financial hit.
Work backwards from your impact date: for many, this will be April next year. Planning ahead will be key to mitigating the effect.
The Bottom Line
The message from our calls is consistent: most businesses are not ready for the increases ahead. Awareness is low, visibility into contract details is limited, and many are missing out on opportunities to soften the impact.
We strongly encourage all businesses, large and small, to take a proactive approach now. Understanding your position today could make a significant difference to your financial stability tomorrow.
If you haven’t already, consider booking a free 15-minute impact assessment to get clarity on what these changes mean for your business.