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EMR stands for Electricity Market Reform
More acronyms, we’re afraid. But here at UHL we do feel strongly that business energy users would do well to get their heads around this latest one – EMR - as it might have an impact on their energy bills. And as we all know, our energy bills are an item of expenditure high in most people’s thoughts, with an increasing impact on the bottom line of any business.
So firstly, the basics. EMR stands for Electricity Market Reform. Again, we will all appreciate that the energy market is in desperate need of reform, requiring fresh funding of low carbon sources of energy. Some rather pessimistic energy insiders have suggested we could risk a situation where the lights could quite literally go out, and in business we obviously can’t afford to let that happen. A dependable power supply therefore needs to be maintained and the EMR is part of the government’s attempt to address that need. It came into effect on August 1st 2014.
There are two main aspects to this legislation. Both are obligations that this legislation places on suppliers and yes, they also come ready-packaged as acronyms. From April next year, then, CFD (Contracts for Difference) will encourage investment in alternative energy sources by guaranteeing a price for low carbon generation. The year after that, CM (Capacity Market) will incentivise energy generators to ensure availability of supply, to guarantee we never experience any shortages.
But it doesn’t come cheap. Estimates suggest that over the next ten years, over £100 billion of investment is needed in terms of fundamentally re-structuring the energy market. Part of that is down to replacing older fossil, and even nuclear, powered stations, developing renewable alternatives, and also ensuring there are always back-up solutions at all times, to ensure a smooth energy flow.
So what does this all mean for businesses, and crucially, to their energy bills?
Dealing firstly with the larger, corporate concerns. Unfortunately this new legislation may well have knock-on consequences for bills. The industry will firstly need to let the dust settle on the new legislation and then take a view on what these new charges will mean for the sector. However ultimately, it may be that the new costs associated with EMR will be passed on to customers, both new customers (where it can be factored into deals, whether fixed or variable) and existing corporate customers.
For smaller and medium sized enterprises (SMEs) there is, however, good news. We can’t speak for the whole industry, but here at UHL we have always promised a “fixed means fixed” policy for our SMEs. This assurance gave customers peace of mind that their bills would never rise over the duration of their plan. And we are not going to change that policy now. We’ll simply factor in these EMR charges to new and renewed contracts, negotiated on behalf of our customers.
So, our small and medium sized business customers can continue to be assured that fixed does indeed mean fixed. In a volatile energy market, it’s good to know there’s some things that never change!