Financial Fragility for Care Homes as Unstable Energy Market Contributes to Rising Operational Costs This Winter

With the wholesale cost of energy surging to levels not seen since 2008, to say the energy market is unstable would be an understatement.
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In 2021 alone, to date, 22 energy suppliers have collapsed and new suppliers appointed by Ofgem. For care homes, the need for constant ventilation to reduce the risk of COVID transmission only heightens the need for continuous heating within the home, meaning an almost certain surge in energy bills. Some are predicting a doubling of costs over Winter. To put this into context, a 50 bed care home in more normal times has an energy cost of around £50k per annum, so the doubling of this cost could be detrimental.
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This is yet another blow to the Care sector which is already facing numerous operational challenges – recruitment, retention, and decreased occupancy - which in combination with increased costs, brings into question the financial viability of many Health and Social Care businesses, as recently reported by the CQC.
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The trend of small energy suppliers going out of business is likely to continue as smaller, less financially stable suppliers struggle to bear the huge cost of energy market prices that are influenced by multiple social, environmental, and economic drivers.
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For those suppliers that continue to operate, some are:
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• not quoting for contracts that start prior to April 2022
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• increasing costs mid-term (note: they should provide 30 day notice and a chance to move suppliers)
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• offering 12 month or 36 month contracts only
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• offering renewals only
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• heightening credit criteria
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• offering direct debit payment options only;

and some are carrying on as usual. These are the suppliers that will 'level the storm' so to speak.
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As a commercial purchaser of energy, it is important you understand that:
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1. The price cap applied by Ofgem is applicable only to domestic contracts, leaving the commercial sector vulnerable to attempts by some suppliers to recoup their own costs.
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2. The variation in pricing between suppliers is currently at around 300%, (and at any given time, there is typically up to a 60% swing in prices from the cheapest provider to the most expensive).
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The implications to you of your supplier going bust:

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• Firstly you will be deemed out of contract and moved onto a variable rate arrangement, which is typically 40-60% more expensive than a contracted rate.
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• Ofgem will employ a supplier of last resort to take on your supply leaving you at the mercy of the rates that they decide to apply.
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• Signing into the incumbent supplier offer could cost you up to 60% more than if you take the time to shop around for a better deal.
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• The energy industry is cumbersome at the best of times – if something goes wrong in the process your costs can spiral out of control with a time consuming headache to put it right.

Turn this predicament into an opportunity
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If you find yourself without a supplier, consider carefully which alternative supplier can offer a long-term, sustainable option for your Care business. The ultimate goal should be to find one that is financially stable.
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However, this is only one factor. There are other considerations that can impact your bottom line such as the length of term, green energy options (and knowing what is truly 100% green), smart metering for electricity and gas so you can have more visibility and control over usage.
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Quality Care Group and its energy experts provide a bespoke service to its clients meaning:
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• You get consultancy level service without the consultancy price tag.
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• You get the benefit of deep energy market knowledge and daily energy price tracking, which can inform the optimal time and terms on which you should sign into an energy contract.

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Now more than ever is time to be paying close attention to your operational costs. Our experts closely monitor their panel of trusted suppliers and will only consider those that meet the specific needs of our clients and demonstrate long-term financial stability and responsible behaviour to theirs stakeholders.
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For more information or advice, contact Alice Kinnard at alice.kinnard@qcaregroup.co.uk or call 01273 424 904

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