December 2022

Electric and Gas Contracts.

TMESL has taken advice for its contracts throughout the last many years from specialist independent utility supply consultants. Contracts before and leading up to October 2022 had been largely unavailable due to the national and international energy crisis caused by the war in Ukraine and the Nordstream 1 and 2 gas pipeline dispute with Russia. Our contract for electricity unfortunately expired on 30 September 2022 and the best renewal prices obtainable by our consultants at that time were 1. A day rate of 66.23p per kWh which gave an increase of 500% and 2. A night rate of 48.56p per kWh and 3. A standing charge of £79.64 per day which represented a staggering increase of 3000% - this has been raised by us at a meeting with, and now being challenged at Govt Ministry level, by Jason McCartney, our local Colne Valley MP, as it is not subject to any Govt or Ofgem cap and appears to be unfair. All these prices are subject to 20% VAT although they are only recharged to the common parts at 5%. Our new contract is for 1 year expiring 30 September 2023.

Our gas contract expires 31 July 2023. Our consultant has advised that we need to budget for a significantly higher figure which will lead to an increased heat cost although this has only a relatively small impact on the budget.

 

Common Parts Utilities Budget 2023

TMESL has engaged an independent consultant to analyse the electricity usages of Titanic Spa, all of the apartments and the common parts and to calculate the appropriate figures using the following unit rates:

  1. For the period 1/1/2023 to 31/3/2023, the current contract prices of 66.23p per kWh day and 48.56 night has been reduced to a rate of 43.95 per kWh (net of VAT) being the blended day and night rate proportionately split between the totals of the day and night usage to take account of the Govt support for businesses provided by the Energy Bill Relief Scheme (EBRS) which only endures until 31/3/2023. The reduced blended rate is the best estimate of the appropriate rate given by our utility supply consultant as, at the time of writing, no verification has yet been received confirming the Govt supported discount to be applied. The anomaly of this situation is that the Govt cap for main grid connected households is lower than for households on private wire supply as these have to rely on the support for businesses, but the Govt has made this decision.
  2. For the period 1/4/2023 to 30/9/2023 (the current contract termination date) the first quarters blended rate has been increased by 20% to 52.74p per kWh (net of VAT). The reasoning behind this is that the Govt will be announcing their advice on continuing EBRS support for businesses beyond 30/3/2023 by the 31 December 2022 but have given no indication yet of what level this would be and to which businesses it will be made available. We have however anticipated that the continuing EBRS support will be granted to us. The Govt however have confirmed that the electricity tariff for households beyond 31/3/2023 will increase from an average of £2500 pa to £3000 pa, an increase of 20%, and it is unlikely that the tariff for businesses will not be increased however we have anticipated that the same percentage increase might apply.
  3. For the period 1/10/2023 to 31/12/2023 our utility supply consultant has advised us to apply the same tariff as in No 2 above, on the basis that the renewal prices will remain the same as the existing contract prices, as the offers obtainable during the summer have always lower than in the Autumn and Winter. We have also made the assumption that the Govt support under the EBRS will be continued throughout the calendar year.

 

The tariff rates as detailed above have had to be anticipated and estimated and the actual ones will be taken into account as they become known and the budget figures will be recalculated after the 2023-year end.

Govt EBRS support for gas tariffs only applies to contracts taken out after 31/12/2021 and does not apply to us as ours was taken out on 1/7/2021 and would in any event be below the minimum level supported.

Further Information from the Freeholders

Common Parts Utilities Budget

The vast majority of the utilities budget relates to electricity costs and the substantial increase in the budget for 2023 is due almost entirely to the renewal tariffs of the contract with the electricity supply company, which were the best obtainable for TMESL by their energy supply consultants prior to renewal under very challenging circumstances. The vast majority of the common parts electricity usage is attributable to the internal upper floors. The overall proportion of the utilities budget used by the Spa is limited, because it operates its own internal energy systems and is independent of the upper floors internally. The utility supply budget usages were challenged through a case brought before the First Tier (Property) Tribunal in 2017/2018 and the Freeholders provided a report on the common parts utilities usages investigated by an independent Energy Consultant and Chartered Engineer. The conclusions of the report were: 1. The charges are reasonable and proportionate. 2. The charges have been accurately calculated using historical data. 3. TMESL must recover its costs 4. A plant Replacement and Refurbishment Provision is necessary to ensure the continuity of utility supplies to the site. The charges were fully debated at, and accepted by, the Tribunal.

Possible Solutions being Investigated by the Freeholders

  1. Reduction in usage
  1. Car Park Lamps: change the lamps to LEDs. The lowest of two quotes obtained recently was £20,400 exclusive of VAT as the lamp heads have to be renewed which along with hiring the cherry picker comprise the bulk of the costs. However, following very recent discussions with the solar and voltage installers below they have quoted £4098 exclusive of VAT due to them having just had a job cancelled and can use their own high lift machinery. The possibility of a grant is being investigated by Jason McCartney for us. There already is a regime for switching off many of the lamps at midnight.
  2. Solar Roof Panels: their cleaning and servicing has already been budgeted in order to maximise output.
  3. Corridor Lighting: there are approx. half a mile of corridors and accessways. The lighting has been substantially changed to LEDs and the movement PIRs have been checked. It is essential that these items are regularly checked and maintained where necessary.
  1. Measures to increase self sufficiency

 

  1. Voltage Optimisation. Solar and voltage optimisation installers have been consulted and following site and consumption data investigation have advised that an 8.4% reduction in total usage can be obtained following equipment installation at a cost of £83,000 plus VAT. Once again, our enquiries are underway for possible grants, tax relief benefit and VAT relief together with possible routes of funding.
  2. Increase in Solar Panels on the Main Mill Roof. The solar installers have again made a site and consumption data investigation and advised that the existing 16-year-old solar panels are removed to be replaced with modern ones which give 4 times more output. In addition, the remainder of the available roof areas, including the North West facing pitches, receive panels. The output generated would be approx. 20% of current total usage at a cost of £320,000 plus VAT. Once again, our enquiries are underway for possible grants, tax benefit relief, VAT relief and funding possibilities are under consideration. Detailed discussions have also separately taken place with a consulting firm specialising nationally in undertaking Community Benefit Schemes which involve involvement by public share offer.
  3. Installation of Solar Panels in Car Park and Grounds Areas. The majority of these areas are unsuitable due to too much shading, however there are some opportunities which are still under consideration for installing new solar panels. Approaches have been made to adjoining landowners for possible additional land for more panels.

Conclusions

The vast majority of the Common Parts 2023 Utilities Budget is the electricity usage. The tariffs have had to be estimated by TMESL in consultation with their utility supply consultants and by anticipating the ongoing Govt supports, the levels of these, and pending the confirmation of the support levels from the electricity supply company. The Budget will be fully analysed and recalculated after the year end when all the actual costs are known. The utility supply budget usages have previously been analysed by independent specialists and approved by the First Tier (Property) Tribunal. Measures to reduce the ongoing electricity consumption and increase self-sufficiency of supply are under active consideration and the reduced tariffs gained by any solutions introduced will be taken into account in the recalculated year end figures and future years budgets.