Business energy prices – how will landlords react?
This year has seen an unprecedented increase in energy bills but what does this mean for commercial landlords? Are landlords looking to fix energy rates alongside long term leases or licences and what does this mean for the tenant? Here, we take a look at how the landscape looks for landlords over the next year…
Why are business energy prices rising?
It’s a combination of many issues that have directly impacted the prices of energy supplies for both domestic and commercial markets. But most notably – increased demand, limited supplies, a shortage of storage space and the conflict in Ukraine. This has been a deadly combination that has led to households and businesses across the UK struggling to pay energy bills.
Energy Bill Relief Scheme
The government introduced the Energy Bill Relief Scheme to help business owners with soaring energy costs. This new scheme has fixed wholesale electricity prices and wholesale gas prices for six months. However, there is a ceiling on the amount of discount the government will provide. Currently, this is set at £405 per MWh for electricity and £115 per MWh for gas. This will apply to all non-domestic energy customers, including charities and public sector organisations. The level of the price reduction each business receives will depend on the type of contract agreed with the energy supplier.
Will landlords absorb energy increases for long term leases?
All-inclusive bills are popular with landlords as it gives tenants a clear-cut price which can often appeal when looking to let a property. And especially now when energy prices are so high, it gives tenants a fixed price for the term of the contract making budgeting easier. But will landlords be out of pocket in the long term? The answer is quite possibly yes. But signing up a new tenant for a longer period of time also gives landlords financial security. Most all-inclusive contracts will have an energy usage cap or a fair usage policy. Put simply, this means that your agreement is only ‘all-inclusive’ up to the point where you exceed the fair usage policy. Again, this helps to protect the landlord with excessive energy usage.