Energy Credit 101: Handling Transitioning of Business Energy With Accrued Credit
You operate an energy-providing business for your local town. Your facility and the work have been steady for the past couple of months since you began operations – no trouble or worries in sight.
Then suddenly, the country’s leading energy regulator OFGEM has mandated your company as a SoLR or supplier of last resort.
You know how the concept works, and what it means for your industry. You know what to do once the cooling off period for business energy contracts begin. But the thing is you have not actually dealt with the scenario. We will delve into what you can do once it does happen.
But that will wait until later, for it is time for some fundamentals.
Business Energy Contracts: Basics Firsts
There is circulating news that several of your locale’s energy providers are going out of business. They have no means to continue their operations, or perhaps the prices of energy and resources are too high for them to keep up with entirely.
Here is a basic fact. An energy provider going bust can only mean one thing: a lot of businesses and companies need gas and electricity to keep going.
That is where your energy supply comes in handy. OFGEM or the Office of Gas and Electricity Markets is the entity that will assign your company to be a supplier of last resort or SoLR.
Your company will handle all of the customers whose energy providers are about to shut down permanently.
Accrued Credit or Discredit: The Pros and Cons
Most of these customers will be looking for a new energy-providing company that will cater to their gas, water, and electricity needs. As a supplier of last resort, these potential customers can choose you as their new provider, which is a neat plus for your company.
It will entail several benefits you can grasp at a later time. While there are advantages to such a scenario, there are some downsides to taking on these clients, even on a temporary status.
The downsides will take a long time to cover, which is why we will deal with one for now. Some businesses will have accrued energy credit.
Accrued energy credit is an amount that a business has to pay after using resources.
Think of it this way: your business will utilize gas and energy for now, but will pay for all of it later.
It is one of the aspects you will take care of once you accept customers coming from the closing provider’s wing. The worse thing is that a lot of these enterprises have extensive amounts of accrued credit. The other ones will be easier to cover.
It is paramount that you have to set aside quite a sum of money should you get on with the SoLR process. What happens is that you will pay for any accrued credit a customer has under their business account. The proceeds will go directly to the previous energy provider.
But one good point is the previous energy supplier will take care of the documentation and check a customer’s accrued amount to pay.
You do not have to stress yourself out to see if a customer has some or none at all. In addition, the previous supplier will share any information regarding a customer who has other charges besides the accrued credit.
However, there are instances where you cannot pay the liability a potential customer might have under their name. What you can do is let OFGEM know about it as soon as possible. That way, OFGEM will inform the customer and will locate another supplier on their behalf. You do lose a potential client, but you prevent the risk of losing additional funds to cover their expense.
Transitioning to a Credit Provider
Most energy companies have an opinion regarding such an approach, but gambling sometimes pays off during such scenarios. You can still spend a lot of your business or personal funds to settle any credit a transitioning organization or entity owns. It will take some time to get the money back since the customer will utilize your energy as the provider transition occurs.
The switch usually takes at least two to three weeks tops. In addition, you will have to provide them with gas and electricity during this period as a part of your supplier of last resort terms. Most energy companies will transfer switching customers with high credit to save on costs and resources.
Gambling in such a situation might land you a sweet deal in the long run once you calculate things to the minutest detail. Not only that, but your finances must be secure – personal and business-wise.
That means even though you lose money after the gamble, you don’t have to worry about the expenses you pay to keep your business up and operating.
Plus, it will be beneficial for you after taking such a risky maneuver. Not only will you have revenue in the long run. But that also means your customer will respect your choice of taking them even with credit and other issues.
They will inform their colleagues and other partners, telling them that you took a blow for them during their time of need. Word will spread, and before you know it, more and more customers will come knocking on your doorstep.
They are not there only because of closing energy providers, but for the fact, that you are a reliable and daring energy supplier who cares not only for business but for the customers as well.
However, you must also check how your enterprise works during your period as a supplier of last resort.
See whether your resources can manage to provide tons and tons of energy to oncoming businesses and industries. Perhaps you can limit how many customers your business can handle. That way, you can still cater to their needs as they transition from their previous energy supplier to another without messing up your supply.
In The End
OFGEM will declare your business as a SoLR or supplier of last resort to cater to industries whose energy providers are going out of business. That means you must brace your assets and resources to guarantee these customers receive the energy their operations require. But that does not mean only they will benefit from the switch. Your business will have more clients who are in for the long term.
