Energy
Find the right way to buy energy for your school.
Buying energy is a complicated process. Ensure your procurement is compliant.
Do not let your contracts expire – the cost will be higher.
Ensure that you fully understand any quotes and compare like for like. A set of minimum standard questions are available to help you understand quotes and ask the correct questions.
See if you can buy your electricity energy through a DfE-approved gas or electricity framework.
Support is available from the get help buying for schools service.
The energy market is different to most other goods and services you buy and is different to the domestic energy market for home use, for example:
- there’s usually no cooling off period
- prices are not capped
- separate contracts are required for gas and electricity
- at the end of the contract, if no action is taken, you will move to a higher uncompetitive cost, known as the ‘deemed rate’
- energy prices can fluctuate rapidly from day to day
The Get help buying for schools service is available to help and support in scope schools and trusts with their procurement activity.
When buying energy it’s important that you consider:
- the duration of the energy contract
- fixed, flexible or variable energy costs contracts
- who you’re buying from
Reduced rate VAT
Schools with charitable status are usually entitled to issue a certificate to their energy supplier to get fuel and power at a reduced rate of VAT, provided it is used for the non-business provision of education. This removes the climate change levy charge from the energy bills for these schools. If fuel and power is used for business activities, then an apportionment should be made.
For more information, visit:
For specific VAT queries you should contact HMRC or appoint a tax expert.
Emergency contact details
If your annual gas consumption is above 732,550 kwh (25,000 therms) you need to provide emergency 24-hour contact names and phone numbers when completing your contract.
You will not be able to register your site with a new supplier without this contact information.
Choose a pricing option
For gas, only 65% of your bill is made up of gas. The rest is made up of network costs set by Ofgem and other costs fixed by the government.
For electricity 50% of your bill is made up of electricity costs. The rest is made up of network costs set by Ofgem and other costs fixed by the government. These costs are referred to as pass through costs.
Fully fixed prices
You’ll get a fixed cost per kWh throughout the length of your contract, including network costs (electricity) or fixed standing charge (gas).
Fixed price contract
Energy is purchased in advance of the contract start date. You’ll get a fixed cost per kWh throughout the length of your contract.
In high priced or volatile markets you many want a shorter length contract, for example, no more than 12 months, to allow time to make an informed decision.
With gas, the standing charge is fixed. The standing charge is normally shown as a cost per day.
The electricity network costs may change if Ofgem approves changes. Your provider will notify you of cost changes.
Variable, locked or flexible basket price contract
This pricing option varies according to provider. Consider what each provider offers before you buy.
The price you pay for energy will vary during the length of your contract. This is because your provider purchases energy in blocks before and during the length of your contract. The gas standing charge will normally be a fixed cost per day. Electricity network charges will normally be passed through for these contracts
Fixed pricing
The benefits of fixed pricing are:
- you know the rate before supply starts
- you’re protected from increasing prices
The limitations of fixed pricing are:
- you cannot benefit if market prices reduce
- the price is fixed for the duration of the contract
Flexible or variable pricing
A benefit of flexible or variable pricing is that the price could reduce if the energy price reduced. However it’s harder to budget as the price isn’t known in advance and you’re not protected from increasing market prices.
There are multiple contract length options.
Level of support
Different framework providers offer different levels of support.
If you’re unfamiliar with the energy buying process, you may want to use a provider who offers more guidance. You can also contact our Get help buying for schools service.
Contract length
Typically 1, 2 or 3 year contracts are offered.
Longer term contracts
The benefits of longer term contracts are:
- known contract details
- less workload
- less dates to manage
The limitations are:
- longer term commitment
- larger impact: you need to ensure it remains complaint and you understand the implications
- to not forget to review before the contract ends
Shorter term contracts (typically 3 to 12 months)
Shorter term contracts mean you have more flexibility to change your approach. However you’ll need to manage renewal dates and quotes more often.
All energy contracts should be recorded in your contract register.
Read the minimum standard questions to help you evaluate your quotes.
Energy can be bought from:
- a DfE approved framework
- local authority agreements, where available
- other suitable compliant frameworks
- brokers – also referred to as third party intermediaries (TPI)
- direct from the supplier
Whichever route you select, ensure that it is complaint with procurement regulations and your setting’s approval process, meets your needs and that you understand the total cost of the contract.
Use a framework
DfE reviews a range of frameworks. These are assessed for compliance with procurement regulations, ease of use, suitability and value for money.
Buying from a framework can be quicker and easier than getting bids or quotes because the agreements:
- have already been through a full competitive tender process
- have been quality checked
- are checked to make sure they comply with the law
- may have support available
- benefit from economies of scale by grouping demand together
If you’ve chosen to use a framework, use the documentation provided by the framework supplier to make sure you are covered and understand the framework terms and conditions.
Use an energy consultant or broker
Before you use an energy consultant or broker, be aware of the additional costs for this service.
Running an energy procurement can be complicated. Many schools use an energy consultant or broker, sometimes referred to as third party intermediaries (TPIs).
When using a TPI, you may be charged a one-off fee for their support or an additional cost per kWh added to your energy bill.
This is paid to the TPI through your supplier. If there is an additional cost per kWh, you need to calculate this across the length of the contract to understand the full cost of the services provided.
As with any service, your supplier must clearly state the cost for any service they provide. They must fully declare all commission, rate and benefits that they will receive from the contract.
Letter of authority
A letter of authority (LAO) should only be used for quotation purposes. It should not provide authority to sign contracts on your behalf.
A letter of authority should only be valid for 12 months maximum from the date of signature.
Key elements of the procurement cycle are:
- agree with your organisation which pricing option and contract length are most appropriate for your needs
- obtain the information in section 1 ‘before you start’.
- follow the correct procedure - read find the right way to buy
- assess the proposals and obtain internal approval - fixed price contracts are typically valid for 24 hours, prices may change after this period and require a new quote
- agree your new contract
- terminate existing contract - make sure it is issued on time to the correct email address and that you receive confirmation
- supply starts
Considerations when evaluating your quote
Use the minimum standard questions to help assess that all the necessary information has been provided.
When evaluating your quote, it’s important you consider the following:
- that you know what you are paying for
- fixed rate contracts: know the total delivered cost and details of the services you’re paying for
- flexible and variable rate contract: understand details of the service you’re paying for
- cost is made up of 2 main factors:
- energy rate
- non energy costs, including charges, levies, fees and standing charge
- ask what are the total fees and margins that you are paying
- ensure rates, standing charges, fees and all other cost are clearly stated, including any mark up on these fees
- ask for details of commission, charge backs, rebates etc
- check what additional tie-in and extended terms are applied
- insist on written quotes and contracts