The October energy price cap announcement was, sadly, not as overstated as we all had hoped.

The announcement, coming off the back of a summer that saw pay rises also announced, has meant budgets and school finances will be stretched considerably as we head into a new academic year.

Instead of looking forward and making strategic changes to improve the education of pupils’ bright futures, we are all searching and looking for cost savings to help our educational offering remain constant rather than an improvement.

Reading your bills

Energy bills are one of the highest costs in schools and should command a great deal of scrutiny, even before price increases were announced.

I only joined my multi-academy trust (MAT) in the spring of this year but was already quite alarmed at the size of the bills being issued, as well as the number of them due to various meters dotted around the different school sites.

I was however somewhat relieved to hear we had entered a fixed contract for five years in the preceding October - a smart move by my predecessor.

But the large bills were still bothering me, and I was concerned that we were being overcharged. It was when I looked at the bill closely that I noted two things.

Firstly, each bill saw the Climate Change Levy (CCL) being applied. The current rates (as of 1 April 2022) for the CCL are £0.00775 per kilowatt-hour (kWh) for electricity and £0.00568 per kWh for gas. While this is a small charge per unit, just 1,000 kWh of energy spread across both types of energy would cost your school £13.43.

This can soon add up over time depending upon your levels of use. Indeed for our MAT that use represented approximately £4,000 of charges across both types of energy and all sites in six months.

However, I was aware of Excise Notice CCL1/3: Climate Change Levy - reliefs and special taxable commodities, which states the following: “Supplies of fuel and power to educational institutions such as schools, sixth form colleges, further education colleges and universities are subject to the main rate of CCL unless the institution is a charity engaged in non-business activities.”

The key element being that schools clearly do not provide business activities. Therefore, schools are exempt from CCL.

Improving cash flow

Secondly, it was noted that each bill had a VAT of 20 per cent being applied, and not 5 per cent. On the face of it, this does not cause academies a problem because they can, in theory, recover the VAT. But as academy schools are exempt charities, they are entitled to the reduced 5 per cent VAT rate for non-business use.

This meant our cash flow in the short term was being depleted as we paid over 15 per cent too much VAT to the supplier and then waited for the refund from HMRC when making our VAT reclaim. The overstated VAT amounted to approximately £13,600 in six months.

I immediately made a complaint to our supplier on both fronts.

This led to a request for a Certificate of Declaration having to be issued to them stating the trust and its schools were exempt charities carrying out non-business use by virtue of being schools. The certificate was provided by the supplier and was a simple form to complete.

Additionally, I also had to provide a reason why the certificate had not been issued at the commencement of the contract. I explained the previous chief financial officer was not aware of the legislative rules and therefore had not issued the certificate.

The certificate was soon provided, and we eventually started to see credit notes issued for each bill that had been raised since October 2021 and then re-issued again but this time excluding the CCL and VAT being charged at the correct rate.

This meant we were in credit on our bills thanks to the overpayments that had been made. This will at least help absorb some of the forthcoming bill increases.

I also made sure that the re-issued bills had the same readings on them, as by now my trust towards the supplier had evaporated, and kept a log of all bills to ensure we received all the credits due to us.

Lastly, if you identify that you have been charged VAT or the CCL over a number of years, it is worth noting that claims can be made for up to four years. So it is worth doing this for the small headache of entering a number of credit notes and revised invoices.

Every little helps 

Thankfully we are now seeing bills being issued correctly but we need to monitor our usage. Too many of the bills are being issued as estimates and site managers will be instructed moving forward to provide actual readings on a monthly basis to reduce our exposure to overstated bills.

We have requested smart meters from the supplier but that is proving a challenge to have these issued - it would certainly make our ability to provide readings more efficient and stop wasting valuable site manager time. Another battle to be won on another day it seems!

The moral of this story? It is certainly worth reviewing your energy supplier invoices to check if you are being charged correctly - as this is most likely to be an issue when you have changed suppliers and not had a request for the Certificate of Declaration.

It’s worth getting right because, at present, every saving helps.

Phil Reynolds is the chief financial officer at The Island Learning Trust