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3yr Cost Review (Dec 2013)

NTRCA members have asked the association to produce a basic report on the cost pressures applicable to running a tank cleaning station. The following provides information based upon the last 3 years.

General Inflation:

2011 Ave 2012 Ave 2013 Ave 3yr Ave
RPI 5.2 3.2 3.0 3.8
CPI 4.5 2.8 2.6 3.3

CPI replaced RPI as official inflation figure in Dec 2003.

 

Gas & Electricity:

The “Big six” energy companies account for 99% of the UK market.

Between August and December 2012, these six energy companies outlined price rises of between 6% and 10.8%. In 2013 energy prices increased by an average of 8% even though wholesale costs of fuel do not mirror these increases.

2014 seems to be more of the same although there seems to be pressure from MP’s to increase competition in the energy market and to curb inflation busting rises. We will have to see how this unfolds.

 

Water:

The cost of water supply has been fairly steady over the last 3 years. OFWATs 2009 5 year agreement has resulted in an average increase of +0.7% above inflation.  Recently however, Thames water requested OFWAT to allow a massive 8% increase for April 2014. 

The biggest impact from water treatment is the cost of disposing the resultant sludge – the “solid” waste extracted by effluent processing.  As consent levels are likely to be revised downwards as environmental pressure grows, water processing has become of paramount importance to ensuring effluent compliance. The disposal routes traditionally used by the waste disposal companies are reducing and this in turn is having an effect by increasing costs of this effluent plant waste disposal. Separation of wastes is a common method used by cleaning stations to ensure effluent compliance; however, the costs of disposal of these wastes are also increasing dramatically. A straw poll of our members reveals that in some instances there have been increased in access of 100% in the last 12 months.

With traditional effluent processing, any value in the waste (oil, solvents,etc) cannot be extracted in sufficient dilution rates. Even with more capital investment in effluent processing, the revenue from the sale of recovered wastes do not justify the investment costs.

 

In Summary:

The effects of utility price hikes has an obvious effect on the operating costs of the UK tank cleaning stations. CPI does take into account these energy increases however as energy costs account for a significant proportion of the cost of cleaning a tank, the general inflation figure does not reflect the actual increase in operating costs the industry is facing.

The effects these market forces are having will vary from region to region, even station to station. One thing is clear however, that the last 3 years has seen sustained higher than inflation rises from many of our utility suppliers, and as they all seem to follow each other, moving supplier rarely offers anything more than a short term benefit. Until the government can increase competition in the energy marketplace this is unlikely to change.