Every business needs energy – even if it’s just to light and heat an office – so it makes sense to shop around to get the best deal on gas and electricity, particularly if you run a small businesses with ever-tightening margins.
The business energy team at Confused.com make it their mission to find the right energy contract for your company, whether you run a microbusiness or a multi-site corporation. Here’s everything you need to know to compare business energy tariffs and switch to a better deal.
It makes no difference whether it comes from the same source, or is supplied by the same company, business energy and domestic energy are not the same.
Here are the main ways business energy differs from domestic energy:
Cheaper energy - Unlike domestic energy, which is bought on a monthly basis, commercial energy is bought in bulk by suppliers, who buy enough to last the duration of your contract. This bulk buying means suppliers can charge businesses a cheaper unit rate for gas and electricity, though additional charges such as VAT and Climate Change Levy can increase costs quite significantly.
Longer contracts – Most business contracts are taken out for an agreed term that can be anything up to five years, during which time your business will pay a fixed amount for each unit of energy it uses. And because the energy for each contract is bought in bulk and up front, you may find it’s all but impossible to terminate your contract early. This means you won’t be able to switch to a new energy deal until your current contract is within its renewal window, which is usually between one and six months before it’s due to end.
No dual fuel – Energy suppliers don’t offer dual fuel contracts for businesses, meaning you have to compare business tariffs for gas and electricity separately before you secure a deal. This can be a bit of a headache, particularly if each utility contract has a separate end date, so it can be a good idea to get a broker to do all the leg work for you.
No ‘off-the-shelf’ tariffs – Each business has different energy demands, and so suppliers don’t offer businesses the same ‘off-the-shelf’ tariffs they offer domestic customers. Instead, suppliers assess the needs of each business on a case-by-case basis and offer a bespoke quote accordingly. On the one hand, this is ideal because you know the contract has been designed to suit the needs of your business, but on the other hand, it makes it difficult to know whether you’ve been offered the most competitive rates, unless you compare energy plans with every supplier. Running quotes with us saves time and ensures you’re getting the best deal available.
No cooling-off period – Commercial energy deals rarely come with a cooling-off period, and once you’ve signed you contract, you’re locked in. So before you sign up, read through all the terms and conditions to make sure you’re completely happy with the deal.
Despite these differences, there is at least one thing business and domestic energy have in common – there is a head-spinning range of contracts to choose from.
Different businesses have different energy demands, and so energy suppliers have to offer a range of tariffs and contracts to meet the needs of individual businesses. So it’s important to make sure you secure the cheapest business electricity tariff and commercial gas deal that suits your needs.
Broadly speaking, there are five main types of business energy contracts:
- Fixed term contract - Allows you to fix the amount per unit (kWh) that you pay for your energy. Please note, it does not fix the total amount that you pay each month.
- Variable-rate contract - Your unit rates are linked to market activity, meaning they can increase and decrease throughout the duration of your contract.
- Deemed rate contract – Also known as an out-of-contract rate tariff, this is a rolling contract with expensive rates that are arranged by suppliers for customers with no formally agreed contract.
- 28-day contract - A contract for businesses who haven’t switched since the energy market deregulation came into effect.
- Rollover contract – A contract that is used when no alternative has been agreed before your current contracts’ end date. Rates are usually among the supplier’s most expensive.
No matter how big your business, it’s often a good idea to tie it in to a fixed rate deal, so you know exactly how much the gas and electricity rates will be for the duration of your contract.
If you’re currently on a deal that doesn’t suit your business, or you think you’re paying too much for your gas and electricity, compare prices online with us, or give our experts a call on 0800 158 5296.
There’s more to your energy bill than how many units of gas and electricity you use every month, so to help you work out what exactly you’re paying for, here’s how your bill is broken down:
Unit rates – The amount your business pays per unit (kWh) of energy it uses, and usually accounts for the biggest price difference between energy quotes. Unit rates can differ between providers, and are also often based upon how much energy your business is likely to use, and even where it’s based.
- Standing charge – A fixed cost, charged per day to cover the expense of repairing and maintaining facilities used to supply energy direct to your premises.
- Wholesale costs - These are the costs charged to energy suppliers when they buy gas and electricity, and depend on the changing costs of gas and oil, which can fluctuate according to anything from transport costs to global events. If you’re in a fixed contract, your rates will not be affected.
- Network costs - These fees cover the cost of delivering energy from power stations to your business, including the maintenance of supply pipes and cables.
- Environmental costs – Government legislation requires all energy suppliers to contribute a certain amount of money to environmental initiatives, so a certain amount is added to your monthly bill to cover this cost.
- Operating costs – This charge is to go towards the costs associated with running an energy company, including customer and account services.
- Climate Change Levy (CCL) – A government tax designed to promote greater energy efficiency and reduce gas emissions. As a customer, you won’t be charged CCL if your daily electricity consumption is under 33kWh, or your daily gas consumption is under 145kWh.
- Value Added Tax (VAT) – A government tax charged on goods and services – and one you’ll be all too familiar with. You can be charged at the standard rate or reduced rate, depending on your usage.
Once your commercial energy contract ends, you’ll automatically be rolled onto your existing provider’s expensive out-of-contract rates. So it’s vital you compare business energy tariffs and switch to a better deal before this happens.
You should set a reminder to start comparing business tariffs for gas and electricity about six months before your current deal is set to end. Don’t worry if you don’t know when your contract is due to end though, as once it enters its renewal window, your supplier should send you a letter detailing their offer of a new deal. This will at least give you a figure to work with when comparing energy deals.
If you decide to switch provider, your old supplier will send a final bill once your contract with them expires, and may ask for a final meter reading to ensure the bill is accurate. You will also be given a date by which this final bill has to be paid. If you have not arranged a new deal, you will be moved onto a rollover contract, or deemed rates, depending on your circumstances and supplier.
As outlined above, it’s all but impossible to exit your contract before the renewal window, but you might be able to under the following circumstances:
- If you go out of business and cease operating.
- If you move into a new business premises.
In either of the above apply to your situation you must contact your supplier directly to inform them, and they will then advise you on the next steps.
You might be eligible for commercial energy rates if you are a sole trader and you work from home, in which case you’ll most likely meet the definition of a microbusiness. This means you’ll have greater protection than larger businesses, such as a reduced notice period and Ofgem is recommending microbusinesses are offered a cooling-off period, similar to those on domestic energy contracts.
What is a microbusiness?
The European Commission (EC) defines a microbusiness as one which has fewer than 10 employees and a turnover or balance sheet total of less than €2 million. To qualify for a microbusiness energy contract, it must use less than 200,000 kWh of gas or 55,000 kWh of electricity a year.
Are you eligible for a business energy contract in your home?
To meet the criteria for a commercial energy tariff, you’ll need to prove you are running a business from home and use a significant portion – usually 50% – of your energy to run your business. Although this may sound a high proportion, simply using lighting, heating and electricity for your business is likely to be enough to make you eligible.
When calculating how much energy you use for business purposes, remember to deduct any appliances that would be on regardless of your business being there, such as fridges.
If you need further advice on finding the best deal on your business’s energy contract, speak to one of our business savings experts today on 0800 158 5296. Or leave us a few details and we’ll give you a call back.