Can Businesses Access Energy Savings Too?

As a small business owner, effectively managing your energy costs is crucial, especially with the volatility the UK energy market has experienced in recent years. With Ofgem’s new Energy Price Cap coming into effect on 1st July 2024, it’s essential to understand how these changes impact you. While this adjustment will reduce your bills at home, unfortunately, the savings won’t extend to your business premises.

This guide will help you understand the differences between consumer and commercial energy, providing practical tips on managing and potentially reducing your business energy expenses.

Getting to Grips With the Cap

The Ofgem Price Cap is a regulatory measure introduced by the UK’s energy industry watchdog to protect consumers from excessively high prices. It sets a maximum limit on the amount energy suppliers can charge for each unit of gas and electricity, ensuring fair pricing for households. Ofgem reviews and adjusts this cap periodically to reflect changes in the wholesale energy market.

From 1st July 2024, the Ofgem Price Cap will decrease by 7%, offering a welcome reduction in energy bills for households across England, Scotland and Wales. Specifically, the costs for electricity and gas will drop by 9% per unit, though the standing charges will remain unchanged.

The primary benefit of the Ofgem Price Cap is consumer protection against unfairly high energy prices. By capping the maximum price providers can charge, Ofgem protects households from sudden, steep increases in their energy bills. This upcoming price cut will particularly benefit high-volume users, providing some financial relief during the summer months.

Domestic vs Business Energy

Under this summer’s price cap, households on standard variable tariffs will see a 7% decrease in energy bills. On the other hand, small businesses must be proactive in managing their energy costs without the protection of the price cap. This approach involves regularly reviewing energy deals, negotiating with suppliers, and considering different contract types to find the most cost-effective solution.

Life After the EBDS

The Government's Energy Bills Discount Scheme (EBDS) ended in March 2024, forcing businesses across the UK to prepare for the impact of rising energy costs. The scheme previously provided valuable support for SMEs during the energy cost crisis, but it has yet to be replaced by an alternative scheme.

Anthony Ainsworth, CEO of npower, said: “We know that businesses would welcome more incentives to invest in energy efficiency or to install on-site renewable energy generation. At the end of last year, the Government outlined how it will allocate the £6 billion of funding for energy efficiency improvements that was initially announced in the 2022 Autumn Statement, which included £225 million for the Industrial Energy Transformation Fund and £1.25 billion allocated to the Public Sector Decarbonisation Scheme.

“£410 million was also allocated to ‘Industrial Energy Efficiency and Decarbonisation’, but as yet, we have not seen the detail, and the funding itself is not due to become available until 2025. This leaves a significant gap between the end of the EBDS and more potential funding for energy efficiency when businesses really need support now.

“In this crucial election year, it is vital that the voice of business is heard. While some measures announced recently will be welcome, there is still the feeling that more could be done to support businesses, particularly when it comes to helping them proactively reduce energy consumption and make the necessary investments to support net zero.”

Long Term Considerations

Stay informed about future market trends that could affect business energy costs. While the market is currently volatile, understanding potential developments can help you make better decisions. For example, advancements in renewable energy or a potential change in government at the general election could impact future energy prices and availability.

Effective energy budgeting is essential for long-term financial planning. Monitor your energy usage and costs to identify any unexpected increases. Consider preparing a contingency fund in your budget in case of any sudden spikes in energy prices. Planning ahead and staying proactive can better manage your business energy costs and avoid unwelcome surprises.

Capping Off

Managing energy costs is a critical aspect of running a successful small business. While the new Ofgem price cap will benefit domestic consumers, it does not extend to commercial energy, making it essential for companies to be proactive in finding the best energy deals.

Start by shopping around for competitive energy deals and negotiating with your current supplier. Implement energy-saving measures to reduce consumption and utilise available grants and incentives. Finally, plan for the long term by staying informed about market trends and budgeting effectively.

Switch and Save for Your Business

While following energy efficiency advice can cut your business energy bills significantly, you could go even further by switching to a more cost-effective tariff. That's where BusinessComparison comes in. We compare electricity and gas tariffs from a wide range of suppliers, giving you access to the best deals available from our partners.

Cost-Cutting Begins at Home

Once you've compared Business Energy tariffs, check if you could save money on your Home Energy bills. Fixing your Home Energy Tariff now can provide you with year-long stability, and with current fixed rates being competitively priced, it might be a good time to switch. At UKPower, you can quickly compare gas and electricity suppliers to get competitive domestic energy prices and cut your bills at home.

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Sam White