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Whatever the size of your business, energy bills can be a drain on your running costs. Heating, lighting and equipment are all essential to keep you functioning and it's all too easy to get stuck on a tariff that's sky-high or simply not right for your business.
At BusinessComparison we understand that just as companies vary in size and scale, so do their energy requirements. When it comes to gas and electricity use, it's certainly not a case of one size fits all. That's why we strive to find you the best energy rates for your individual needs.
There are two main types of business energy tariff, fixed rate and variable. Fixed term agreements are usually cheaper in the long term, protect against wholesale electricity and gas price increases and can be budgeted for by setting up a direct debit.
A variable rate contract benefits users if commercial electric and gas prices fall. Business energy is supplied on a contractual basis with terms lasting typically between one and three years.
When it comes to running your own business there's no doubt that the bills stack up. Gas and electricity are essential commodities and, as such, will always form a portion of your monthly outgoings. However, there are choices that you can make to reduce the amount you're paying for energy.
Just by switching suppliers you can save up to 40% on your bills.
So how do you go about making an informed decision about which providers to use and which deals are best suited to your business needs?
There are two main types of tariff used for business energy. Because the size and scope of every business is different, so too are their requirements for gas and electricity.
Choosing the correct type of tariff reflects how you use energy within your business as well as how you go about paying for it. Certain factors should be taken into account when selecting a commercial energy tariff for your company, including your businesses financial situation, how much energy you use and where your business is located.
This type of payment plan, where the energy bill is fixed at a set rate, is well suited to businesses for whom budgeting is key. The rate that you pay for your business energy is fixed at a set amount for an agreed period of time. In some cases this can be for as long as four years. After which you can enter into a new agreement or switch to a different supplier.
This arrangement ensures protection from price changes during the agreed period and prices are usually cheaper than with a variable contract.
Some providers also offer a percentage discount off every bill for customers who pay by direct debit.
However, one point to consider with this type of tariff is that you are locked in for the agreed duration and are unable to switch if energy prices go down or better deals become available on the market.
Variable tariffs can offer cheaper energy rates at the time of agreement, however don't offer the same level of protection against energy price rises as the amount that you pay for your business gas and electricity will fluctuate depending on the energy market.
A variable tariff represents the balance between paying lower energy costs in the short term and the risk of these rising in the long term. This may be a risk that small or start-up companies are willing to take to keep immediate overheads down. Within a variable tariff there are two main types of agreement.
These are a tracker price tariff which changes based on wholesale market movements and a blend and extend agreement which is an extension of your existing contract for a longer duration.
The blend and extend tariff obtains a unit rate that comprises of an average between your current contractual rate and that of the current available market rate.
There is no hard and fast rule to say that businesses can't move between these two tariffs as long as notice is given to the current supplier as per the agreed contracted period.
70% of firms experience difficulty comparing energy tariffs and 43% have never switched supplier according to research by the Federation of Small Businesses.
This is surprising when you take into account the scale of savings that could be made by businesses. A lack of understanding about the different suppliers, customer loyalty, concern about the time and effort it may involve and mistrust of lesser known suppliers are all perceived issues standing in the way of making a switch to a different energy provider.
However, switching is not the long and complicated task that many believe it to be and the savings can make the change well worth it.
Typically, your supplier will send you a renewal letter detailing the new prices they intend to charge for your energy use. Usually this is sent 60 days before the end of your current contract, however this can vary.
At this point you can either choose to renew your contract at the rate suggested or save money by switching to a different supplier with a new contract.
Compare gas and electricity energy deals for your business using our comparison finder tool. Simply follow the online instructions and we'll guide you through the whole process.
Upon comparing prices it's useful to have a copy of a recent energy bill in front of you. On this document you'll also find important reference numbers that you will need to give in order to switch. These are the Meter Pointer Reference Number (MPRN) for gas and the Meter Point Administration Number (MPAN) for electricity.
Once you have found the best deal for your business with a provider that you are happy with, you need to arrange a new deal in plenty of time. Ordinarily you have up to 30 days before your existing deal expires to switch to a new supplier.
This is referred to as Notice Period End Date and you must inform your supplier of your intention to switch before this date.
Use a business energy broker such as BusinessComparison to process the switch and inform your existing supplier that you are taking your business elsewhere.
Some businesses choose to bulk buy energy in advance of using it so they know how much they've paid. This is called the Flex approach. Using this type of approach a business can take advantage of a favourable energy market rate and purchase gas or electricity at a good price months or even sometimes years in advance when costs are low.
This works well for some businesses however, can be a risky choice if you are caught out of contract when energy prices are high.
There are no generic business electricity tariffs available which makes comparing suppliers even more important. Each contract – the price and duration – is unique to your business.
Even though you might choose the same supplier for electricity and gas the contracts will be separate and may contain different start and end dates.
Most businesses have the standard 20% VAT rate applied to their electricity bills although there are some exceptions to this. If you are a charity, non-profit organisation or small business with low electricity usage then you may qualify to apply for a reduced VAT rate of 5%.
If you pay via a monthly direct debit then your supplier may give you a small discount.
To ensure your rates will be in line with your current gas consumption it's useful to have a recent bill to hand when comparing prices.
Over the course of a year, a business paying 4 pence less per kWh can easily save over £1,000.
Gas contracts typically last between one and three years.
From 1st April 2018 private landlords will have to ensure that before a property is let out it must have a minimum energy certificate band of E or above. That's following the introduction of the Energy Efficiency Regulations 2015. Landlords who do not follow this will be served with a compliance notice followed by a penalty of up to £10,000.
These new regulations are worth taking into account when considering the duration of your new energy contract as improvements to the energy performance of commercial properties are likely to drive down your associated business costs if you are renting your business space.
Based on their gas and electricity consumption, a Crewe-based manufacturer has secured a saving which equates to over £2,460 against the amount their previous supplier had quoted in their business energy renewal letter. Within a few minutes of using our solution they had compared the whole market and arranged their switch to Opus Energy – an independent supplier specialising in saving businesses money in a hassle-free way.
A Bolton-based hairdressers with an average business energy use said that they were delighted with the service, "They really do know their stuff when it comes to business electricity and gas contracts. I was advised on the different suppliers and their tariffs which ultimately allowed me to make an informed decision. Plus I saved money!" By using BusinessComparison they saved £257 per year.
One of the UK's largest retailers of disability and mobility products found that they saved time and money using this comparison service. In the past they, “would call around all the different suppliers,” which “was extremely frustrating.” They used the personalised service to save £13,885 on their energy bills and now they receive a call from their account manager to make sure they are saving money every year.