Business energy explained
Whatever the size of your company energy bills can be a drain on your running costs. Heating, lighting and equipment are all essential to keep you functioning. It's all too easy to get stuck on a tariff that's sky high or simply not right for your business.
At Businesscomparison.com we understand that, just as companies vary in size and scale so too do 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.
So how do you switch? Switching your business energy tariff is made straightforward with our comparison tool to guide you towards the best deal for your business. It's designed to save you money and time by making it easier for you to hunt out the fairest deals and switch suppliers.
There's no need to get stuck with one energy provider, particularly if it means you're paying more than is necessary for your company gas and electricity.
When it comes to switching energy companies many business owners can be put off by, what they fear will be, a long and complicated task. However, just as for domestic supplies, there is a full and competitive marketplace out there for business energy customers.
Whether you're looking for a fixed term tariff to help you manage the amount you spend on gas and electricity or whether you think a blend and extend tariff to reduce your costs long term may better suit your business.
By making the decision to switch you could save a large amount of money in the long run. If you've never switched before then you could cut your bills by as much as 30 per cent.
For property developers and landlords, in particular, gas and electricity costs can really stack up and there are large financial savings to be made by switching suppliers. For example, electricity prices can vary from as little as 10 pence per kWh to as much as 25 pence per kWh.
Why not compare business energy for your company today with Businesscomparison.com? We'll search for the best deals from suppliers of gas and electricity to help you make savings by switching today.
What do I need to know about business energy?
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 30 percent 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?
Business energy tariffs
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.Fixed-rate tariff
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 tariff
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 percent of firms experience difficulty comparing energy tariffs and 43 per cent 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. Here's our guide to switching once you have found the best deal using our energy comparison tool.
Read more about business energy in our FAQ
Who supplies my business energy?
You can find out who currently supplies gas and electricity to your business by looking at a recent energy bill. The contact details of your supplier will be printed on the document.
If you have just moved to new premises or don’t have this to hand then you can contact the Meter Point Administration service to get details of your gas supplier and your local electricity distribution company.
What is a deemed contract?
If you move into new premises then a deemed contract will normally be in place for gas, electricity or both even if you have not agreed a contract with a supplier. If an existing contract has come to an end but the customer continues to consume energy then a deemed contract may also exist. Costs of deemed energy contracts are on average 80% more than rates charged in a negotiated contract. Around 10% of micro-businesses are on deemed contracts.
What is a rolling contract?
This is when a supplier of gas or electricity rolls you over onto a new contract. This may be the case if you have failed to tell your supplier of your intention to end a contract before the notice period.
What is a business energy change of tenancy?
If you are moving into or out of commercial premises then it is referred to as a Change of Tenancy by business energy providers.
My business is relocating, what do I need to do?
As a new tenant, you must agree a new contract either with the existing energy supplier or a new supplier of your choice. You may decide to use a price comparison site to help you search for a deal or seek a more competitive tariff with the existing company provider. If you are the tenant moving out then you must keep your supplier fully informed of your situation.
Do I need to tell my existing energy supplier I’m leaving them?
Yes. If you decide to switch your energy provider then you must inform your existing supplier either directly or, if you are using a comparison company or third-party intermediary (TPI) by signing and supplying a Letter of Authority (LoA).
What is a Letter of Authority or LoA?
When you switch energy supplier to get the best deal on your tariff through a comparison site or third-party intermediary (TPI) you will be required to sign a Letter of Authority (LoA). It is a recognised legal document that allows a broker to purchase energy and liaise with a supplier on your behalf and with your permission. Put simply, you are allowing a new supplier to call time on your existing tariff and set up a more competitive new one.
What is included in a Letter of Authority?
The Letter of Authority (LoA) follows a standard format and states that while a third party can gather information, negotiate and submit notice of termination on your behalf, they do not have the right to agree a contract without your consent. The Letter of Authority must be signed by you.
What are MPAN and MPRN numbers?
An MPAN (Meter Point Administration Number) is the number that identifies your electricity supply. It’s sometimes referred to as a ‘Supply Number’ or ‘S Number’. This unique meter code helps energy companies locate your home and is found on your old statements. If you don’t have an electricity bill to refer to then your energy supplier or local distributor will be able to tell you what it is.
MPRNs (Meter Point Reference Number) are the equivalent reference for gas and will also be found on your gas bills. They have 6 to 8 digits and are sometimes also referred to as an ‘M Number’. An energy supplier or local distributor will be able to tell you what your MPRN is if you are unable to find it.
What is a commercial meter?
Commercial meters supply data about how much energy your business uses. This can help put an end to inaccurate bills as suppliers will no longer need to rely on estimated costs.
What are multi-site meters?
If your business is large and operates from different locations, then you may require a multi-site meter. This can help you to manage the energy that you are using more efficiently.
Switching to get the best price for your business energy can become time consuming and complicated if you are using different suppliers for different sites. This is especially the case when tariffs are due for renewal at different times. A multi-site meter means you are on one tariff with one bill across your sites. We can help you to compare suppliers and switch to get the most competitive deal possible for your multi-site meter.
Can I cancel my commercial energy contract?
Because every business energy contract is for a fixed amount of time, you’re tied into the agreement until it expires and can’t cancel or change it. The time frame will depend on your agreement with 12 months being the minimum. Smaller businesses receive reminders about when their contract is due to expire. This is the point at which you can search for a cheaper business energy deal. If you find a deal that you prefer with a different supplier then you can accept it and inform your existing supplier that you want to close your account. Once your contract expires, you will be sent a final bill to pay and may be asked to send a final meter reading.
What is the average annual utility bill for a small business?
The average annual utility bill (gas and electricity) for a small business ranges from £2,700 to £4,300. For a micro business, this is £950 per year t £2,500 and for a medium business the average is £4,800 to £7,000+.
Is business energy cheaper than residential tariffs?
There are certainly more commercial savings to be made with business energy rather than domestic or residential tariffs. Business contracts can last anything from 28 days to 5 years and businesses are locked in to the fixed term meaning that, with suppliers chasing your business, there are opportunities to access cheap deals and make larger savings.
Why should I compare business energy prices?
Significant financial savings can be made for small business owners that compare deals on gas and electricity and make a switch that benefits their needs. Using a price comparison site can make this process even quicker and easier.
At Businesscomparison.com we offer a free energy comparison service. Why not compare over 150 business energy tariffs with us today?
Four steps to switching energy suppliers
Step 1: Know when your existing contract is due to expire
Typically, your supplier will send you a renewal letter detailing the new prices they intend to charge for your energy use. Usually this is send 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.
Step 2: Compare the best deals
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.
Step 3: Arrange the switch within 30 days of expiring
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.
Step 4: Use a business energy broker
Use a business energy broker such as Businesscomparison.com 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 contract 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 contacts will be separate and may contain difference start and end dates
- Most businesses have the standard 20 per cent 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 per cent
- 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 the difference in a business paying a deal in the region of 4 pence per kWh than those facing higher charges of 8 pence per kWh can easily be in excess of £1000
- As with electricity charities, non-profit organisations and smaller businesses with low energy use may be entitled to in a reduction in VAT on their electricity supply
- Gas contracts typically last between one and three years
Property developers and landlords
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.
Commercial landlords will need to consider their property portfolios to make sure they fit within the new regulations and, if they don't, make changes before the deadline of 1st April 2018.
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.