A guide to choosing the right energy tariff for your business

30 September 2021

When you have a business to run, keeping overheads as low as possible is crucial. And since gas and electricity costs can mount up, a business needs to choose carefully if they want to avoid forking out more than they need to on their energy bills.

By comparing the range of rates and deals on offer, you could slash the amount you’re paying and save a bundle on your gas and electricity every year. But before you begin comparing quotes, understanding more about business energy, the rates on offer and how everything on your bill is calculated puts you in a better position to decide which energy tariff is right for you.

To help make your choice a little more straightforward, we’ve weighed up the pros and cons of each tariff and answered some of the most common questions regarding business energy as part of this extensive guide.

How can I understand my business energy contract?

When it comes time to choose a business energy contract, you’ll probably be faced with terms and jargon you may not be familiar with. To clear up some of the potential confusion, we’ve defined some of the key terms below to get you up to speed before you choose.

calculator

  • Billing period: The time between each bill, which you can negotiate with your supplier when settling your contract. For smaller businesses, shorter billing periods can be a great way to keep your spending habits in check.
  • Unit rate: The price you pay per kilowatt-hour (kWh) for energy that your business uses. When you’re comparing suppliers, you’ll want this to be as low as possible. And keep in mind, the unit rate is where your suppliers differ most – the amount is dependent on your business’ circumstances.
  • Standing charge: The daily fixed cost included in your bill that covers the maintenance of your meter.
  • Agreed Supply Capacity (ASC): For high consumption customers, the ASC is the agreed maximum demand of electricity a business agrees with its supplier. If you’re deemed to be exceeding this capacity, then it could lead to power cuts or expensive excess charges.

How does business energy differ from domestic energy?

If you’re a new business moving into its premises for the first time, or you’re unfamiliar with business energy as a whole, it’s easy to assume that choosing a commercial energy deal is the same as it is for household energy.

busy office

However, things aren’t quite so similar. There are plenty of ways that commercial energy differs from its household counterpart, including the below:

Business rates tend to be cheaper

Domestic energy suppliers buy and sell gas and electricity on a monthly basis. Business energy, on the other hand, is bought in bulk – enough to last the duration of your contract. This means you could benefit from a cheaper unit rate, though it could mean you run into issues with ending your tariff early.

Business energy contracts are longer

Although you can decide on fixed and variable rate tariffs (more on these later), all business energy contracts are taken out for an agreed term, which can sometimes be as long as five years. Take note too: you can’t look for a new deal until your current one enters its ‘renewal window’ which is generally between one and six months before your current deal’s scheduled end date.

Business energy contracts have no cooling-off period

When switching domestic energy, the 14-day cooling-off period allows you to cancel the contract without incurring a penalty. Unfortunately, no such thing exists for business energy deals – so making the right choice becomes all the more important.

lightbulb moment idea

Many business energy deals are single-fuel only

While a domestic supplier will often provide a joint contract for both your gas and electricity – and save you money in the process – you may not have the same luxury with your business energy contract. Typically, you’ll have separate contracts for your gas and electricity.

Business energy deals are supplied on a case-by-case basis

Business energy is a much more tailored process compared to domestic. Suppliers assess the needs of each business and create a quote based on those needs.

What type of business energy contract should I choose?

To avoid overpaying on your energy, it’s important to choose the contract type that’s right for you and your business. Generally, you can choose between a fixed-term tariff or a variable rate tariff, but there are other tariffs you should watch out for too. We’ve detailed them for you below.

Fixed-term

What is a fixed-term contract?

Fixed-term contracts charge a set price per unit (kWh) for the duration. Despite the name, the “fixed” part of the name only refers to the unit rate and standing charge, rather than the actual cost of energy use. This actual cost will vary according to your usage.

Nevertheless, they’re great for businesses looking for hassle-free and affordable business energy.

businessman looking through forms

What are the pros of fixed-term contracts?

  • Typically, the cheapest tariffs since suppliers lower the rates for customers
  • You’re protected should wholesale prices rise
  • Fixed unit rates and standing charges make budgeting easier
  • Wider selection of deals due to the competitive nature of suppliers wanting to keep their customers

What are the cons of fixed-term contracts?

  • If wholesale prices fall, you could miss out on a better deal
  • You’ll have to pay exit fees should you find a better tariff elsewhere
  • Automatic rollover upon expiration may mean you roll onto a more expensive plan

Variable-rate

With variable-rate contracts, unit rates are tied to market activity. If the market price increases, then you may end up paying more. But if your business isn’t opposed to risk, then you could just as easily reap the benefits of falling market prices too.

What are the pros of variable-rate contracts?

  • Possible to benefit from reductions in wholesale energy prices should they fall
  • Since you aren’t tied to a contract, you can leave at any time
  • Likewise, there are no exit fees for standard variable-rate tariffs
  • You can switch to a different plan whenever you want

What are the cons of variable-rate contracts?

  • Generally, prices tend to rise as opposed to fall over time
  • Since there’s greater uncertainty regarding future prices, it’s harder to budget
  • Staying on top of wholesale energy prices takes time, especially when you have a business to run

Looking for total control over your business gas rates? Built for larger businesses who use more than 100,000 kWh of gas a year, our flexible purchasing option lets organisations buy and sell as much energy as they want.

By giving businesses the power to control their own costs, we’ve strengthened our relationships with some of the UK’s best-known brands, as well as a host of public sector organisations and large industrial manufacturers.

Interested? You’ll find more information, along with links to customer case studies, right here.


If you're looking for the best business energy tariff, discover how Gazprom Energy could help

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Other rates to keep in mind include:

Deemed-rate

Should you let your current tariff end without switching supplier or arranging a new deal, you’ll be placed on a deemed-rate contract: a rolling out-of-contract tariff that means you’ll pay your supplier’s priciest rate.

Because they’re so expensive, we’d advise you to look for a new tariff as soon as possible.

28-day

A rolling 28-day contract, 28-day tariffs are for businesses who haven’t switched since the energy market regulation took effect. Both the unit rates you’re charged can increase and decrease.

Rollover

When your contract expires and you haven’t arranged a new deal, you’ll be placed on a rollover contract. You’ll be signed up for another year, and you’ll be charged rates that are among the supplier’s most expensive.

Best practices for choosing the right business energy tariff

Time is of the essence

The sooner you move your business onto a cheaper tariff, the sooner you can start saving money. Business energy prices can change frequently, so if you spot an opportune time, then you’d do well to strike while the iron is hot.

Work out your current business usage

Regular meter readings can pay off when it comes to choosing the right tariff.

energy metre

Using a smart device like a smart meter or AMR device, or taking meter readings the old fashioned way, can give you more precise information about your energy consumption, which certainly comes in handy when it’s time to negotiate that new contract.

Remember: energy tariffs usually include a standing charge and a unit rate. What could be a great deal for a high energy user might not be as good for a business that uses far less, especially if a pricey standing charge outweighs any benefits of a low unit rate.  

Ask yourself what you want from a new tariff

There are many reasons why a business might want to change its energy supplier. Paying less for gas and electricity? Avoiding price hikes over time? Better customer service?

To narrow down your choices and help pinpoint the ideal supplier, ask yourself just what it is you want from your next energy tariff.

Use the services of an energy broker

Dedicating time to finding the right energy tariff might not even be possible when you’ve a business to run. Here’s where the services of an energy broker come in. Through expert knowledge and connections, they can research suppliers, compare quotes and negotiate prices, all while keeping a watchful eye on changes and trends in the energy market.

For more information on how an energy broker can help you find the right deal, check out our interview with Zenergi CEO Graham Cooke.

What happens when my business energy contract ends?

Whichever tariff you opt for, when you near the end of your contract, you’ll be given a renewal period. When you’re in this period, your supplier will offer you a new deal. Keep in mind, there’s no obligation to accept this offer – you may be able to find a better deal as a new customer elsewhere.

businesswoman reading paperwork

If you do decide to switch providers at this point, you’ll be sent a final bill based on your current tariff. You might also need to provide a final meter reading to ensure the bill is accurate.

If no new deal has been arranged, however, then you’ll be automatically placed on an expensive out-of-contract tariff by your supplier. We’d strongly recommend informing your supplier of your plans, and collecting some tariff comparisons way in advance, to avoid overpaying on this contract.

What happens if I move business premises?

If you’re looking for a new energy tariff and you’re moving premises, there are a few things you’ll need to do.

Firstly, you should let your existing energy supplier know when you’re leaving a month in advance. You should also inform them of your new address. As with the above, there’ll be a final bill to pay, or if you’re lucky, you could even be due a refund.

On the day you move out, take a final meter reading and pass this on to your supplier so that you only pay for the energy you’ve used.

empty meeting room

Certain suppliers might let you transfer your existing business energy deal to your new premises, but if this isn’t possible, setting up a new energy contract will ensure you’ll avoid those dreaded deemed rates.

Should you decide to stick with the same supplier, there’s a chance the penalty fee for an early exit will be waived. That said, it may still be cheaper to switch completely, so we’d advise carrying out the appropriate research beforehand.

Upon moving into your new premises, be sure to check your energy supply has been disconnected. If the previous tenant has not paid their bills or they cancelled their direct debit, you might need to pay a reconnection fee to get things up and running.

If you move into your premises problem-free and you have a new contract in place, then all you’ll need to do is take a meter reading as soon as possible. Pass this onto your new supplier, and your business will be up and running from the first day you move in.

Gazprom Energy is a leading supplier of business energy, offering competitive gas and electricity contracts that are simple to set up and manage. For more information, visit the homepage or call our team today on 0161 837 3395.

The views, opinions and positions expressed within this article are those of our third-party content providers alone and do not represent those of Gazprom Energy. The accuracy, completeness and validity of any statements made within this article are not guaranteed. Gazprom Energy accepts no liability for any errors, omissions or representations.


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