A Guide to Choosing the Best Business Energy Tariff

When you have a business, it’s important to keep overheads low. And, since electricity and gas costs tend to pile up, you have to choose carefully if you desire to avoid spending more money than you need to on your energy bills. You must compare a wide range of business energy deals and rates so that you can reduce the amount you should pay and save a lot on your electricity and gas each year. Let’s take a closer look at a business energy tariff.

Business Energy Tariff

But before you begin comparing business energy quotes, you must understand what business energy is all about. You also need to know the rates on offer as well as how energy suppliers calculate everything on your energy bill. In this way, you can be in a good position to choose the right energy tariff for your business. This article is a guide to choosing the best business energy tariff.  

Understanding your business energy contract

When choosing the right business energy contract, there is a good chance that you will come across many unfamiliar terms and jargon. A business energy contract has a billing period that refers to the time between each energy bill. Remember that you can decide to negotiate this billing period with your business energy supplier. For small and medium businesses, it’s a good idea to have a short billing period so that you can check your spending habits. 

There is also a unit rate which is the price you have to pay per kilowatt-hour for electricity and gas your business uses. You need to find a low unit rate when comparing energy suppliers. And, remember that most energy suppliers tend to differ a lot on the unit rate. The amount often depends on the circumstances of your business. 

Besides these, your business energy bill has a standing charge. This is a daily fixed cost that covers the maintenance of the energy meter. An energy bill also has an agreed supply capacity. For high consumption businesses, the agreed supply capacity refers to the agreed maximum demand of energy that you agree with your energy supplier. If the energy supplier thinks your business is going beyond this capacity, it can lead to expensive excess charges or power cuts. 

It’s worth mentioning that business energy differs from household energy. Business rates are usually cheaper than household energy rates. Household energy suppliers usually purchase and sell electricity and gas monthly while business energy suppliers buy in bulk, which can be enough to last the period of your business energy contract. Therefore, your business can take advantage of cheaper unit energy rates, but it can also mean that you can have problems terminating your business energy contract. 

A business energy contract can also last longer. Keep in mind that regardless of whether you intend to get a variable or fixed rate tariff, all business energy contracts have agreed terms which may be up to five years. You should also note that you cannot get a new business energy deal until the current one is in its renewal window. The renewal window is often between one and six months before your current business energy contract’s scheduled expiry date. 

A business energy contract also doesn’t have a cooling-off period. When you decide to switch domestic energy suppliers, there is usually a 14-day cooling-off period that allows you to cancel the energy deal without incurring penalties. But business energy deals don’t have this cooling-off period, so you must make the right choice before you agree to sign a business energy contract. This is why it’s a good idea to visit  www.utilitybidder.co.uk so that you can compare the various business energy deals.  

Type of business energy tariffs

A fixed-term tariff charges a set price per kilowatt-hour for the duration of the contract. Remember that the fixed part only refers to the standing charge and unit rate, and not the actual cost of business energy use. The actual cost tends to vary depending on your energy consumption. Regardless of this, a fixed-term tariff is good for a business that is looking for affordable energy.

There are many benefits to choosing a fixed-term tariff. In most cases, a fixed-term tariff is considered to be a good one because energy suppliers can reduce the energy rates for customers. This tariff can also protect you when wholesale prices rise. It’s also easier to budget with a fixed-term tariff since the standing charges and unit rates are fixed. Above all, you have a wider selection of energy deals because energy suppliers compete to retain their customers.

That said, there are also some cons to choosing a fixed-term tariff. You can miss out on better energy deals when wholesale prices fall. You are also liable for exit fees once you decide to terminate your energy contract for a better tariff. Worse still, there can be an automatic rollover when your energy deal expires, meaning your energy supplier can roll a more expensive energy plan.  

With a variable-rate tariff, a unit rate is tied to market activities. Therefore, if the energy market price rises, there is a good chance that you can pay more money. But if your business can manage to be exposed to some risks, you can benefit from falling energy market prices.  

The good thing about a variable-rate tariff is that you are not tied to an energy contract, meaning you can choose to leave at any time. Also, there is no exit fee and you can decide to switch to another energy plan whenever you desire.

But there are a few drawbacks to a variable-rate tariff. In most cases, energy prices usually rise rather than fall over time. And, because there is a lot of uncertainty when it comes to future energy prices, it can be hard to budget. Lastly, it takes a lot of time to monitor wholesale prices, especially when you need to run your business.

Regardless of the type of tariff you decide to choose, you should remember that energy suppliers give you a renewal period when your contract approaches its expiry date. The supplier can offer you a new energy deal at this point, though you can also find a better business energy deal elsewhere as a new customer.