If the lights flicker out at home, it’s an inconvenience—one that might spoil the food in your fridge and force you to miss the big match—but it won’t be a disaster. But if the power fails at your business, you might have to shut up shop for the day, turn away customers, cancel orders, and miss deadlines. And if you’re paying too much for your business energy tariff, it can have a significant impact on your bottom line, and the viability of your venture.
All homes have approximately the same energy needs. Even your neighbor down the street who’s filled his garage with chest freezers (let’s not ask questions) will have a one-size-fits-all domestic energy tariff. But the energy appetites of small businesses vary dramatically: a small shop will have different daily consumption than a restaurant running kitchen equipment or a small manufacturer or anyone running a warehouse.
Commercial energy tariffs are more bespoke than those for households, tailored to your specific energy needs, and finding quotes for them isn’t as straightforward. That’s part of the reason rates of switching among SMEs have flatlined as domestic consumers have become more empowered and mobile. But with the average small business spending £5,100 on electricity and £4,100 on gas each year, you can’t afford to get this wrong. Luckily, there are savings to be had, and rights that protect the small businesses from being ripped off by their suppliers.
Getting Quotes for Energy for Your Small Business
Negotiation a new energy tariff and switching supplier can shave thousands of pounds off annual bills for small businesses. However, in 2013 the energy regulator Ofgem found that 40% of SMEs hadn’t changed provider in five or more years. A quarter of those hadn’t switched said they hadn’t done so because they believed the process was too complicated and that they couldn’t spare time away from running their business to a lengthy energy window shopping and protracted haggling with their supplier over the phone.
But it doesn’t have to be that complicated. You can use comparison sites for business energy plans, much like you can for domestic plans. When comparing quotes, you should pay attention to two numbers: the unit price, how much you’ll pay per kilowatt hour (kWh) of electricity or gas and the standing charge, the ground fee you’ll pay to the supplier each day.
With a fixed price business energy contract, the unit price for your gas and electric will be locked in for the term of the contract, which can range from one to five years (three is typical). Flexible energy plans allow you to purchase wholesale energy in smaller chunks spread throughout the length of your contract, giving you more control over how much energy you buy and when. You can benefit if energy prices fall over the term of your contract. Traditionally, flexible contracts were reserved for larger enterprises but might be an option if you’re a medium-sized business, or have very high energy needs.
When negotiating a business energy tariff, you’re advised to contact suppliers via the phone before committing to a contract, to ensure they can meet the energy needs of your business.
Energy Market Rights for Small Businesses
Typical commercial energy contracts run for longer than domestic tariffs. With fixed contracts, businesses can lock in energy rates for three years to five years, allowing them to make longterm budgets and plans without worrying their electricity bills will suddenly skyrocket. However, safeguarding your bills comes with higher rates and makes cancellation difficult (90 days notice is generally required). The exception is if your business moves or goes under in this cases, you can cancel penalty-free. However, be aware that business energy contracts have no cooling off period and that they often auto-renew at the end of the term—which may seem like a convenience but you might notice your rates for this new period have crept up.
Lengthy contracts may not be advisable for micro businesses, especially new ventures just trying to get of the ground. Luckily, Ofgem regulations guarantee certain protections for small businesses, giving them more flexibility with contracts. If your business uses less than 100,000 kWh of electricity per year, uses less than 293,000 kWh of gas per year or has fewer than 10 employees and an annual turnover of less than €2 million, it’s a micro business. The majority of UK businesses qualify under one of these conditions.
If you’re running a micro business, you can cancel your energy contract with a notice period of just 30 days. Furthermore, the letter you receive about the renewal of your fixed term contract must include data about your current prices, new prices, and consumption, so you’re in a better position to negotiate a new contract, either with your existing supplier or a new one.