Business electricity tariffs are one of several factors companies have to take into account when preparing their budgets and forecasting. It’s important to compare tariffs across suppliers when considering your business electricity costs because these can have a considerable effect on what you pay on an ongoing basis for your electricity. This blog aims to clear up any confusion you may have about business electricity rates so you can secure a good deal going forward.
Business electricity tariffs in the UK
Electricity companies in the UK tend to offer either fixed-rate or flexible tariffs. When domestic consumers consider switching suppliers, they can opt for dual fuel prices, but these are not generally available for businesses. As a business, however, you can often negotiate on price. It’s worth shopping around to find the cheapest electricity company for your own company’s circumstances and usage. Below, we list the most commonly found types of business electricity tariff in the UK.
1. Fixed rate tariff
As the name implies, the amount you pay for each kilowatt-hour (kWh) of electricity you use is fixed for the duration of your contract. With a fixed-rate tariff, you always know how much you’ll be paying, and you will be unaffected by any fluctuations in electricity prices. Fixed-rate tariffs tend to be the cheapest business electricity tariffs in the UK on the market, so it’s a case of searching for the company that offers the lowest tariff for the longest period of time if you want to go down this route.
One disadvantage of this type of tariff is you don’t benefit from any reduction in your bills if the price of electricity does drop below your fixed rate. What’s more, fixed-rate tariffs generally come with long-term contracts, which means you’re tied down to a single electricity provider until your contract ends. That’s usually a minimum of 12 months but can be longer.
2. Flexible rate tariff
Again, as the name suggests, a flexible rate tariff means your energy per unit cost can go up or down, depending on the wholesale electricity price. If you sign up for a flexible rate tariff, your bill will increase if electricity prices rise; however, you’ll make savings when it falls. There are two main types of flexible rate tariffs, rolling contract and deemed rate.
A rolling contract will automatically renew until such time as you decide to terminate it. Beware, though. The automatic renewal generally comes at a higher tariff rate. Sometimes, you may be able to negotiate a lower rate when you agree to extend the duration of the contract. However, other options are more likely to get you cheaper deals, so if you’re on a flexible rate tariff, make sure you know when your contract ends and properly compare cheap business electricity tariffs across the market before the end date.
The other type of flexible tariff is a deemed rate contract. These are commonly applied by providers to businesses that have recently moved locations or have come to the end of a fixed contract but have not signed any new agreement.
Deemed rate contracts tend to charge more expensive rates, so you should only ever use these as a temporary arrangement while you are negotiating for better prices and suppliers.
Fortunately, deemed rate contracts can be terminated at any time, and suppliers are not allowed to charge any cancellation fees. You can also terminate a deemed rate contract without having to give any prior notice, unlike other types of business electricity contracts.
Because electricity prices under flexible tariff contracts can be more expensive than fixed-rate ones, it’s important to research what offers other electric companies are providing to make sure you sign up to the best deal for your company’s circumstances and usage.
Are business electricity rates cheaper than domestic rates?
The rates charged for business electricity are often lower than those for domestic electricity. That tends to be because businesses typically use more electricity than domestic households so they can negotiate lower rates. However, although the cost of the electricity itself is cheaper for businesses, the fees for business electricity are higher. The main financial hit is VAT on business electricity, which is charged at 20%. Domestic users only pay 5% VAT on their electricity.
Other expenses businesses may have to pay include the Climate Change Levy, also known as CCL. This tariff aims to lower CO2 emissions by encouraging businesses to be more efficient in their energy usage. CCL is a tax imposed by the government on businesses with higher electricity usage to deter them from using too much electricity.
As energy prices rise, it’s critical to ensure you’re getting the best deal. But if you have neither the time nor resources to spend exhaustively checking out the market and comparing deals from the many suppliers out there, why not invest in a consulting firm to do the legwork for you?
Here at Smarter Business, we have a wealth of knowledge about the energy market and can find you deals that could save you thousands of pounds. We work across the UK, assisting businesses of all sizes and types to reduce their electricity and other utility bills and more. If you’d like to see whether you could save money on your business utilities, contact us by phone on 01444 220060. Alternatively, email us at firstname.lastname@example.org.
Simple Ways to Save Money on Your Business Electricity Rates
Knowing what you require from your electricity provider and obtaining the best business electricity rates could help you save money on your energy bill. There are other ways to minimise your monthly payments so you can reduce your outgoings and reinvest that money where it matters most. Here are some tips to help:
- Shop around
One of the elements that will determine how much you could save is your existing electricity usage patterns. If you haven’t switched suppliers in a long time, the savings you’ll make could be substantial.
- Turn everything off and reduce electricity consumption
This may seem obvious but only turn on the appliances you intend to use. If something isn’t in use, make sure you unplug it from the mains, don’t leave it on standby. Also, involve staff in the process, making them aware of how much electricity is consumed each day. You could provide incentives to help people become more mindful of and efficient with electricity.
- Get a smart meter
A smart meter gives you advance notice of what your bill will be, making you far more aware of your business electricity charges and helping inform conscious efforts to consume less. Smart meters help you and your staff to identify changes to your daily routines that will make your business more energy-efficient and cost-effective.
All You Need to Know About Small Business Energy Usage
If your company hasn’t switched energy providers in a while, you could be overpaying for gas and electricity by hundreds of pounds every year. That’s a lot of money wasted, but fortunately, it’s simple to switch energy suppliers and move on to a better deal.
To avoid being bitten by large early exit fees, you should normally wait until your current contract expires before switching. Once your contract enters its ‘renewal’ window (which your provider will notify you about), start comparing what else is available and lining up more competitive business electricity tariffs to switch to.
If you don’t switch, you’ll be placed on an ‘out-of-contract’ rate. These tend to be more expensive, so it’s preferable to switch before this happens.
If you run your business from multiple locations, you might be able to negotiate a better deal through a multi-site energy contract. This form of contract enables you to bundle all of your commercial energy rates into a single package with a single supplier, which is more manageable and generally ends up saving you money.
Saving costs on business electricity tariff rates is one of the best ways to help your business minimise its operational expenses.
This is where Smart Business comes in. Visit our homepage to learn more about how we can help you with business electricity tariffs comparisons.
FREQUENTLY ASKED QUESTIONS
What is a good price for electricity per kWh in the UK?
According to the Department for Business, Energy, and Industrial Strategy (BEIS), the average cost of ordinary energy in the United Kingdom in 2020 was 17.2p/kWh. However, significant regional differences were noted, with Merseyside and North Wales customers paying 18.4p/kWh and Yorkshire paying just 16.7p/kWh for electricity. Generally, the higher your usage, the lower the cost per unit.
What is business electricity?
Business electricity refers to the energy supplied for business use. There are typically differences between residential and business electricity supply. Here are some of the more notable characteristics of business electricity:
- Prices can change more often.
- Contracts tend to last longer.
- Often less flexibility to switch suppliers.
- Business customers can get tailored quotes.
Is electricity cheaper for businesses?
Business electricity unit prices are often lower than domestic ones because of the amount of energy used. However, most business customers pay a higher rate of VAT (20% compared to 5% for domestic users). Business electricity rates are based on the business size and electricity consumption, computed on a kWh/square foot basis. Some are also liable for environmental levies.
How much power does my business need?
Various factors determine how much electricity your business requires to operate. The exact cost varies based on the business size and the climate in your area. Typically, commercial heating and cooling consume an average of 5 kWh per square foot — 7 kWh/square foot if ventilation is included.
What businesses use a lot of electricity?
Businesses that tend to have high energy consumption include car dealerships, office buildings, residential buildings, hotels and motels, grocery stores, restaurants, and convenience stores. These types of businesses pay the highest business electricity fees in the UK based on the way they use their premises and their operational standards.
How do I change my business electricity supplier?
Switching to a different business electricity supplier is a decision every business should consider from time to time, especially to reduce costs. Here are the four steps:
- Evaluate your current energy contract.
- Request a business energy bill.
- Talk to an energy broker about reducing usage and sourcing a better deal.
- Confirm your business energy switch.