What Does the Price Cap Increase Mean for Your Business?
April’s 6.4% price cap increase is the third consecutive increase, which has seen an increase of 15% since September 2024. While this has significant effects on household budgets and the affordability of living, what does this mean for your business?
What is the Energy Price Cap?
The energy price cap is the maximum amount that energy suppliers can charge per unit and standing charges on prepayment and standard variable tariffs. This is done to ensure that the pricing remains fair and based on true energy costs. The price cap is based on typical household use. Ofgem reviews and sets the energy price cap every three months.
Increases can be attributed to a range of factors, primarily the rising cost of wholesale gas, which is bought on the global market. This makes it more susceptible to international geopolitical and market conditions.
Is there an Energy Price Cap for Business?
There is no price cap on business energy. The energy price cap only applies to households. However, the domestic energy price cap reflects important market conditions that affect businesses.
What Are the Implications of a Rising Energy Price Cap for your Business?
The increase in the energy price cap affects businesses’ energy costs and portfolios, but it signals other potential impacts for businesses too.
- –Wholesale energy costs: Ofgem’s quarterly review of the price cap means this will signal market fluctuations. Keeping an eye on the price cap for domestic contracts gives an idea of upcoming potential pricing changes.
- –The cost of doing business: While pricing fluctuations will affect the balance sheets of all businesses, energy-intensive businesses in particular will feel the effects of rising energy costs. This makes front-foot energy management essential to controlling operational expenses as much as possible.
- –The knock-on effect for supply chains: a higher cost of living impacts consumer spending. This has an effect that filters throughout the supply chain, affecting businesses.
Energy Price Cap Important Dates in 2025
Keep an eye out for the following review dates:
- -27 May 2025 for the period 1 July to 30 September 2025.
- -27 August 2025 for the period 1 October to 31 December 2025.
- -25 November for the period 1 January to 31 March 2026.
What Should Your Business Do in Response to the Price Cap Increase?
Monitor Market Trends
Keep a finger on the pulse of what’s happening in the energy market. This helps to make better informed decisions around procurement, contract terms, and portfolio management. By working with Smarter Business, you don’t need to do this alone. Your dedicated account manager is on hand to answer market-related questions. We also provide smart procurement software solutions, assist you with shopping the market for the best energy deals, and support you step by step when effecting changes.
Consider a Fixed Rate Business Energy Contract
If your contract us coming up for renewal, it is always worth shopping the market to source the best deals. Fixing your business energy rate is the most effective way to buffer your business from fluctuating prices. We are here to help – with quotes negotiated with leading business energy suppliers and an end-to-end switching service.
Get Smarter About Energy Efficiency
In the short term, saving energy is going to be essential to cost-saving strategies around volatile business energy prices. At Smarter Business, we provide all the tools you need to do this as effortlessly as possible. From smart meters to energy monitoring software platforms, understanding your consumption data is the first step to ensuring you prevent waste and tap into savings with minimal disruption to your business.
Looking to the long term, making the move to alternative energy sources is another way to manage rising energy costs. We offer a full commercial solar solution – and are here to advise on the viability, funding options, and ways to maximise the value of your solar array.
Contact Smarter Business for the Smartest Approach to Business Energy Management
In the UK, our marginal cost is set by gas-powered plants, which is particularly sensitive to global geopolitical events. While below energy crisis levels, gas prices have remained high in recent times. While we are unable to accurately predict what the markets will do long into the future, building business resilience means taking a pragmatic and forward-focused approach to this key operational expense.
While the price cap increase does not directly affect businesses, it gives us a glimpse into market conditions that impacts your business. Contact Smarter Business today to build an energy procurement and management strategy that’s geared for the future.