How Does Business Electricity Pricing Work?
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Understanding Business Electricity Pricing
So, what makes up the total electricity price that businesses pay?
- Wholesale energy cost or raw energy cost
- VAT charged at 20% (domestic customers pay at 5%)
- Transmission or distribution cost
- Unbilled volumes or losses
- Environmental costs or levies, like the Climate Change Levy (CCL)
- Operating costs of the supplier, TPIs (broker), and metering expenses
- Supplier’s profit
The wholesale costs businesses pay vary between providers in part because it depends on how much electricity they have to route to their clients. As with any other wholesale business, the more electricity is bought, the lower the business electricity prices per kWh will be.
The network costs also cover transmission and distribution. The main provider takes the burden of transmitting electricity where it needs to be sent, equating to additional costs in terms of maintenance and operational expenses.
As for the environmental costs, these are mandated by the government for a good reason. It’s businesses’ responsibility to adopt more sustainable practices. Environmental levies help energy providers become more responsible in their own practices as well.
Other costs include taxes and other operating costs involved in suppliers transmitting energy to your business.
How We Can Help You Reduce Your Energy Costs
Here’s how our services can help you:
- We do all the research
We save you the time and effort of researching what’s on offer from each provider by doing all of that for you. Because we understand how providers work, we are able to tap into every possible deal they offer and how each of these could benefit you based on your usual energy consumption.
- We analyse the data and recommend the best deals
We don’t just look for the cheapest rates. We also analyse those and the terms and conditions that come along with them. Often, people only see the low rates and fail to factor in how these might change over the longer term of the contract and beyond. They also might not consider other conditions that come with these energy products, such as whether you’re opting for an introductory rate that will go up after a period or the length of the contract. We look at long-term results based on your needs and recommend which ones would benefit you financially over a longer time period.
- We help you apply best practices that trigger long-term efficiency
We don’t just help you find great business electricity rates – we also create utility management plans that further decrease your utility costs. This ensures you’re future-proofed in terms of using less energy and therefore paying less over time, regardless of changes in the market.
The ultimate goal here is to avoid all unnecessary costs so that this extra resource can be diverted into other aspects of your business.
Smarter Business Practices to Minimise Electricity Usage
With our help, you can make your business practices more sustainable while also improving your financials by saving on electricity costs. Here are just some of the many ways you can save on energy costs while growing your business:
Did you know that a single LED light only uses 5 watts to give out the same amount of light that a halogen does at 30 watts? That’s an 85% decrease!
In some cases, businesses opt not to switch to more energy-efficient equipment, simply because the initial outlay appears to be more expensive. But bear in mind that buying such appliances and equipment is a one-off cost. If you compute the amount you will save over the longer term, the benefits will become apparent.
Even more than the kind of equipment you use, the way that you and your employees use energy matters. Many employees are not aware of the impact of their actions, especially when it comes to your business’s energy usage.
When businesses become more intentional about sustainability, they contribute not just to their own financial health, but to that of the earth as well. Including simple yet sustainable practices in policies, like shutting down office equipment and other electrical fixtures when not in use, really can make a difference.
Energy audits give you opportunities to further reduce your overall energy usage. You may have the right intentions, but it’s less effective to transition into energy-efficient practices without knowing the current state of your business’s consumption and practices.
After an energy audit, you will be given specific recommendations that fit your business. This way, you can monitor the successes against the original baseline and be more sure that every step you’re taking is heading in the right direction.
FREQUENTLY ASKED QUESTIONS
What is business electricity?
Business electric tariffs are types of energy deal created for business purposes. You can request bespoke quotations from suppliers and can negotiate better rates than home energy users. However, business contracts tend to last longer and offer less flexibility to switch.
What is a good rate for business electricity?
On average in 2021, the price of business electricity begins at 12.66 pence per kWh. Small business electricity prices tend to be higher at an average of 15.10 pence per kWh, while big businesses are currently paying around 11.76 pence per kWh.
How do I change my business energy supplier?
Here’s how you can switch business electricity supplier with the help of an energy broker:
- Read the terms of your existing energy contract
- Locate a current energy bill for your business
- Contact an experienced broker
- Confirm the best deal for your needs
- Await your business energy switch
How much can you save by switching to an energy supplier?
It’s estimated some businesses can save up to 45% a year by simply switching energy supplier. While you may not achieve this rate of saving, it does emphasise that comparing providers and taking the time to research the best deal could be worthwhile. If you don’t have the time or knowledge of the market, an energy broker is invaluable.
Can I cancel my business electricity contract?
Yes, by calling your businesses electricity supplier for this. You can usually do this within 30 days of the contract’s end date. You can send a termination notice to your supplier at any time, usually with 90 days’ notice. You may have to pay a penalty if you’re still within contract – check the terms and conditions.
Is electricity cheaper for businesses?
Electricity rates for businesses are based on their size and electricity consumption. Business electricity unit prices tend to be lower than domestic costs, simply because of the higher amount of energy they use. However, overall, the majority of business customers pay higher rates of VAT (20% compared to 5% for domestic users).
How can businesses reduce electricity costs?
Simple tips to reduce business electricity costs include:
- Switching off lights that aren’t in use
- Buying energy-saving light bulbs
- Consider using fluorescent bulbs, which use 10% less energy than traditional bulbs
- Hiring an energy broker like Smarter Business to explore suppliers’ deals and find the best one tailored to your business’s needs and usage
What businesses use the most electricity?
The following tend to use the most in terms of electricity:
- Restaurants, convenience stores, and grocery shops are considered to be some of the highest energy consumers
- Car dealerships are open long hours, and lighting is critical to how products are displayed
- Office buildings, residential buildings, hotels, and motels
How long does it take to switch electricity providers?
It may take as long as three months to completely switch the provider of electricity for your firm. This is because electricity meters tend to be read on a quarterly basis and your new provider will need an accurate reading before they bill you.
What should I look for when choosing an energy company?
What to consider when hiring a provider of electricity for companies:
- Their business electricity rates in the UK
- Their reputation for customer service
- The flexibility or otherwise of their contracts
- Whether or not they provide green or renewable energy
- What happens to prices once the contract ends
Using an energy broker takes the guesswork out of choosing an energy company.
Smart Ways to Minimise Business Electricity Usage
Here are some tips to lessen your business electric power consumption:
Buy energy-efficient appliances.
The smartest way to save energy is to invest in appliances that are made to do just that. Having energy-efficient appliances in your place will keep your power consumption at a minimum.
Make the most out of natural sunlight.
If your office has an area where the natural light comes in, then it’s better to take advantage of that than turn lights on. Natural light is also better for employees’ well-being.
Use fans instead of an AC system.
Shut your AC off a few days a week and use fans to keep the space cool. Offices, warehouses, showrooms, and kitchens can all benefit from this.
Hire in an energy audit.
An energy audit will keep track of electricity consumption and include professional advice on how to reduce it.
Top Common Uses Of Electricity In Business
- Air conditioners
- Water heaters
- Office lights
- Printers, computers, and laptops
- Telephones, modems, and routers
- Dishwashers and refrigerators
- TV and game consoles
Tips on Getting the Best Business Electricity Tariffs
- Check your current tariff so you can compare rates
- Find out when your contract ends to avoid being re-enrolled in a disadvantageous new one
- Decide how long you want your new contract to last
- Research new suppliers, including smaller suppliers and suppliers who are new to the market
- Read reviews on suppliers you’re thinking of using
- Check your business electricity profile class to ensure you’re signing up to the right tariff
- Understand your current usage and patterns of usage
- Check your business’s credit rating
- Pay by direct debit to save money.
If you don’t have the time or inclination to do all of the above, a professional energy broker can find you the best deal for your circumstances.
Dos and Don’ts When Switching Electricity Providers
What to look for when switching business power providers:
- The ease of transferring. Don’t accept a provider who offers a complex, lengthy transfer process.
- Avoiding common pitfalls. Look beyond low initial prices to what happens when this promotion expires. If costs spike, avoid the deal. Watch out for contract auto-renewal as this is also likely to be disadvantageous.
For an easy and stress-free switch of business energy provider that will save you money, request a quote from Smarter Business now. Our knowledgeable team of professionals will guide you through your transfer every step of the way.
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