Is Business Energy Cheaper than Domestic Energy?
New business owners may be wondering: is business energy cheaper than domestic energy?
A simple question, with a more complex answer. There are a number of factors to take into consideration when comparing business energy with domestic energy.
Although the actual gas and electricity supplied to business and domestic customers travels via the same cables and comes from the same sources, energy suppliers offer different contracts to commercial and domestic customers.
So, is commercial energy cheaper than household energy? Let’s unpack the detail…
Domestic and non-domestic energy operate in different ways. Although domestic energy tends to get more media attention that business energy, understanding the nuances of business energy supply and contracts can help you get the best energy deal for your business.
Average business energy rates vs. average domestic energy rates
Businesses pay a lower per unit price for energy, largely due to volumes and economies of scale – the larger the business, the lower the unit rate.
Commercial clients are also able to negotiate and choose contracts based on their needs. Household customers aren’t offered tailored rates, but are charged the same amount as the rest of their region.
Energy price fluctuation
Commercial customers are more likely to experience energy price fluctuations than domestic customers, who usually face price changed on an annual basis. This is because business energy customers can choose flexible energy contracts that move with the market, taking advantage of its peaks and troughs.
But is business energy cheaper than domestic energy? Not necessarily, when you take other charges into account…
Business vs. domestic energy VAT rates
Business typically pay 20% VAT on energy, whereas domestic customers only pay 5% VAT on energy.
Extra charges that apply to business energy
- Climate Change Levy (CCL) – the climate change levy is currently 0.188p per kWh for gas and 0.541p per kWh for electricity.
Here are some of the differences between business energy and domestic energy
Length of contracts
Business energy contracts typically have longer terms than domestic contracts.
- Business energy contracts – run over 36 months.
- Domestic energy contracts – generally last between 12 – 24 months.
It’s harder for businesses to cancel energy contracts. Suppliers will often charge businesses high fees if they try to cancel a contract before the expiry date. Although domestic customers may also be charged for early termination, the charges are not as high as commercial contract cancellation charges.
In addition, domestic energy contracts are allowed to rollover month-to-month after they have expired’ whereas businesses are usually placed onto expensive out-of-contract rates if they don’t renew or sign a new contract.
Cooling off periods
Domestic energy suppliers offer cooling off periods – a window within which domestic customers may opt to cancel their energy contracts. Business energy customers are not offered this option, so they need to do their due diligence before a signing a contract.
Businesses are required to adhere to strict energy regulations and guidelines, such as:
- Electricity at Work Regulations 1989 – these guidelines include acceptable quality standards of equipment, protection from excess current, procedures to safely shut off electricity and other safety measures.
- The Electricity Safety, Quality and Continuity Regulations, 2002 – these regulations detail precautions relating to supply failure, safety of wiring and other safeguards for employees and the general public in the commercial environment.
The benefits of commercial energy contracts
- Cheaper energy unit costs
- Fixed or flexible pricing
- More contract options
- The ability to find a contract tailored to your business’ needs
How to get the cheapest business energy rates
Finding the best business energy deal can be a confusing and time-consuming task. But Smarter Business is here to help. Our team of energy experts will guide you through the entire energy comparison process and secure you the best business energy deal. To get started today, simply fill in a quick form and we’ll get back to you.