Thu, 07 Jul 2022

When you run a business, you need to keep overheads low. Because electricity and gas costs can add up, you need to choose the right energy deal so that you can avoid paying more money on your energy bills. The best way to get the best energy tariff is to compare the rates and energy deals on the market.

But before you decide to compare quotes, you need to know more about business energy rates and all the details on your energy bill so that you can be in a better position to negotiate for the right energy deal for your business. This article explains what small business owners need to know before choosing an energy tariff.

Understanding your business energy contract

There are many terms and jargon associated with a business energy contract you need to be aware of. There is a billing period that refers to the period between each energy bill, which you can decide to negotiate with your energy supplier when setting up your contract. Smaller business owners require shorter billing periods so that you can check your energy spending habits.

There is also a unit rate, which is the price you have to pay for each kilowatt-hour of energy that the business utilizes. Therefore, when you want to compare energy suppliers, you may want this to be low. Keep in mind that the unit rate is something that most energy suppliers differ a lot because the amount of money can depend on your business situation.

Another thing worth considering is the standing charge. This is the daily fixed rate that energy suppliers include in your energy bill to cover the maintenance of the meter.

Also, energy suppliers can include the agreed supply capacity. For high energy consumer customers, the agreed maximum demand for energy is what a business with its energy supplier. Therefore, if the energy supplier thinks that you are going beyond this capacity, it can force them to cut power or ask you to pay for excess charges.

Business energy vs domestic energy

If you have just launched a new business and decide to move into a premise, there is a good chance that you may not be familiar with business energy. Some people can be forgiven to think that a domestic energy deal is the same as a business energy deal. The truth is that these energy deals are quite different.

In most cases, business energy rates are usually cheaper than domestic energy rates. Domestic energy buyers purchase and sell electricity and gas each month. On the other hand, business energy suppliers tend to purchase gas and electricity in bulk, which can be enough to last the entire period of your energy contract. This means you can benefit from cheaper unit energy rates, but you can also have some problems when you try to terminate your energy tariff early.

Also, business energy contracts typically take longer. With Utility Bidder, you can choose to be on fixed or variable rate tariffs, but you should note that all business energy contracts have agreed terms, which can sometimes last for five years. And, you can't switch to a new energy deal until the current one is in the renewal window. A renewal window can be between 1 and 6 months before the expiry of your current energy deal.

A business energy contract also doesn't have the cooling-off period. When you want to switch domestic energy, there can be a specific cooling-off period that allows you to terminate the energy contract without getting a penalty. Business energy contracts don't have this cooling-off period, so you need to make the right choice before you choose any business energy deal.

Most business energy contracts are also single-fuel only. A domestic energy supplier can usually offer a joint energy contract for both your electricity and gas. This can save you cash in the process. But you cannot have the same luxury with a business energy contract. In most cases, you can have separate business energy contracts for your electricity and gas.

Above all, business energy deals can be offered depending on your business model. In other words, business energy is a more tailored process than domestic energy. Energy suppliers need to assess the requirements of your business to help them create the right quote based on the needs of your business.

Types of business energy contracts

You can avoid overpaying energy bills by choosing the right energy contract that suits your business. Sometimes, you can decide to choose between a variable rate tariff or a fixed-term tariff, though there are several other tariffs out there.

A fixed-term energy contract refers to the one that charges a specific price per unit of energy for the duration of your contract. The fixed part of this name only applies to the unit rate as well as the standing charge instead of the actual cost of the energy usage. Therefore, the actual cost can vary depending on your energy usage. Regardless of this, this can be an excellent option for your business, especially if you are looking for affordable business energy.

The good thing about a fixed-term energy contract is that it is usually the cheapest energy tariff you can find on the market because most energy suppliers reduce the energy rates.

You are also protected in case wholesale energy prices increase. As a business owner, you need to opt for a fixed unit rate and standing charge because it makes budgeting easier.

Alternatively, you can choose a variable-rate energy contract. With this one, the unit rate is tied to the market activity. The good thing about a variable-rate energy contract is that you can benefit from decreases in wholesale energy prices. Because you are not tied to an energy contract, you cannot terminate it at any time.

Also, a variable-rate energy contract doesn't have termination fees, especially for standard variable-rate energy tariffs. Even better, you can decide to switch to any other available energy plan whenever you desire. At the end of the day, you need to choose an energy tariff that best suits the needs of your business.

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