The USE Business Energy Guide
- August 1, 2018
- Business Energy
- by Chris
Key difference between business and domestic energy tariffs
The key difference between business and domestic energy is that business energy tariffs are more specialised. Businesses have more diverse needs compared to someone living in a residential building. Both will want gas and electricity but a business energy policy will have other terms and conditions.
It is not as simple to switch your supplier and business energy tariffs tend to have higher costs involved. Domestic tariffs allow you to manage both gas and electricity together but business energy plans will require you to manage these separately.
Business energy contract types
Business energy contracts can be adjusted to meet the needs for each business, below we have listed the most popular contracts available:
Flexible rate contract
A flexible rate business energy contract can vary depending on the current market conditions, if the price of gas or electricity increase or decrease, you can expect your energy bill costs to reflect this.
Customers may end up paying more than those on fixed rate tariffs if prices rise or a lower amount if the price drops.
Fixed rate contract
A fixed rate contract will have the same price during the length of the contract for business energy. This type of contract is especially popular with smaller businesses, as it will give them the assurance of knowing how much they will be charged for the duration of the contract.
This can make it easier by helping them calculate the expenditure for each financial year a lot easier.
Interruptible rate contract
This type of tariff allows customers to pay a lower price if energy usage is reduced or not as consistent. The supply of electricity may be turned off if the business has a period of high usage demand.
Large site peak day demand
This allows business owners to cap the amount of energy that they use in any time period, typically for each day. This type of contract is especially useful for those who monitor and want more control over their finances and energy usage.
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Switching your business energy contract
It is generally more difficult to switch a business energy contract compared to a domestic contract, but there is still the possibility to do so. Many business energy contracts will require you to give around a six month notice before you can lapse your contract.
Contracts will have terms applied that make it necessary for you to inform your energy provider that you do not wish to renew. It is a good idea to read the small print to ensure you know when this specific window will be, this will help make the transition process as smooth as possible.
If you choose not to follow the terms and conditions of any agreement you have, you may likely be hit with large fines, loss of service or even forced into another year on top of your current contract.
Government legislation allows smaller businesses to have more security, make sure to check the terms and conditions before taking out business energy.
Small business and micro-business
Some small businesses are sometimes to referred to as a microbusiness. Energy suppliers are requested to be more lenient with their terms and conditions under government legislation. A micro-business has the option to inform its provider that they wish to switch their energy supplier prior to the contract ending, even before the notice period.
This gives them extra stability when managing their finances. A micro-business only has to provide a maximum of 30 days’ notice to terminate its business energy contract.
Business energy suppliers must give micro-business customers information about new prices and how these compare with current offerings, including how much energy is used in total over a 12 month period.
In business energy, a micro business is a company that uses less than 100,000kWh of electricity per year and less than 293,000kWh of gas per year. There are many other conditions that have to be met to be classed as a micro-business so it is useful to carry out your own research.
Business energy contracts and standing charges
Your overall bill will also include a standing charge. This is a fixed rate that is charged for use of the service, with additional costs on top for the amount of gas or electricity you use. This will be charged daily during each billing period, it still applies even if you do not consume any gas or electricity.
It can range from 10p to 80p for gas per day and 50p to 60p for electricity per day. Most business energy providers will include these standing charges as part of their tariffs.
However, there are some providers who do not have these charges, these can be especially helpful for a business that does not regularly consume a consistent amount of energy.
It is important to compare all the different tariff options before deciding as eliminating the standing charge will not necessary provide any financial benefits or guarantees.
Climate Change Levy and the effect on business energy prices
Any business that consumes more than 33,000kWh of energy within a single day is required to pay a Climate Change Levy (CGL), this is in addition to your standard energy bill.
Under government legislation, this is a mandate in order to push businesses to reduce their daily electricity consumption. If you are exceeding this amount, you are able to sign a Climate Change Agreement (CGA) in order to reduce the costs associated with CGL expenditure.
This is an agreement by the UK government which requires your business to move towards long term energy efficiency and specific conditions will have to be met to reduce overall consumption.
Measuring energy usage
As the years pass, energy metre readings have become more complex due to advancements in technology. Energy providers are able to calculate the amount of electricity consumed with greater accuracy, smart metres are used to carry this out.
Smart metres don’t just make estimations, they can accurately calculate how much energy is being used.
In previous years these may have been estimated incorrectly meaning customers ended up paying more or less than they should be.
A smart metre can measure an energy usage period as close to a 30 minute period. Larger businesses that consumer a lot more energy are required to have these 30 minute energy metres fitted.
Influencing your energy price and usage
There are a number of factors that will influence the amount of energy a business consumes and the price it will pay for this usage. Here’s a list of some of these factors:
Financial credit rating
Type of metre that calculates energy consumption
Location: average area price and distance to power plants
Electricity energy profile
Your electricity energy profile explained
Electricity energy profiles categorise energy customers into one of nine different segments. Factors that influence the category you will be placed in include your location and the amount of energy you consume.
A domestic energy user will normally be placed into one of the first two categories, this leaves business energy consumers being placed within the remaining seven places. Profile number one to four are generally used for ‘standard demand’ users and places five to nine are reserved for ‘maximum demand’ energy users. Below we have highlighted the key differences between each category:
Domestic unrestricted customers: Normally covers domestic home energy users.
Domestic ‘economy 7’ customers: Normally covers domestic home users with an ‘economy 7’ metre installed.
Non-domestic unrestricted customers: Mainly covers small and microbusinesses with no specialist energy requirements.
Non-domestic unrestricted customers: Similar to above, the only different being that they use a smart metre.
Non-domestic MD customers that have a peak load factor of less than 20%.
Non-domesticated MD customers that have a peak load factor between 20% and 30%.
Non-domesticated MD customers that have a peak load factor between 30% and 40%.
Non-domesticated MD customers that have a peak load factor of over 40%.
Non-domesticated MD customers with a peak electricity load usage which is over 100kw
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*Love Energy Savings £1,000 Cashback Guarantee – Terms & Conditions Love Energy Savings aim to beat the forecast annual cost of any 1, 2 or 3-year fixed electricity or gas initial renewal offer, based on your annual consumption that you provide to us. Where Love Energy Savings decide not to offer a lower priced plan, Love Energy Savings will pay £1,000 per customer. The promotion is open to new and existing customers who are small or medium enterprises and excludes any other promotion offered by a competing supplier, e.g. cashback. Your energy tariff or fixed price contract must be in the renewal window. If Love Energy Savings can’t beat the price you tell us and you’d like to claim the £1,000 promotion, we’ll need to see the competing initial renewal offer either in writing or by email issued by your existing supplier. The contract start date must be within 120 days of the date on the renewal letter or email.