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Business Energy Tariff Types Explained
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"Don't switch" is good advice for households. But business energy is different and there's no price cap to protect you*. "Compare now" is good advice for businesses!
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*with no price cap in place for businesses, some out of contract rates are up between 15% and 120%
Unlike standard domestic gas and electricity tariffs that place you in a bracket that best suits your usage, business plans are tailored to your exact needs.
Although this level of accuracy is a bonus for your business, itâs still tough for you to put a finger on the exact cost of your business gas and electricity tariff.
How much should you pay for business energy?
What makes forecasting your usage and cost so hard is that even if youâre basing your business against a similar sized company, there are so many other variables that impact costs. Employee numbers and postcodes are two things that vary hugely across industries and will affect how much energy will cost. No two businesses are exactly the same.
Regional variations can account for as much as a 20% in price difference, even across similar markets, with businesses in rural areas typically paying more for energy than their city-based counterparts.
But to give you an idea how much energy your business should be using and the relative cost, see below the average electricity and business gas consumption rates and prices:
Average business electricity prices and usage*
| Business size | Average annual usage (kWh) | Average price (per kWh) | Standing charge (daily) | Average annual price |
|---|---|---|---|---|
| Microbusiness | 5,000 - 15,000 | 13p - 13.5p | 26p - 30p | ÂŁ650 - ÂŁ1,800 |
| Small business | 15,000 - 30,000 | 11.8p - 13p | 24p - 26p | ÂŁ1,900 - ÂŁ2,900 |
| Medium business | 30,000 - 50,000 | 11.3p - 11.8p | 21p - 23p | ÂŁ3,300 - ÂŁ5,000 |
*Figures are based on industry averages and are only intended as a guide. There are a number of other factors that can impact the amount that you pay for your business electricity including consumption habits and the location of your business premises.
Average business gas prices and usage
| Business size | Average annual usage (kWh) | Average price (per kWh) | Standing charge (daily) | Average annual price |
|---|---|---|---|---|
| Microbusiness | 5,000 - 15,000 | 4.1p - 4.5p | 23p - 26p | ÂŁ300 - ÂŁ700 |
| Small business | 15,000 - 30,000 | 3.8p - 4p | 21p - 22p | ÂŁ800 - ÂŁ1,400 |
| Medium business | 30,000 - 50,000 | 3.5p - 3.7p | 18p - 20p | ÂŁ1,500 - ÂŁ2,000 |
**Figures are based on industry averages and are only intended as a guide. There are a number of other factors that can impact the amount that you pay for your business gas including consumption habits and the location of your business premises.
What business gas and electricity tariffs are available?
Each business has a different needs, and to match this suppliers have different tariffs to try and meet these demands. In general, there are five types of main contract available for businesses. These are:
- Fixed term contract - Fixed term allows you to secure a certain cost per unit (kWh) that you always pay for your energy. Itâs worth noting that this doesnât fix the cost of your bill. The variable of how much you use will increase or decrease your cost.
- Variable-rate contract - Your unit rates are linked to market activity, meaning they can increase and decrease throughout the duration of your contract. Thereâs an element of risk with this tariff.
- Deemed rate contract â This is also commonly known as an out-of-contract tariff. Itâs a rolling contract with expensive rates that are arranged by suppliers for customers with no formally agreed contract. This isnât a good deal.
- 28-day contract - A contract for businesses who havenât switched since the energy market deregulation came into effect.
- Rollover contract â A rollover contract is used when no alternative has been agreed before your current contractâs end date. You will automatically be signed up for another year, and rates are usually among the supplierâs most expensive. This is a place you donât want to be.
It doesnât matter what the size of your business is, you always want to be on a fixed rate contract. Thereâs less risk and itâs easier to calculate your usage across the contract length this way.
If youâre currently on a deal that doesnât suit your business, why not have a chat with us? We compare energy tariffs in the UK to help businesses and domestic customers save money on their energy bill. Catch our experts on 0800 688 8773.
What happens when your business energy contract ends?
When your energy contract ends, youâll be pushed onto your suppliers more expensive standard tariff. This plan, as explained earlier, is what you want to stay away from. This eventuality comes from a lack of action on your behalf because youâve not cancelled your old plan. Cancelling your initial contract and renegotiating the deal elsewhere is how you get a better price for your business.
Our business tariff experts are always on hand to explain, help and compare deals on your behalf, and whatâs better - itâs completely free of charge. We take a fee at the end of the process from the supplier, so you save money, time and effort by letting us take the stress away from you. For more information, give out experts a call.