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Choosing a business energy tariff
Choosing the right business energy tariff is essential for managing costs for your business. Businesses that don’t actively choose the right business energy tariff can pay enormously expensive out-of-contract business electricity prices. Shockingly, these out-of-contract rates can be over twice as expensive as fixed-rate tariffs on offer on the market.
The key decision for small business owners, when you compare business energy prices, is choosing between a fixed or variable tariff. Here are the key differences between these:
- Fixed business energy tariff – The cost for each kWh of electricity or gas consumed during your contract will stay fixed, typically for one to three years (in a fixed multi-rate tariff, you will have a different fixed unit cost for peak and off-peak periods).
- Variable business energy tariff – The cost of each kWh of electricity or gas will change during the contract based on wholesale energy rates. If market rates go up, your rate will be higher; if they go down, your rate will be lower.
💡In large business energy, there are more tariff options – click for our full list.
Should I choose a fixed or variable business energy tariff?
Most SMEs in the UK choose a fixed busienss energy tariff for two reasons:
- Energy price certainty – A fixed tariff provides certainty over the cost of your energy bills, allowing businesses to forecast their energy costs accurately and protect them against future rises in the price of energy.
- Cheap fixed tariffs to new customers – Business electricity and gas suppliers typically offer significantly cheaper fixed tariffs to attract new customers to switch their energy supply.
💡Here’s our full summary of the benefits of a fixed business energy tariff.
The downside of a fixed contract is that you will not benefit from falling wholesale energy prices during your tariff. Our graph below compares the unit price paid at a fixed rate versus the unit price paid in a variable business energy tariff in a few different scenarios.
Our experts have produced a full guide to help you decide whether to fix energy prices until 2024.
What other factors should be considered when choosing a business energy tariff?
The overall price is obviously the main focus, but what else should you consider when choosing a business energy tariff:
- Contract length – The number of years your business energy tariff will remain in force.
- Payment method – How your business agrees to pay for its business energy bills, typically either by direct debit or BACS.
- Early exit fee – Whether there is an exit fee for leaving the contract early.
- Automatic renewal – Business energy tariffs will define either a standard variable or rollover tariff that will automatically apply if no termination notice is applied.
For more information, here’s our guide on what happens at the end of a business energy contract.
What are the benefits of a fixed-rate business energy tariff?
Our business energy experts summarise the six most important benefits of a fixed-rate business energy tariff.
Price stability
With a fixed-rate tariff, businesses can lock in a set price for their energy supply over a specific period, typically one to five years. This provides price stability and protects a company from potential energy price fluctuations, making monthly business energy bills predictable.
Budget control
With a fixed-rate tariff, businesses can accurately forecast and manage their budgets for energy costs, improving their ability to manage and allocate funds. It’s particularly beneficial for small and medium-sized enterprises (SMEs) with limited resources and a need for cost certainty.
Protection against market volatility
Various factors influence energy prices, including global demand, geopolitical events, and weather conditions. Businesses can shield themselves from these fluctuations by choosing a fixed-rate tariff which maintains stable energy costs regardless of market conditions.
Long-term contracts
Fixed-rate tariffs often involve signing a multi-year contract with an energy supplier. While this commitment may initially seem restrictive, long-term contracts provide stability, ensuring uninterrupted service and minimising the hassle of frequently switching suppliers.
Comparative analysis
Businesses with fixed-rate tariffs can easily compare energy prices and offerings between competing suppliers, allowing you to calculate the cheapest tariff. This empowers business owners to make informed decisions while evaluating the offerings of different suppliers.
Simplified billing
Fixed-rate business energy contracts have very simple billing. Each month, your energy used (in kWh) will be multiplied by your agreed unit rate to calculate your usage charges. In contrast, your unit rates may increase or decrease monthly in a variable tariff.
How to get the best business energy tariff
There are hundreds of business energy tariffs on offer, so finding the one best suited to your company can seem tricky.
Our commercial energy experts are here to help by using our simple business energy comparison service. With three quick and easy steps, you can access the best business energy tariffs:
Enter your business postcode above
Use our smart address finder to locate your business details. We’ll then search for your energy supply data.
We present your energy tariff options
Using our relationships with suppliers, we’ll present you with an array of business energy tariff options.
Complete a hassle-free tariff switch
Our business energy experts will handle the switch for you. Sit back and enjoy your new business energy tariff.
What are the different business energy tariff options?
Before you compare business electricity prices and business gas rates, you should consider which tariff type meets your needs.
Here’s our comprehensive list of the types of tariffs to consider when comparing business energy prices:
- Fixed rate business energy tariff
- Variable rate business energy tariff
- Extended business energy tariff
- Flexible approach business energy tariff
- Pass-through business energy tariff
- Time-of-use business energy tariff
Fixed rate business energy tariff
A fixed rate tariff is the most popular tariff for SMEs, where a business will pay a fixed unit cost plus a daily business energy standing charge.
Your monthly bills may vary over the year, depending on your energy usage, but the unit rate per kWh of energy consumed will remain fixed. Fixed rate contracts allow businesses to forecast energy costs easily. We’ve produced a guide to business energy bills to help you understand monthly fees in a fixed rate energy tariff.
A fixed rate contract is a safe option that most businesses opt for when switching business energy providers. The available fixed rate tariffs depend on the current state of the energy market, so it’s important to compare your current tariff against the market to see if you can get a better deal.
Variable rate business energy tariff
A variable rate tariff is often described as a “freedom” or “flexible” tariff. With a variable rate business energy tariff, you’re not locked into a contract for a specific period, and you’ll be free to switch to another tariff at any time.
In a variable rate tariff, the amount you pay per kWh will regularly change to reflect current wholesale market conditions.
Commercial electricity and business gas suppliers typically use the variable rate tariff as their deemed contract, so when a fixed-rate tariff ends, you’ll automatically transfer onto a variable rate tariff.
Extended business energy tariff
The extended tariff option allows a business to extend an existing tariff’s term and fixed unit costs with your current business energy supplier.
If you’re happy with the service your current energy supplier is providing you, then this is a recommended route. You’ll be rewarded for loyalty with an extended tariff, but it is always worth reviewing and comparing business energy suppliers in the markets as business energy prices are constantly changing.
Generally, extended tariff options are only available if the market price of energy is decreasing.
Flexible approach business energy tariff
The flexible approach tariff is a tariff that enables you to buy energy in bulk in advance. The benefits of this tariff are that you already know how much you’ve paid for the commodity, which means that, as a company, you will benefit from the wholesale prices.
This tariff works well in energy for larger businesses that can afford the initial down payment and want to benefit from low wholesale prices. When the bulk payment of energy is used, the flexible tariff leaves businesses exposed to increases in the cost of energy.
Pass-through business energy tariff
The pass-through tariff allows your business to split your bill between the wholesale price and other energy charges. In a pass-through tariff, you’ll pay separately for:
- Wholesale energy costs
- Network costs
- Retail fees for your supplier’s service
The pass-through tariff is riskier as your supplier will directly pass on the costs they incur to supply your commercial property. If the wholesale energy cost goes up, you’ll be paying more than if you entered a fixed-term contract.
Time-of-use business energy tariff
Sometimes also known as the Economy 7/10 tariff, with a time-of-use tariff, you’ll pay two different rates for energy used, “peak” and “off-peak”.
In a time-of-use tariff, your business benefits from lower business energy rates during the night hours when there is less demand for energy.
To benefit from a time-of-use tariff, you’ll need either a half-hourly meter, a dual-rate meter, or a smart business energy meter.
Rollover business energy tariff
All business energy tariffs define what will happen when your tariff ends if you haven’t made any other arrangements. Some business energy suppliers have an automatic rollover mechanism where your current tariff will extend for an additional year at a fixed price per kWh defined by your supplier.
Automatic rollover business energy tariffs are legally binding deemed contracts. Unfortunately, rollover tariffs can be enormously expensive. Here’s our complete guide to rollover business energy contracts for more information.
Business Energy Tariffs – FAQs
Here, we answer the most common questions surrounding business energy tariffs. In this section, we explore everything you need to know to compare business energy tariffs.
Is there a cooling-off period for business energy tariffs?
A cooling-off period allows you to cancel the contract within a certain timeframe without penalty.
Unfortunately, business energy suppliers do not offer a “cooling-off period” as they have to buy your energy from the wholesale market in advance when you first sign a contract with them.
This means you must read your contract and ask any questions to ensure you understand and are happy with what you are signing.
Check out our complete guide to cooling off periods on business energy contracts.
Can I get a renewable business energy tariff?
Yes, you can get renewable business energy tariffs. Most business energy suppliers offer renewable tariffs for customers looking to reduce their carbon footprint.
The fuel mix of renewable business energy tariffs will only provide energy generated from inexhaustible sources. Renewable energy tariffs in Britain are typically powered by:
How can I find business energy tariffs for multiple sites?
Typically, a company will have a separate business energy tariff for each energy supply point (MPAN/MPRN). However, for businesses with properties across the country, managing each separately can become a massive administrative burden.
The multi-site business energy meter solves this problem. A multi-site tariff is a single contract that encompasses several individual supply points. The quotation process for multi-site properties can be complicated and requires bespoke quotes from business energy suppliers.
Our business energy experts are here to help arrange a multi-site energy tariff. Simply enter the details of your head office in our business energy tariff comparison box above, selecting “multiple properties”. We’ll then work to collect multi-site tariff quotes for your business.
What’s a blend and extend business energy tariff?
In 2023, a little-known business energy tariff became a popular option – the blend and extend tariff.
The blend and extend tariff is a mid-contract option where you’ll agree to extend the duration of your current fixed tariff while benefiting from a reduction in your fixed energy prices.
In the autumn of 2022, prices soared, and many businesses entered into fixed contracts, locking them into expensive rates. Since then, the cost of energy has fallen significantly. A blend and extend option allows these businesses to partially benefit from the falling prices.
For more information, here’s our article on getting out of a business energy contract.
What is a green business energy tariff?
A green business energy tariff is a tariff that is sourced from renewable energy sources, such as wind, solar, hydro, or biomass. Your energy supplier will also typically contribute to environmental schemes as part of the deal.
Green energy tariffs typically involve a slightly higher price than standard tariffs, as the cost of generating electricity from renewable sources is generally higher than from non-renewable sources such as fossil fuels.
For more information, check out our guide on renewable energy for business.
What are the key parts of a business energy tariff?
A business energy tariff is a contractual agreement between a business and an energy supplier. An energy tariff tells you how much you’ll pay per kWh used and how much your daily standing charge will be during your energy contract with your business energy supplier.
Here are the three most important components of a business energy tariff:
- Unit price – Defines the cost of each kWh of energy supplied; this can either be a fixed price or a variable rate that changes with market conditions.
- Standing charge – A fixed cost, in pence per day, for the supplier maintaining a connection to the mains.
- Term – The time in months or years the tariff will remain in effect.