When looking for the best energy deals for your small or medium-sized business, it can be an easy task to use a price comparison site to find cheap business gas and electricity deals from the leading UK energy providers. However, not all business owners will bother to take the time to do this.
According to business survey figures from the government, around 40% of UK businesses have never switched their energy providers!
Whether business owners don’t have the time to search out a better energy deal or they simply don’t know how to go about it is unclear, but because they don’t keep on top of their energy management it could mean that most UK small and medium-sized business owners could be paying more for their energy than they need to.
Many business owners may worry that by switching their energy supplier they may lose their gas or electricity supply temporarily. This isn’t the case because the energy market is still controlled by Ofgem, so all businesses can switch suppliers very smoothly without any interruption to their energy supply.
A competitive energy market
Finding a cheap business gas and electricity supplier can be easier than you think. This is because there is a lot of strong competition between energy suppliers to attract new customers with good deals, reliable services and often tempting business incentives that can make the difference between choosing one supplier over another.
While most business owners that are searching out a better deal for their energy needs will look to the ‘big six’ energy suppliers that own the majority of the energy market, there are also good deals to be found by widening your search and looking outside of the main suppliers.
You may believe there won’t be a big saving to be made by going outside the main suppliers, but you can be surprised as newer, more competitive rivals enter the energy marketplace they will be keen to deliver cheap prices to win a cut of the market.
But what will also affect the cost of your business gas and electricity will be the size of your business, how much energy you use, your business location (region), and fluctuations in wholesale energy prices.
By far the best time to carry out a price comparison to find the cheapest business energy deals will be when your current energy contract is just about to expire. Your supplier will tell you what your new contract rates will be, so you can take that information and do a price comparison against other energy suppliers to see if you can get a better deal elsewhere.
Comparing business energy per kWh deals
What you need to be aware of is that while the business energy per kWh (kilowatt-hour) deals between providers can vary, and a new provider may be offering a great kWh rate, they may have a much higher price for their standing charges, which means that the deal they are offering may not be as good as it first seems and you may not be making any savings at all.
This is why it makes sense to take your time and read the small print to make sure that you are getting a good deal. At first glance, you may be really pleased with the savings you will make with a lower cost per kWh, but with the service charges on top, you may end up paying more for your energy than you do now.
Smart meter only tariffs
With the introduction of smart energy meters, some energy suppliers are now offering smart meter only tariffs for domestic and business customers that have a smart meter fitted.
UK energy suppliers are currently rolling out and installing the next generation of gas and electricity meters, called smart meters. The UK government has put a policy in place to offer everyone smart meter installation at no upfront cost over the next few years.
This has led to many of the top energy deals being offered only to those with smart meters. While smart meters are not compulsory, there are cost-saving benefits for business owners who do have one installed.
Smart meter benefits
Smart meters can help you get accurate readings for your energy consumption, meaning that you don’t need to keep paying estimated bills that could be much lower or higher than your actual usage.
Paying exactly what you owe can save you from overpaying for your energy and then having to claim money back from your supplier, or underpaying for your energy and then being faced with a large bill once the correct readings have been given.
With a smart meter installation, you will get two smart meters, one for gas and one for electricity. They are small and neat in design and can be fitted where your existing meters already are. Your usage information is sent automatically to your supplier so you don’t need to read your meters and spend time submitting the readings to your supplier.
You will never get an estimated bill again and you will only ever pay for what energy your business uses. With standard gas and electricity meters, you will be charged a monthly bill based on estimated use and then you need to send in actual meter reading every few months to get a proper bill and know exactly how much you have underpaid or overpaid for your energy.
Understanding business energy tariffs
Most UK energy suppliers don’t publish a full list of their tariffs because the fluctuating prices on the wholesale energy market would make these lists inaccurate. However, they do publish both their deemed and out-of-contract prices.
For the purpose of this article, we are using these prices as a comparison tool between suppliers. Keep in mind that the prices we use here are the worst-case scenarios, so you will probably find you get a cheaper tariff when signing a new energy contract with one of these companies.
Small business electricity prices (deemed rates)
|Energy supplier||Unit price per kWh||Standing charge per day|
Out-of-contract rates (extended supply)
|Energy supplier||Unit price per kWh||Standing charge per day|
Prices listed were accurate as of 03 January 2019. Rates are subject to change at any time at the sole discretion of the energy supplier. The prices above exclude VAT (normally 20%) and Climate Change Levy (CCL).
Business gas prices compared
Below is a comparison of the deemed rates between the best business gas suppliers in the UK. This should also give you an idea of their fixed and variable rates.
|Energy supplier||Gas unit price per kWh||Standing charge per day||Annual cost|
|Total Gas & Power||4.19p||0.0p||£533.00|
While the above-listed prices may seem high at first glance, they reflect what is known as deemed or out of contract rates and can be used as a general indication of what the higher-end prices will be with each energy supplier.
The only time deemed rates such as these are used is when you don’t have an active contract with an energy supplier. This is most commonly the case when you move business premises and the property energy supplier will assume you will want to be supplied with continuous energy, so will supply you with power at the deemed rates.
The deemed rates will be paid by yourself until you sign an agreed energy contract with them or you switch to a new energy supplier.
Out of contract rates, or extended supply rates, are similar to deemed rates and these will be applied during the period when your existing contract expires with one energy supplier and your new contract starts with a different supplier. Out of contract rates can also be applied by your energy supplier should you repeatedly fail to pay your bills.
When can I switch to a new business energy supplier?
Your current business energy supplier will send you a renewal letter a few weeks before your business energy contract expires. This will allow you to shop around and compare prices for better deals with other suppliers.
Your current supplier will usually also offer you an auto-renewal where you can remain on your current tariff or move to a new plan offered by them. It is worth checking any new plan being offered by your existing energy supplier against other suppliers on the market to see if you can get a better deal elsewhere.
Sometimes your existing supplier can be cheaper because they will be keen to hold on to your business, especially if you have been a good customer and have paid your bills on time.
It is wise not to let your current energy plan expire without setting up a new one because once your plan ends you will start paying their deemed and out-of-contract rates, which are set so high to be an incentive to get yourself signed up to a new energy contract as quickly as possible.
|Comparing fixed-rate with variable rate electricity tariff contracts →|
|Once upon a time, a business owner was only ever able to get a fixed-rate tariff for their energy supplies. However, these days when you are ready to sign up to a new small or medium-size business energy deal, you will be offered two different types of tariff to choose from.|
Fixed-rate tariffs are useful for businesses because they fix the price you pay per kWh for a set period, usually anything from 1-3 years, but some suppliers will offer fixed-rate tariffs for up to five years.
The one thing to realise about fixed-rate tariffs is that the prices offered are not necessarily the lowest you can get, but it does help you to budget as you will know exactly how much you will be paying for your energy every month.
The downside of a fixed-rate tariff is that you could end up being locked into a higher rate should wholesale energy prices drop significantly.
Variable rate tariffs
For businesses, variable rate tariffs are being more commonly offered and they can give you better rates than signing up with a fixed-rate contract in the short term. However, should wholesale energy prices rise in the future, you may end up paying out more than an equivalent business paying a fixed-rate tariff.
One of the most attractive benefits of a variable rate contract for business owners is that you can often switch energy suppliers much more quickly and smoothly than those businesses on a fixed-rate contract.
While there is no ‘single best tariff’ for a small or medium-sized business to be on, what it boils down to is how much risk you are willing to take. If you are not prepared to pay fluctuating energy bills that will rise and fall with market prices, you should consider a more stable fixed rate tariff.
Regional energy price differences
Like many things in the business energy market, not everything is always clear. While the energy supply companies mentioned above are the businesses that actually sell your business energy, they do not own or operate the distribution network that brings power to your business.
This work is done by the Distribution Network Operator (DNO) Companies who operate across different regions in the UK. These are the people you would phone if there’s a power cut in your region.
Many energy suppliers will also use a region factor to set different prices for their supply. For example, there could be a 14% difference in deemed price rates between a rural business in the north of England and business in a built-up area such as London.
This means the cheapest energy supplier in one region may not be the cheapest in the next. This is why you need to do a price comparison of the top energy suppliers to get results for your region to find the best prices for your business.
Comparisons sites to use to find the cheapest business energy tariffs include:
- Money Compare (from Which?)
- Compare the Market
- Go Compare
- Money Supermarket
Simply enter some basic details about your current gas supplier, your business location, and contact details to get a list of results showing the best energy deals from the leading UK suppliers.
Business energy FAQ
The energy used by domestic and business customers is exactly the same. It’s just the way that contracts and tariffs are set up that is different. Businesses also pay 20% VAT on their energy where domestic customers only pay 5% VAT.
Business energy will cost more than domestic energy because your business will consume more energy than an average domestic residence and businesses pay a higher rate of VAT on their energy than domestic customers pay.
Yes, you can switch to a different business energy supplier, but you may need to pay an exit fee if you are still under contract. The best time to switch is when your energy contract comes to an end.
Yes, microbusinesses are treated differently to large businesses. Microbusiness customers can give termination notices at any point during their contract. Energy suppliers must also clearly state the contract end date and notice period on bills and statements of account for micro-business consumers on fixed-term contracts.
A deemed contract is where you are paying out-of-contract prices for your energy, usually between an old contract expiring and a new contract starting, or where you move premises and don’t have a contract with an energy supplier.
A standing charge is like a rent paid for the gas and electricity meter, connection and delivery equipment that supplies your premises with energy.
The easiest way to find the cheapest business energy supplier for your company is to conduct a price comparison search using one of the leading online comparison sites.