FAQs
Unsure where to start? We’ve put together some handy frequently asked questions to explain how our comparison and switching process work.
About Business Energy
The biggest difference between business and household energy is how suppliers set up contracts. Business energy contracts tend to be for a fixed duration typically between 1-5 years, without the option to cancel early. Businesses can opt into fixed-rate contracts, which will protect them against changes in the energy market.
Energy providers are bound by a series of industry codes and the supply Licence Conditions, which regulate how they do business and interact with customers. These rules are enforced by several independent regulatory bodies, including Ofgem, and are designed to protect customers and make sure they’re treated fairly.
The main difference in business energy between micro, small/medium and large companies is the types of gas and electricity contracts available, and how they’re priced.
For example, SMEs generally opt for fixed-rate energy contracts, as these offer the best combination of convenience and affordability. A fixed-rate contract means small businesses are protected from changes in the wholesale energy price, so they can easily budget for energy costs.
For companies that meet the ‘micro business’ criteria, there are some further distinguishing factors when it comes to business energy. Micro businesses are able to view business energy prices online using only their postcode and consumption information and can terminate their contracts closer to the end date (at 30 days out, as opposed to the standard 90 days).
Large businesses, on the other hand, may treat energy as a strategic function – in which case, they may choose a flexible purchasing contract that gives them the freedom to buy and sell gas and electricity to optimise procurement.
Several factors affect the wholesale price of business gas and electricity, including the weather, how it’s stored, regulatory pressures, crude oil prices, flow and availability, and wind generation. However, few customers will notice these changes, as a fixed-rate contract protects small business customers from daily wholesale price fluctuations.
The cost of gas and electricity is dependent on the size of your business. On average, UK businesses spend £1,135 per year on gas and electricity – based on a variable tariff. However, this could be significantly higher or lower, depending on the size and industry of business.
The right supplier can be dependent on your finances, the type of business you run, what the energy will be used for, and how committed to the environment your business is.
Generally, SMEs look for fixed-rate contracts that offer a price guarantee for the length of the contract. Before agreeing to any energy deal, always read the small print in the provider’s terms and conditions.
A few quick fixes around the office can play a part. Turning off computers at night, encouraging staff to work from home once a week, using DIY insulation and turning down the thermostat can all help with saving money on your energy bills. See: Our 6 tips to cut business energy costs.
Contracts
Fully fixed-rate contracts mean that the rates detailed on the contract represent the price you’ll pay for the full contract term, making it easy for SMEs to budget for energy use. It is important you seek clarification that any fully fixed-rate contract you accept also includes all third-party charges and any other charges – and isn’t just fixing the cost of energy alone.
Pass through products (or partially fixed) typically fix the cost of the energy for the duration of your contract but allow the supplier to pass through third-party charges such as transportation and distribution charges at the cost they are being charged by the distribution companies. It can be beneficial to have these types of products especially if you think you are going to reduce energy consumption or don’t require 100% budget certainty.
Flexible purchasing contracts allow large businesses users to buy their energy at different times during the contract period instead of agreeing the contract rate upfront like you would on a fixed contract.
Pass-through rates are affected by the prices that third parties charge suppliers in order to move the energy around the country, and eventually to your meter point. Suppliers also need to include costs for unidentified gas (UIG) and feed-in-tariff (FiT) charges. Typically, suppliers will pass through prices they don’t control which may also include any new or current government levies.
For a micro business contract, terms and conditions must be written in ‘plain and intelligible language’ since the business’ owners might not necessarily be familiar with the industry.
Additionally, the supplier must state when the contract begins and ends as part of a ‘Statement of Renewal Terms’. A notice period for termination must also be included, set at 30 days before the end of the contract.
Yes. If your supplier does not have the necessary information about your business, you may be asked to provide them with the number of full-time employees, the business’ turnover and its energy consumption.
You can find out whether your contract is coming to an end by checking your most recent energy bill, where the end date should be stated in the section that also includes your tariff name and account number. Alternatively, you can check the signed copy of your contract or call your energy provider to double check.
You will normally receive notification that your current tariff is ending 42-49 days before your contract’s official end date (or 60 days before for micro businesses).
Many business energy contracts will not be renewed automatically following their expiration – instead, your business will be placed on to out of contract rates until a new contract is put in place, your business moves premises, or your business switches supplier.
Out of contract rates refer to the default charge a business is levied with when their contract ends and no new alternative is put in place, i.e. renewing the supply agreement with the existing supplier or entering into a supply agreement with a new supplier. These can be expensive, so you should always remember to arrange a new contract before the out of contract rates come into effect.
Deemed rates are charged when there was never a contract in place, as with when a new tenant moves into an existing site.
Switching
No, most suppliers will require termination to be issued to them in writing at a period which will be specified within your contract. As long as you have adhered to the termination window then your new supplier will arrange the switch on your behalf. However, in some circumstances, your old supplier may object to the switch, if you either owe them money or your new supplier tries to register you for the wrong date.
As long as you don’t owe your existing supplier money, or you are not tied into an energy contract with them, then a successful transfer can be concluded in less than 3 weeks.
Most SMEs will have fixed energy contracts for their gas and electricity supply, which normally last one year or longer. The contract wording will set out a period in which you can terminate your supply. Customers on an out of contract or deemed rate can initiate a switch at any time as long as they inform their supplier of their intention to switch within a 30-day period and all outstanding payments have been made.
Billing and Payments
In simple terms, your energy supplier charges you the rates you have agreed as per the contract for the volume of kilowatt hours (kWh) you have used. Usually, you will be billed monthly or quarterly but may have further options if you choose to use portals or go paperless. Most energy suppliers will charge in pence per kWh and a standing charge in pence per day or pounds per annum, but it is also good to check what is included on the point of agreeing the contract.
Most businesses will pay VAT at a rate of 20%, though some are eligible for a discount. Since your energy supplier automatically adds the VAT to your bill, you’ll need to apply for this potential discount separately. An example of a business that pays the reduced VAT amount is a registered charity.
A meter point administration number (MPAN) is a unique 13-digit reference that identifies your business’ electricity supply point; similarly, a meter point reference number (MPRN) relates to your gas supply.
In order to arrange the metering for your property, your chosen supplier will require your business’ MPAN and MPRN. These numbers can be found on your current energy bill.
The MPAN/MPRN should not be confused with the meter serial number, which is found on the meter itself.
CCL is charged on taxable commodities supplied for lighting, heating and power purposes to businesses in the industrial, commercial, agricultural and public service sectors. Your business is being charged the CCL as a means of encouraging businesses to be more energy efficient.
You can pay a reduced rate on CCL charges by entering into a climate change agreement with the Environment Agency. Contact us on info@commerceutilities.co.uk to find out more.
If your bills are usually based on estimated readings, the easiest way to ensure you’re paying the correct amount is to send your supplier regular meter readings.
In order to avoid estimated readings, it’s recommended that you take a meter reading on the last day of each month and submit it to your energy supplier within 5 days, so they can calculate an accurate bill. This ensures that you only pay for the energy you’ve used.
If you have a smart meter or AMR device on your meter you should still pay attention to your monthly bills to ensure your energy supplier is using the automated readings provided by these technologies.
Regulations
Changes to energy regulation are often announced in the government’s financial budget, and usually come into force on April 1, in line with the new tax year – but can be implemented at any point during the year.
Per Ofgem’s Standards of Conduct, energy suppliers have to treat firms fairly when it comes to contacting, billing and switching business customers, with fines coming into play if these are ignored.
It’s possible that new regulations could affect your energy contract. This depends on other factors, such as whether you’re subject to other charges like the CCL. For example, last April the rate of CCL rates increased, affecting businesses who were subject to these charges as a result.
We recommend subscribing to our industry updates on news@commerceutilities.co.uk to keep abreast of the latest regulatory changes, and insight on how they could affect the price you pay for business energy.
If you have any questions please contact us for further information on info@commerceutilities.co.uk
