Getting the right tariff for your business energy

Cutting overheads is more important than ever for small businesses – maybe you should ensure you’re on the best deal for your firm’s power

A wealth of factors contribute to the – often unpredictable and constantly fluctuating – cost of energy.

The price of gas and electricity is affected by demand, which rocketed in the wake of the COVID outbreak, and business and domestic users are facing a truly testing time.

And prices continue to rise, thanks in no small part to the invasion of Ukraine. The conflict in eastern Europe is far from the only reason we are facing what many pundits are calling a new ‘winter of discontent’ due to our energy bill rises.

The cost of running a small-to-medium enterprise (SME) should be a major concern for business owners. It’s not especially glamorous and it is a chore, but businesses now need to do everything they can to reduce their outgoings. Choosing your energy supplier is crucial, and many SME owners and managers consult the experts, employing a broker or intermediary to do the legwork for them.

MARKET EXPERT: Energy brokers can find the best deal for your business. But was your broker swayed by personal incentives?

A good energy broker has the know-how and experience to help you find a good deal, and often has access to special discounts, to help businesses.

Their help can be invaluable in cutting down overheads.

Their job is to scour the market on behalf of their customers and unearth the best possible deal for their clients. They are the experts, after all.

But how reliable is their advice when they are swayed by outside factors? For instance, when you last bought into an energy deal for your business, were you persuaded to take the cheapest deal, or merely the one that earned the best reward for your broker?

Intermediaries have to make their living, and it’s only right that their expertise gets rewarded. But, if your business has unwittingly been paying extra on top of your normal energy bills to pay a broker’s commission, then your business energy deal has been mis-sold.

Brokers are required to disclose their earnings from your deal at the point of sale. Your purchase of a business energy supply should be transparent throughout.

A broker’s failure to disclose his or her cut of your contract – or that they earn a commission at all – is a case of mis-selling. And if your business has fallen victim to this practice, you have a case to claim compensation.

Barings Law are experts in helping our clients get reparation for mis-sold business energy deals. We make the process quick and simple for you and, once you have submitted your documents, we’ll do the heavy lifting.

What’s more, we work on a no-win no-fee basis so there’s absolutely no financial risk to you. If we don’t win your case for you, there’s nothing to pay for our services.

Click on the button that’s conveniently located at the bottom right to start a webchat with a member of our team.

But, back to your business energy and finding the best tariff.

Let’s sort the basics first – namely, understanding your contract and bills.

Here are the key terms you need to know and understand:

Billing period – self-explanatory, this one. It’s simply the time between each of your business energy bills. The majority of smaller business owners generally prefer shorting billing periods as an effective way of tracking and analysing their spending.

Standing charge – a fixed cost, this is included in your bill and covers the upkeep and maintenance of your meter(s).

Agreed Supply Capacity – Some customers have a pre-set electricity usage maximum, a limit agreed with their supplier that means they benefit from cheaper rates. Exceeding that limit can prove expensive, though.

Unit rate – Perhaps the biggest factor in securing cheap business energy, it’s the price per kilowatt-per-hour (kWh). This is where the suppliers out there will differ the most and, obviously, the lower the unit rate, the better the deal.

Standard meter – A single-rate meter provides a single tariff for the units used by a business, primarily offices, shops, cafes and restaurants.

Smart meter – An advance on regular meters, these automatically supply accurate readings to energy suppliers, as well as supporting other functions beyond a standard meter.

Retail price – The final cost that the business customer pays for their energy. This covers the price of wholesale energy, transportation from generator to meter point, metering, losses and the supplier’s margin.

Contract end date – When a fixed-price contract term finishes. This does not mean the supplier automatically cuts their customer off, they will keep supplying power until the supply end date.

You’d be forgiven for thinking that the purchase of energy for commercial premises is barely different from buying domestic power. It isn’t. Let’s look at how business energy differs from domestic power supplies.

SMILES AHEAD: Getting the right energy tariff for your business can make a world of difference

Firstly, business energy is bought in bulk, meaning SMEs can benefit from cheaper rates than the supplies for domestic customers, which is bought and sold on a monthly basis.

And while domestic customers will often buy their gas and electricity as a package, saving money and the minor hassle of dealing with two separate companies. Business energy is, in the main, sold separately as single-fuel contracts.

However, energy for business premises is tailored to its needs. Domestic power isn’t sold as a bespoke deal whereas assessors look at your commercial usage and base their quotes on the business’ requirements.

We often change our suppliers for home utilities, scouring the offers available regularly to find a cheaper tariff. And switching for the home comes with a ‘cooling-off period’, generally 14 days, within which you can cancel your new contract without being penalised. But when moving to a new supplier for your SME you won’t get that safety net. Which means that making the right decision in the first instance is imperative.

So, what do you need to think about to make sure you’re getting the best deal for your business?

Act swiftly – the sooner you get onto a cheaper tariff, the sooner the saving can start. If you come across a better price, snap it up because business energy costs (indeed, energy costs as a whole) fluctuate regularly but are definitely on the rise. Whatever else you do, don’t let your old contract expire without arranging a new one. If you don’t you’ll automatically move to a pricey tariff by the supplier. They will contact you before the term ends, and will have a renewal plan prepared. It’s your choice whether you accept it, move elsewhere or show your supplier comparisons to try to negotiate a better renewal deal.

Keep on top of your usage – take regular meter readings, or have a smart meter do it for you. When you come to look at lower tariffs and negotiate new deals for your energy, knowing your consumption can be a handy scales-tipper. And it helps to know whether you’re a high or low energy user. A fantastic deal for one power-guzzling firm doesn’t equate to a good deal for those with minimal usage, especially if the standard charge could negate the positives of a low unit rate.

Consider your motives – ask yourself why you are switching your supplier and what benefits your new tariff are most important to you. Is it simply to pay less for your business energy or are you looking to tie down a long-term deal to avoid massive rises further down the line?

How will the energy crisis affect your business?

Enlist an energy broker’s help – if you feel you don’t have the know-how, the time or the inclination to search for your next business energy deal, bring in someone who does. The experts have the knowledge of the market to help you out. They can do the research and comparisons, and even negotiate prices on your behalf.

You may have used a broker in the past and believed you were getting the best deal out there. But if your broker recommended a supplier based on their own rewards then we’re afraid to say you have been mis-sold your business energy and have probably been overpaying for your utilities throughout the entire contract.

Energy brokers deserve to be paid for their expertise. It’s how they make their living, after all. But if there wasn’t complete and full disclosure of their fees and commissions at the point of sale you should take steps to redress the balance.

Barings Law can examine the details of your business energy purchase and find out if you have been the victim of mis-selling.

Call us on 0161 200 9960 or click the webchat icon at the bottom right of this page to speak to one of our advisors.