Small business? How to source your electricity

·6-min read
 (Pixabay)
(Pixabay)

Whatever type of company you run, and however many sites you have, how much you pay for small business electricity will affect your balance sheet.

While you might use gas to heat your business premises such as an office, shop or café, you are likely to use more electricity to power equipment and computers, and for lighting.

In either case, you’re likely to need separate contracts for gas and electricity as business dual fuel tariffs are rare. However, some energy companies may offer you a discount if your business buys both their gas and electricity from them.

It’s important to be on the best small business electricity deal, to keep your energy bills as low as possible.

Are you a micro-business?

The rules about business electricity tariffs are different if your company is classed as a ‘micro business’.

You’ll be classed as a ‘micro business’ if your firm employs fewer than 10 employees and has an annual turnover or balance sheet no greater than £2million, or the business uses less than 100,000kWh of electricity a year.

If you’re a micro business you will have greater protection from energy suppliers than if you were a larger business. You’ll also benefit from more flexibility when you switch suppliers.

If your business is a micro business, suppliers are required to:

- let you know the key terms of the plan before you agree to it

- send you the contract and terms and conditions within 10 days including renewal terms for fixed term plans

- include the contract end date and the latest date you can give notice to terminate on your bill if you have a fixed term plan.

Small business electricity suppliers

The Big Six energy companies – British Gas, nPower, E.ON, EDF Energy, Scottish and Southern Energy and Scottish Power – all supply business electricity to micro and small businesses.

A number of smaller suppliers operate in the sector too. These include Bulb, CNG, Opus Energy, Clear Business and Yu Energy.

You can normally pay for micro or small business electricity in the following ways:

- direct debit

- online with a credit or debit card

- bank transfer

- cheque on receipt of a bill.

Small business electricity tariffs

Electricity tariffs for small businesses have some significant differences to energy tariffs for residential customers.

Business electricity contracts are usually between two and five years long, and they don’t have a cooling-off period. You’ll find it very difficult to switch suppliers while you’re in contract so it’s important to get the right deal.

Electricity is priced in units called kilowatt hours or kWh. This refers to the use of power over a period of time – for example a 1kW appliance used for an hour will use 1kWh.

Unit prices for business electricity are usually cheaper than for domestic electricity. Businesses can negotiate on price and, in general, the larger the business and the more electricity required, the cheaper the rate will be.

But your electricity bill will include other costs too. These include:

- a standing charge

- VAT (normally at 20% as opposed to 5% charged on domestic electricity bills)

- costs to maintain the transmission and distribution network

- Climate Change Levy.

Types of small business electricity tariff

Business electricity tariffs can be either:

- Fixed – where the unit price stays the same throughout your contract

- Variable – where the unit price could potentially rise or fall throughout your contract.

Some business electricity providers offer ‘green energy’ tariffs which use more electricity from renewable resources, such as solar power and wind farms, than standard tariffs.

Some tariffs come without a standing charge – so you only pay for the electricity you use, and not a daily flat rate as well.

Deemed and rollover contracts

In some circumstances your energy supplier will put your business on a ‘deemed’ or ‘rollover’ electricity contract.

Deemed contracts are often used when you move into new business premises and don’t negotiate an electricity contract.

Rollover contracts are usually used if you don’t negotiate a new electricity deal at the end of your current contract. You could be automatically signed up for another year (or more) on a rollover contract.

These types of tariff both involve paying very expensive rates for electricity. Don’t get stuck on these contracts – they’re a waste of money.

How much does small business electricity cost?

How much you’ll pay for a small business electricity tariff will depend on:

- where your business is located

- the size of your business

- how many sites and employees you have

- how much electricity you use

- your business’s credit history

- the legal status of your business

- your business sector.

Can I switch small business electricity supplier?

Small business electricity customers can only switch suppliers when they are within their ‘renewal window’. This usually comes into effect one to six months before the end of your current contract, and your supplier will let you know when it begins.

Your existing electricity supplier is likely to offer you a new deal. But rather than accept it and carry on, you should compare what other providers are offering.

You’ll find it difficult to switch electricity providers if you are tied into a contract or you owe your supplier money.

How do I switch electricity supplier for my small business?

You can switch supplier by looking for business tariffs on a small business electricity comparison website such as ours.

When comparing prices and quotes, you’ll need to know:

- your business’ current supplier and tariff

- how much electricity you typically use each year

- your average annual bill

- when your contract ends.

It’s a good idea to check out a supplier’s reputation and customer service record before making the switch, rather than basing your decision on price alone.

How does the switching process work?

When it comes to the electricity switch itself, your new supplier should arrange everything. You won’t need anyone to attend your premises unless you are having a smart meter installed as part of the switch.

The switch will normally take three to six weeks to complete.

You’ll need to do the following:

- give a final meter reading to your old supplier

- give a starting meter reading to your new supplier

- pay your final bill with your old supplier.

How I save on electricity costs as a small business?

- don’t pay deemed, rollover or out-of-contract rates for electricity

- compare and switch tariffs when you reach the renewal window

- arrange an energy audit to see how your business uses energy

- check how efficient your business equipment is

- turn off equipment and computers when not in use

- switch to LED lighting and install lighting controls

- get a smart meter so you can monitor and manage energy usage in real time.

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