The world of business energy can seem like a minefield. Everywhere you turn there’s conflicting information and advice, making it almost impossible to know where you stand. Today, we’re going to explain everything you need to know about business energy in the UK so that you can go out and find the very best deal for you.
What Is Business Energy?
Business energy is exactly what you’d expect – energy for businesses! Just like your home, your business premises will require a reliable supply of gas and electricity to operate. Since businesses will typically need more energy than a standard house, business energy contracts are sold separately to domestic ones.
There are a number of things to know about when you’re dealing with business energy, from tariffs and smart meters to government schemes. Once you’ve got your head around all of these aspects, it’s much easier to compare business energy prices and contracts.
How Does Business Energy Differ From Domestic?
There are two main types of energy contracts in the UK, business and domestic. Domestic energy is typically reserved for residential homes, whilst business energy serves commercial operations. If you’re a new business owner, then it’s important to understand how a business energy contract differs from your domestic one.
Business rates are often cheaper
Since commercial buildings often require large amounts of energy, business energy is usually available at a cheaper rate. This is because suppliers are able to buy the energy on the wholesale market, with little risk of it going to waste.
However, this isn’t the whole story. Business rates can vary quite dramatically depending on the type of contract that is being used. For example, a business on a variable-rate contract has to deal with energy price fluctuations, unlike a business on a fixed-rate contract. We’ll delve into the different types of energy contracts more closely later on.
In the vast majority of cases though, you’ll pay less per unit of energy on a business contract than you would on a domestic one.
Business contracts are usually longer
When you sign a domestic energy contract, you typically commit to a 28 day period. For business energy contracts, this time frame is stretched out to between 1 and 5 years. As a result, businesses need to be certain that the contract is right for them before committing.
There’s no cooling-off period
When the initial period of a domestic contract is over, you can continue to use energy under the same agreement on an “as is” basis. This is known as the “cooling-off period” and gives you the chance to renegotiate your contract or look for a new supplier.
With a business energy contract, things are quite different. Once the contracted time has passed, businesses are subject to “out-of-contract rates” that are much more expensive than the in-contract prices.
Keeping the contract end date in mind is essential if a business wants to avoid these additional charges.
Business energy deals are single-fuel only
Commercial energy contracts are always “single-fuel” only. This means that you pay for your electricity and gas separately. Domestic contracts can be dual-fuel, where one contract covers both types of energy.
Although it might sound like extra work, businesses can actually benefit from having two separate contracts. It gives them the chance to search for the best possible deals, with no requirement to use the same provider for both.
Solutions that suit your business needs
In general, business contracts can be tailored more closely to your needs than domestic contracts. If you make the right choices, then you should be getting a reliable supply of energy, without overpaying for the privilege.
Who Are The Best Business Energy Suppliers In The UK?
There’s a large number of energy suppliers operating in the UK, which can make it hard to work out which is the best one for you. Whether you’re signing up for a contract with one of “The Big Six” or teaming with an independent supplier, having some prior knowledge about the company is always a benefit.
The Big Six
These energy suppliers are the major players in the UK energy industry. In fact, The Big Six holds around 70% of the market, so you’re very likely to come across them when you start to compare business energy suppliers.
Although the rise of independent energy suppliers has reduced British Gas‘ market share over the years, the company is still a giant in the UK industry. Around 15 million people have domestic and business energy contracts with British Gas.
For business energy, British Gas offers some of the most affordable rates in The Big Six. But their out-of-contract rates are relatively high, which is something to be aware of. As long as you keep your contract end date in mind, British Gas will prove to be a reliable and cost-effective provider.
EDF is a French energy company that supplies electricity and gas to British businesses. EDF generates its own electricity, with the majority coming from nuclear and renewable sources. EDF isn’t the most eco-friendly supplier out there, but amongst the Big Six, it’s definitely a low-impact option.
EDF offers attractive rates for businesses and relatively reasonable out of contract rates. The company has a high customer satisfaction rate and their UK customer base of 5 million is only likely to increase over the coming years.
E.ON is an international superstar when it comes to energy suppliers. This German company operates in over 30 countries worldwide and has racked up around 30 million customers. E.ON recently acquired the British company nPower, which has improved its standing in the UK market.
Thanks to massive investment in renewable generation, E.ON now produces over 60% of its energy via eco-friendly processes. This is second only to British Gas, which currently generate over 75% of their energy through renewables. Price-wise, E.ON usually has some of the most expensive unit rates of the Big Six, but this might not be the case for your quotes.
We’ve already said that nPower has been acquired by E.ON, but the company is still operating under its own name in the UK. The acquisition came at a good time for nPower, who were slowly losing customers and had a low satisfaction rating.
nPower customers are slowly being moved over to E.ON contracts, but you can still sign up for a business contract with nPower. The company offers very competitive energy rates – with the E.ON takeover complete, it could be a great time to sign up with nPower.
Contrary to the name, Scottish Power is owned and operated by Spanish company Iberdrola. Scottish Power is one of the most established members of the Big Six and has built up a customer base that is 5 million strong.
Scottish Power’s rates generally come in near the top end of the Big Six. What you get in return is an extremely reliable energy supply and customer service that is second to none. Scottish Power is also patterned up with Cancer Research UK, so you’ll know that some of your money is going to a good cause.
The final member of the Big Six is SSE. This Scottish company generates and supplies gas and electricity across the UK. The domestic side of the business is now operated by OVO, but the commercial side is still controlled by SSE themselves.
Not only does SSE boast one of the highest customer satisfaction ratings in the Big Six, but the company is also committed to improving the conditions for its workers. In 2013 SSE was one of the first major companies to pay all their staff a real living wage.
Renewable Business Energy Suppliers
The Big Six have traditionally dominated the British energy market, but their rule has been threatened over recent years thanks to the emergence of independent suppliers. These independent suppliers are often attractive to business owners, offering competitive business energy prices and great perks.
Many independent suppliers also have their eyes on the future and have committed to sourcing their energy using renewable methods. As climate change continues to have a big impact on Government policy, it might be that these eco-friendly providers are well ahead of the incoming renewable energy boom.
Bulb is one of the most popular companies that offers renewable business energy tariffs. Bulb gets 100% of its energy from renewable resources, which is certainly impressive. If that isn’t enough to convince you that Bulb is a great option, then the fact that they offer some of the cheapest business energy tariffs on the market might make up your mind!
Bulb is very highly respected in the industry and has very high customer satisfaction rates. If you want to take an ethical approach to your business energy but still want to team up with a serious, reliable company, then Bulb could be the way to go.
Octopus Energy takes a similar approach to Bulb when it comes to supplying energy. All of their electricity comes from “green sources”, which includes sun, wind and water. Octopus pairs its eco-friendly energy with fair and affordable pricing plans.
Octopus uses fixed energy contracts with all its customers, meaning you’ll always be charged at the same rate throughout your contract term. This makes it easy to budget for your energy usage and you don’t have to worry about the impact of the fluctuating energy market.
Green Energy UK
Green Energy UK is a supplier of eco-friendly gas and renewable electricity. In fact, Green Energy UK are the only British company that supplies “100% green gas” to homes and businesses. This gas is generated from decomposing food, farm and landfill waste.
Aside from its unique energy-generating methods, Green Energy UK is also known for its top-notch customer service. Over the years, the company has managed to build up a dedicated base of clients looking to get their energy in a safe and sustainable way.
Ecotricity is another environmentally-friendly energy company that is aiming to break the fossil fuel cycle. By offering reliable green energy, Ecotricity helps homes and businesses make the switch to low-impact gas and electricity solutions.
Ecotricity doesn’t offer the cheapest rates around, but they have a good reason as to why. The company sets their prices at a point where it can continue to invest in its renewable energy equipment. In the long run, this means more and more people will have access to high-quality, responsibly-sourced energy.
There are some other independent business energy suppliers that don’t use renewable energy exclusively. Here are a few of our favourites:
SmartestEnergy is a supplier that is specifically geared towards small businesses. SmartestEnergy clearly understands the difficulties that can arise whilst searching for business energy and have tried to make the process as straightforward as possible.
Their rates are very competitive, especially when compared to the Big Six. In our opinion, SmartestEnergy’s personalised approach makes the company a fantastic option for any business taking its first steps in the energy market.
What Types Of Business Energy Contracts Are Available?
As a business owner, you’ll have a few choices to make whilst sorting out your energy. One of the biggest ones is deciding which type of energy contract you want. There are various types available, each offering its own benefits and drawbacks.
The cost of any type of business energy contract will be predominantly made up of:
- The unit cost
- The standing charge
The unit cost is the amount you’ll be charged per unit of electricity. Unit cost can be affected by the current energy market, depending on which type of contract your business is on. The standing charge is a daily fee that covers the maintenance of the national grid and any energy transportation.
Perhaps the most common type of energy arrangement is a fixed-term contract. Under this, the price per unit of energy stays the same for the duration of the contract. It doesn’t matter if the wholesale energy price rises or falls, you’ll always pay the same amount for each unit you use.
An alternative setup is a variable rate contract, where the unit price changes depending on the market. Businesses on a variable rate contract benefit when the wholesale prices fall, but can end up paying more if the price goes up.
The energy markets can be difficult to predict, making variable rate contracts riskier than fixed-term options. But if you’re willing to take a gamble, then the payoff can certainly be worth it.
Deemed rate contract
Businesses are placed on a deemed contract when they haven’t agreed on a new contract with the supplier. This could be because they’ve moved into new premises, or their contract has ended and the same supplier is still providing their energy.
Under a deemed contract, energy is charged at the “out-of-contract” rates. These rates are often very expensive and most businesses will want to get themselves out of a deemed arrangement as soon as possible.
If a business fails to renew its energy contract before the end date, then the supplier may automatically place them on a rollover contract. This effectively signs the business up for another long-term contract, but typically at higher rates than their old agreement.
In general, a rollover contract is not a desirable solution. To avoid being placed on one, businesses should always try and get their contract renewals sorted well in advance of the end date.
What Happens When Your Current Business Energy Contract Ends?
Finding the best energy deal is all about switching suppliers regularly to access the best tariffs. To achieve this, businesses have to know when their current energy contract ends and what’s going to happen when it does.
You can find your contract end date on any of your bills or the original contract itself. The “notice period” will also be included on your bills or contract – this lets you know when you need to alert your supplier if you’re planning on switching contracts.
Around 6-7 weeks before your contract end date, your supplier must legally notify you that your agreement is coming to an end. This message will also explain what happens if you fail to renew your contract before the end date. Usually, this will involve going onto a rollover or deemed rate contract, which both feature expensive rates.
To avoid this situation, you’ll want to get your new contract sorted so that it can switch over on the day your current contract ends. If you want to switch to a new supplier, then you have to let your current supplier know within the 6-7 week period before the contract ends.
Environmental Schemes And Levies For Businesses
As the effects of climate change start to become more and more apparent, the Government is implementing a number of schemes and charges to encourage businesses to use their energy responsibly. If you’re going to be signing up for a business energy contract, then it’s essential to know how these schemes are going to affect what you pay.
Renewable Heat Incentive (RHI)
The Non-domestic Renewable Heat Incentive is a programme that provides financial encouragement for businesses to use renewable energy resources. Eligible businesses receive a payment from the Government every quarter. To qualify for the programme, businesses must produce their own energy using renewable resources such as solar or wind power.
The RHI won’t knock money off your energy bill directly, but it will mean that you’ll pay less for your energy in the long run. Using renewable energy has the added benefit of reducing your environmental impact.
Of course, installing a renewable energy source at your business premises can be a significant initial investment. If cutting down your energy bill is your only concern, then you need to work out whether the savings generated and RHI payments make back the cost of the system.
Contracts for Difference (CfDs)
Contracts for Difference is an expense paid by business energy clients to ensure that suppliers continue to use renewable energy sources whenever possible. This system rewards suppliers for their use of eco-friendly generation and encourages them not to switch to coal and gas when it becomes cheaper on the market.
Carbon Reduction Commitment (CRC Efficiency Scheme)
The Carbon Reduction Commitment is placed on large businesses to incentivise them to reduce their emissions. Under this scheme, businesses must monitor and report on their energy usage and CO2 emissions. The Environment Agency uses this information to calculate how much carbon the business has produced, which they must then offset by buying “allowances”.
You can find out more about the scheme and whether your business qualifies here.
Levies and additional business energy charges
Let’s move on to the schemes and policies that will have a negative effect on your energy bill. Your business might not be liable for all of the following charges, but it’s likely to be susceptible to some of them. This is especially true if your business premises are “energy-intensive”.
The Climate Change Levy (CCL)
The Climate Change Levy is a tax that is placed on businesses to encourage them to cut down their energy usage. The amount you’ll pay for this levy depends on a few factors, such as the types of fuel and how much energy your business uses.
The CCL is charged for taxable commodities including lighting, heating and electricity. A business also has to pay a CCL charge if they use fuels such as coal and gas on the premises. There are two CCL rates that can be charged – the “main rate” and the “Carbon Price Support (CPS) Rate”.
A business is subject to the main rate if it operates in the industrial, agricultural, commercial or public service industries. If a business has its own generating stations, then it may qualify for the reduced CPS rate.
The main rate is revised at the start of every financial year. The CCL rate for electricity is typically around 0.7-0.8 pence per unit of usage, and the gas rate usually hovers somewhere between 0.4 and 0.5 pence per unit. These charges are automatically added to your energy bills.
Some businesses may be exempt from the Climate Change Levy. For example, if you are a charity with non-commercial operations, then you won’t have to pay it. Businesses that have signed the Climate Change Agreement (discussed above) also pay a greatly reduced CCL rate.
Business Energy FAQs
How long does it take to switch my business energy supplier?
Switching your business energy supplier is not an instant process. It typically takes between 3 and 6 weeks to move to a different provider. There are a number of things that must happen behind the scenes before your energy is controlled by your new supplier.
It’s important to take this delay into account in relation to your current energy contract. If you time it right, your new provider will be able to take over as soon as your old contract ends. This means you won’t have a crossover where you’ll be paying extra for two separate contracts.
Where can I send complaints about my business energy supplier?
All business energy suppliers will have a complaints process. This could be via a phone call or email form. If you can’t work out how to make a complaint then be sure to get in touch with your supplier directly. They will always let you know how to file a formal complaint. The contact details of your supplier should be listed on your recent energy bills.
If you’re struggling to make progress with your complaint, then you can get help from an organisation such as Citizens Advice. The Citizens Advice website contains templates that you can use to file a complaint.
If you’re still not satisfied with the company’s resolution after making your complaint, then you have the option to take the matter further. Complain to the Energy Ombudsman if 8 weeks have passed and they will provide support. The Ombudsman has the power to force an energy company to correct their mistakes and will even pay you compensation if it’s warranted.
What is a Letter of Authority?
If you decide to pay a broker to find you the best energy deal, then you may have to sign a Letter of Authority during the process. Signing this document gives your broker the power to request information from your current provider. This information includes your current contract, meter readings and your energy consumption.
Some brokers may ask you to sign a “Level 2” Letter of Authority. This grants the broker the power to accept a new energy contract on your behalf. Be wary if your broker is asking you to do this – they won’t have to check in with you before agreeing to a new contract.
Why is business electricity cheaper than domestic?
The main reason why business electricity rates are lower than domestic equivalents is due to the volume of energy that businesses use. Energy companies are keen to sign up with businesses since they know that they will be using more energy than the average household.
Although business rates are definitely cheaper, there are some other costs that are included with a business contract. VAT and the Climate Change Levy are two examples that can bump up your business energy bill quite dramatically.