What to Consider When You Compare Business Energy
Comparing business energy providers can be a daunting task, especially with the variety of options and rates available. If you want to ensure that you select the best energy deal for your organisation, it's crucial to understand the different elements that make up your bill, including the unit rate and standing charge you are quoted. This guide will help you navigate the complexities of business energy tariffs, whether you are running a micro business, a charity, or a non-profit organisation.
Understanding the Basics: Unit Rate and Standing Charge
The first step in comparing business energy is to understand the two primary components of your energy bill: the unit rate and the standing charge.
Unit Rate: This is the cost you pay for each kilowatt-hour (kWh) of energy you consume. The unit rate can significantly impact your overall energy expenditure, especially if your business has high energy usage.
Standing Charge: This is a fixed daily charge that contributes to the cost of providing your energy service, regardless of how much energy you use. This fee can vary from one provider to another and should be taken into account when comparing prices.
When comparing energy tariffs, it's essential to look closely at both the unit rate and the standing charge you are quoted. A low unit rate may seem attractive, but if the standing charge is high, it could result in a higher total bill.
Types of Energy Tariffs
Once you grasp the basic charges, you can delve into the various energy tariffs available. Understanding what kind of tariff suits your business is key to making an informed decision.
Fixed Rate Tariff
A fixed-rate tariff allows you to lock in your energy prices for a set period, typically one to three years. This can provide stability against fluctuating market rates, ensuring predictable energy costs for your micro business or charity project. However, you could miss out on lower rates should the market prices fall.
Variable Rate Tariff
A variable rate tariff means your prices can change throughout the year based on market conditions. While this may initially seem appealing, especially if rates drop, it involves risk, as prices can also increase. If you're unsure about your long-term energy usage, this may not be ideal for your organisation.
Deemed Rate and Out-of-Contract Rate
A deemed rate often applies if you've recently moved into a business location and have yet to set up an energy contract. Under this rate, energy providers may charge you a higher price for your energy usage, which can be detrimental to your finances.
Similarly, an out-of-contract rate comes into play if you have let your contract expire without switching providers. This rate can also be significantly higher than standard tariffs, making it essential to renew your energy agreements timely.
Flexible Rate and Pass-Through Tariff
A flexible rate tariff varies based on your consumption peak and off-peak timings, allowing you to manage costs more efficiently. Such tariffs are often useful for businesses with specific energy usage patterns, helping to lower overall costs.
A pass-through tariff allows businesses to pay the market rate for energy but can also expose them to price surges. It's typically more suited for larger businesses that can manage market fluctuations.
Extended Tariff
For businesses that require specific energy needs or have unique operational hours, an extended tariff may be a better option. This tariff adapts to the business's energy profile and can often accommodate additional services, such as green energy options.
Special Considerations for Micro Businesses, Charities, and Non-Profit Organisations
If your operation falls under the categories of micro businesses, charities, and non-profit organisations, special considerations apply. Many providers offer tailored tariffs that take into account the specific energy needs and financial constraints of these groups. Therefore, it's crucial to ask energy providers about special rates or discounts that may be accessible to you.
Final Thoughts
In conclusion, comparing business energy tariffs requires careful consideration of several factors, including the unit rate and standing charge you are quoted, as well as the specific type of tariff that fits your business or organisation. Whether you choose a fixed, variable, or flexible rate, ensure that it aligns with your energy needs and financial goals. Special consideration should also be given to micro businesses, charities, and non-profit organisations, which can often access specific rates tailored to their situations.
By understanding these elements and doing your homework, you can make a confident decision that could save your business money and improve your overall efficiency in energy usage.