Business Gas & Electricity Tariffs Explained
Rather than putting you in a bracket that best suits your energy usage, business energy tariffs are tailored to your exact needs.
It’s great to have this much accuracy, but it can still be difficult to put a finger on exactly how much your business gas and electricity tariff is costing you.
What business gas and electricity tariffs are available?
Every business has different needs, so energy suppliers have a range of different tariffs tailored to meet these needs. In general, there are five main types of contract available for businesses. These are:
Fixed term contract - On a fixed term contract, you always pay the same amount per unit (kWh) for your energy. But, this doesn’t mean that your bill will be the same every month - it still depends on how much energy you use.
Variable-rate contract - Your unit rates (the amount you pay per kWh of gas and electricity) can increase and decrease during the duration of your contract, in line with market activity. There’s an element of risk with this type of tariff.
Deemed rate contract – This is also commonly known as an out-of-contract tariff. It’s a rolling contract with expensive rates that are arranged by suppliers for customers with no formally agreed contract. This isn’t a good deal.
28-day contract - A rolling 28-day contract, for businesses who haven’t switched since the energy market deregulation came into effect. The unit rates you’re charged can increase and decrease.
Rollover contract – If you haven’t arranged a new deal when your contract comes to an end, your supplier will put you on a rollover contract. You’ll automatically be signed up for another year, and the rates you’ll be charged will usually be among the supplier’s most expensive. This is a place you don’t want to be.
Whatever the size of your business, it’s always best to be on a fixed rate contract. This is the option with the least risk, and it’s easier to calculate your usage across the contract length this way.
How does your business’ credit rating affect your energy rates?
Business energy suppliers can choose which customers they want to deal with based on their credit score and history. This is because business energy is expensive, and is used in large quantities, so suppliers are conscious about the risks involved with supplying gas or electricity to businesses that may not be able to keep up with payments.
If your business has a low credit rating, or is in a high-risk industry, you may have a more limited choice of energy supplier and energy tariffs. Some energy companies simply won’t accept businesses with a poor credit history or a poor credit score, while others may not give you access to their cheapest offers.
Even if they do accept a low credit business, the energy suppliers might:
Charge an additional premium.
Ask for a security deposit.
Insist you pay by direct debit (although some suppliers offer a discount for this arrangement).
Install a prepayment meter.
Energy suppliers tend to offer their best rates to those with a good credit rating. When you apply for a business energy tariff, the supplier will run a credit check to find out your credit score. It’s estimated that one in three businesses are unable to get the cheapest rates because they fall below the required minimum credit score threshold.
Some businesses, especially start-ups, may not have a credit history, or may have a relatively low score. If this sounds like you, energy suppliers will be reluctant to offer you their cheapest prices, because they have no guarantee that you’ll be able to keep up with your payments.
What happens when your business energy contract ends?
When your energy contract ends, your supplier will put you on their more expensive standard tariff. This is not a good situation to be in, because it’ll cost you more. But the good news is that you don’t have to end up on this type of tariff - when your contract comes to an end, make sure you cancel it and renegotiate a deal elsewhere. This is the best way to get a better price for your business.
MoneySuperMarket has partnered with Bionic to help take the hassle out of sorting your energy renewals. Their business tariff experts are on hand to explain, help and compare deals on your behalf, completely free of charge. If you swicth, Bionic will be paid a commission by the supplier.
To cut the amount of form-filling and to save you valuable time, Bionic uses smart data to get all the informaiton they need to run an energy comparison. But it might still help to have the following information to hand:
A recent energy bill
Your business's registration information
Your MPAN and MPRN numbers from your bill or meter
Your current contract's end date
The date your switching window opens
To compare tariffs, give the Bionic energy experts a call now on 0800 088 6986, or fill give us your postcode and we'll get them to give you a call back.