Business energy contracts are not like domestic ones because businesses use energy differently. Understanding what types of business energy contracts are there is crucial to ensure you are getting the best deal for your company.
Here we take a look at all types of business energy contracts you might find when comparing energy deals and looking for the right supplier.
Types of business energy contracts
In the table below you can find descriptions of various types of business energy contracts.
| Deemed and out-of-contract contract | Businesses are usually placed on deemed contracts if they moved to new premises and didn’t sign a contract with the supplier. You might also be placed on an out-of-contract or deemed contract if your existing contract expires and you did not sign a new one. These contracts are usually the most expensive. To avoid overpaying for energy supply, make sure to agree on a contract as soon as you move into new premises. |
| Fixed contract | If you sign a fixed contract you agree to pay a certain set rate per unit of energy (per kWh consumed) for the fixed duration of the contract. That means that every month the price you pay per unit will be the same. The duration of a fixed contract varies but most common ones are for 2 years. Your unit rate will not change throughout the duration of the contract even if energy prices on the market fluctuate. |
| Variable contract | If you sign a variable contract, the price you pay pre unit of energy (per kWh consumed) will depend on what is happening on the market. That means that your rate per unit of energy might be different each month. You can normally end variable contracts anytime without having to pay any exit fees. |
| Rollover contract | If your current contract expired and you didn’t agree on a different one or you didn’t change suppliers, you might be placed on a rollover contract. Rollover contracts usually last 12 months and often you do not have the right to change or end them without paying exit fees. Rollover contracts are amongst the most expensive ones. |
How are business energy contracts different from domestic ones?
Here we take a look at some of the key things that make business energy contracts different to domestic ones.
- Business energy contracts tend to be longer
The majority of business energy contracts last one to three years but some can last five years or even more. Businesses usually sign contracts for a fixed period of time while domestic contracts tend to be rolling with no end date. That means that business energy contracts are slightly less flexible as, if a business wants to change a contract early, they need to pay an early termination fee.
- There is no cooling-off period
When domestic customers sign an energy contract, they usually have 14 days to change their mind and cancel without having to pay any fees. Most business energy contracts do not have such an option. That is why you should think carefully before signing an energy deal.
- It is possible to agree a contract on the phone
When it comes to domestic energy contracts, customers have to sign them for the deal to be binding. With business contracts, however, it is enough to agree on a contract over the phone. Hence, you have to be careful with what you are saying during the conversation with the representative of your energy provider. It is also always better to ask the supplier to send you the contract so you can read and review it.
- Business energy contracts are single-fuel
If you are looking for a domestic energy contract for your home, you might find a dual fuel deal where the same supplier provides both your gas and electricity. Unfortunately, it is not possible to do that with business energy contracts. You need to obtain separate quotes for your business gas and business electricity.
- Prices are different
One of the reasons why business energy prices are different to domestic ones is because the VAT on business energy is 20% while domestic customers pay only 5% VAT on their supply. Moreover, energy suppliers tend to purchase gas and electricity for domestic customers a few months in advance. When it comes to business customers, they only purchase gas and electricity once a business has signed a deal.
Which business energy contract is the right one for my business?
Choosing the right contract for your business can be difficult but doing it is very important as it can help you save money on energy bills. Here are a few things you should think about when looking for an energy deal for your business.
Firstly, you need to ask yourself whether you want a fixed or a variable contract. The biggest advantage of the former is the fact that even if energy prices on the market go up, you will still be paying the same price. This way you might get lucky and avoid being affected by rising energy prices. At the same time, the energy prices might go down after you sign the deal and you will see yourself paying too much for your supply. Moreover, when you sign a fixed contract, you will have to stay with it for a certain period of time, often several years. If you want to change the suppliers or get a different energy deal before your existing contract expires, you will have to pay exit fees that might be expensive. When it comes to variable contracts, they offer a great deal of flexibility as you can end them anytime. This way, if you find a supplier that offers more competitive prices, you can switch immediately. The biggest disadvantage of variable contracts, however, is the fact that you are not protected from energy prices going up and you never know how much you will pay. Your energy bill will be different each month.
Then, you also need to think about aspects such as:
- your average monthly energy consumption
- the location of your business
- the current energy market rates
- the type of your existing tariff.
When you analyse these things, it will be easier for you to figure out what the energy needs of your business are and what energy contract you should get.
Should I switch suppliers?
Many business owners stick to the same supplier for years if they are satisfied with their existing energy deal. While the contract you once signed might have been competitive at the time, it is worth doing a tariff comparison to see what other energy deals are available now. Most likely you will discover that there are some new contracts that offer cheaper rates and more flexible terms now.
‘Switching to a new electricity or gas supplier is easy to do and can save you money on your energy bills, according to research conducted by Ofgem the regulator of energy companies in the UK’, Moneyfacts reported.
The process of switching is very easy. In fact, once you let the new supplier know that you want to switch and you agree on a contract with them, they will handle the rest for you! Many assume that switching energy providers is difficult but that could not be more wrong. Doing so is not only easy but also quick.
According to CompareTheMarket, it takes around 21 days for the process to be finalised. Sometimes it might be even quicker than that.
If your existing energy contract is about to expire, you should do a price comparison and switch suppliers if you see a better deal. You should also consider hiring an energy broker. They can compare hundreds of energy contracts for you and present you with the cheapest ones that are best for the energy requirements of your business. An energy broker can also get you deals that you would not get otherwise.
Are you looking for a perfect business energy contract? Call us today on 0131 610 1688 and we will help you find it!