How to compare business energy quotes effectively

24 July 2018

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How to compare business energy quotes effectively

Whether your energy costs are a significant overhead or not, knowing how to compare the price of gas and electricity could land you a saving – or, at the very least, help you get a handle on what goes into your energy bills.

There’s more to comparing business energy prices than relying on a comparison site and third parties to do the legwork for you. By understanding what types of contract are available to you, as well as factors such as the difference between standing charges and unit rates, you’ll be better-placed to negotiate a deal that you’re satisfied with.

Because we want to make sure you’re happy with the price and the service you get from your energy supplier, we’ve put together this handy guide on how to compare business energy quotes. From it, you’ll get a better understanding of the types of contracts available and how to compare prices yourself, as well as pointers on things to bear in mind before you commit to a deal.

Let’s get started.

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What type of business energy contract should I choose?

One of the first hurdles you face when finding business energy deals is choosing the contract type which meets your needs., There are several contract options available when comparing gas and electricity prices for your business, so it’s helpful to know what they are, how they work and if they offer any benefits or pitfalls.

Here, we look at the different business energy contracts available, what they offer and which kind of business they’re best suited to.

which business energy contract

Fixed rate

A fixed rate business energy contract means that the unit rate and standing charge will stay the same for the duration of the contract. Fixed rates are offered on a 1-3year contract basis, though some do run up to five. Typically, the longer the contract term the more you’ll pay, but this does mean you’ll get greater protection against future price rises – which may be a worthwhile trade-off for cash-light businesses who want long-term price security.

Fixed rate contracts are great for businesses who want simple, cost-effective business energy. One thing to remember, though, is that your bill will go up if consumption is high. The ‘fixed’ only refers to the unit rate and standing charges, not the actual cost of energy use.

Another thing to note is that, while some suppliers and products fix all elements of the bill, others include third-party costs such as transportation and metering charges, which may fluctuate. So always read the small print first before you commit.

Pass-through rate

With a pass-through rate contract, the per kilowatt hour unit rate will fluctuate based on several factors, including the wholesale energy cost and associated market activity. This means that you could end up paying more or less for gas and electricity over the duration of the contract, even if your consumption remains the same.

business owner researching energy

One of the key benefits of a pass-through rate contract is that there are savings to be made if the wholesale energy price drops during your contract term. While those on a fixed rate deal wouldn’t see the benefit of such a reduction, your bills would go down. Of course, it could go the other way and the wholesale price could increase, in which case you’d see higher bills. For businesses with an energy strategy, however, this could be a risk worth taking.

Time of use

Although not as common as fixed or pass-through contracts, a time of use contract could be worth looking into if your business meets the right criteria. With this type of contract, the unit rate per kilowatt hour will change depending on the time of day, so your business could save money on its bills if most energy consumption occurs during off-peak hours when there’s less demand for energy.

Time of use contracts are a good option for businesses with specific energy needs, however, you may see your bills increase if you use energy outside of the stated period. A smart meter or AMR device is also required for businesses on a time of use contract, as these allow for accurate half-hourly meter reads.

Typically, these are the three energy contract types most small to medium-sized companies will consider when comparing business energy deals.

 compare business energy prices

How do I compare business energy prices?

When it comes to securing the best possible deal on business energy, comparison sites will only get you so far. While they’re good for benchmarking potential energy costs, comparison sites only offer indicative quotes which may not accurately reflect the actual price you’ll pay. This means, to find the most competitive deals, you need to put in the groundwork.

Below, we offer practical tips on comparing business energy deals to find the best option for your company.

Stay abreast of the contract end date

To avoid the risk of being rolled onto an expensive out of contract rate, make sure you’re well aware of the contract end date. Most business energy contracts require termination at least 90 days prior to the contract’s end date (30 days for microbusinesses). Staying abreast of the business energy contract allows you to shop around and find the best deal for your business.

Suppliers aren’t required to publish the contract end date (except on microbusiness contracts), but the information can be readily found by contacting the supplier.

For businesses looking further into the future, it is possible to sign new contracts years in advance. If your contract is due to run for another three years, it is possible to sign a new contract now – potentially taking advantage of current offers and supply details.

business energy comparisons 

Get a benchmark using a comparison service

Start by testing the waters and getting a feel for price points using a comparison service. While they can only give you an estimated figure for annual energy prices, it’s a good starting point from which you can then approach suppliers and try to negotiate an even better deal.

When you find a deal you like the look of, make a note of the unit rate and standing charge offered as part of the contract and don’t forget to confirm whether the rates are fully fixed, party fixed or pass-through. Using these actual figures will make it easier to compare quotes effectively; we’ve provided more guidance on how to understand unit rates and standing charges below.

Approach suppliers and compare quotes

Keeping in mind the unit rate and standing charges, approach individual suppliers for an accurate energy quote that offers a more detailed breakdown of your prospective energy costs than the indicative sum provided by comparison sites.

To provide an accurate quote, energy suppliers will need to know the name of your business, the business address, what it does and how energy is typically used. They may also ask for a recent meter reading, which will help make the quote even more accurate and reflective of your actual energy consumption.

Unlike domestic energy, in which customers aren’t able to haggle for a better deal, you may be able to negotiate on the price of your business energy contracts. That’s why understanding the different contract types and per unit rates are so important to securing the best deal.

difference standing charge and unit rate 

What’s the difference between standing charges and unit rate?

Take time to understand the difference between unit rates and standing charges, and you’ll be well placed to make an informed decision on the business energy contract that’s right for you. Here, we take a closer look at what these terms mean and how they can help with your energy search.

What is a unit rate?

The unit rate is the cost of each unit of energy, measured in kWh. Unit rates vary depending on a range of factors, including the wholesale energy cost, which is why a lot of companies choose a fixed rate contract – meaning the unit rate is locked for the duration of the contract term.

For instance, say your unit rate is 11 pence per kWh, the total cost will only change in line with consumption. If you choose a fixed rate contract, this will stay the same, while a pass-through contract means it could go up and down.

What is a standing charge? 

A standing charge is essentially the maintenance costs of your energy connections. These charges are always set at a per day rate – for example:

Your standing charge may be 24 pence per day. This means that per year, an extra £87.60 will be added to your bill (0.24 X 365 days).

Of course, the unit rate and standing charge aren’t the only figures you’ll see itemised on your energy bills. For more on what makes up your bill, read our handy guide.

Once you know what the unit rate and standing charge mean, you can compare different energy quotes on a granular level and use the figures in order to negotiate a better deal with your preferred energy supplier.

business energy things to remember 

Things to remember before you commit

With the potential to make a saving or enjoy a better service from your supplier, the question of which energy contract to go for should never be taken lightly. So, before you commit to a new deal, here are a few things to remember which could influence your decision on which business energy contract is right for you:

  • You can’t get dual fuel business energy – An obvious point, but an important one. Unlike domestic energy, you need to get separate quotes for gas and electricity. While this does mean more work, it also gives you the chance to ask for an extra bit of discount if you take out gas and electricity contracts with the same supplier.
  • You can’t switch mid-contract – One thing that all business energy contracts have in common is that there’s no option to switch mid-contract – which is why it’s so important to get it right first time.
  • The cheapest energy deal may not be the best – As attractive as a cheap energy quote may be, price isn’t the only thing you should consider when searching for the best energy deal. Service and reliability are important when the smooth running of your business is at stake, so read reviews, do your research and find the supplier which you feel 100% happy with before you commit.
  • Always check the renewal period – One of the first things you should do after starting a new business contract is make a note of the renewal period and put it in your diary. Miss this window and your supply will be automatically renewed, meaning you could face expensive out of contract rates.

SEFE Energy is a leading and award-winning business energy supplier, helping thousands of small businesses manage their gas and electricity contracts. To find out more about what we can offer your business, visit the homepage or call us today on 0161 837 3390.

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