Is business electricity getting cheaper?

Energy prices are no longer at their peak, but remain significantly higher than pre-pandemic levels. The business energy provider Bionic says prices may not return to those lower levels for the remainder of this decade.

If you’re approaching the end of your current electricity plan, it could still be worth searching for a fixed-rate tariff. This could protect you from any further price hikes while the market remains volatile.

What contributes towards the cost of business electricity?

There are two main charges you should be aware of when comparing commercial electricity rates:

Unit rate

This is the price you pay for each unit of electricity your business uses. It’s given in pence per kilowatt hours (kWh). For example, your unit rate could be 10p per kWh.

Don’t just focus on the unit rate when comparing business electricity plans, though. Although it makes up the bulk of what you’ll pay, the standing charge can also make a big difference to your bill.

Standing charge

This is what your electricity supplier charges you for its service. It covers maintenance of the National Grid, the cost of delivering electricity directly to your business, and managing your account. This is priced in pence per day.

Other charges that may apply

You’ll also have to pay the Climate Change Levy (CCL), which will be added to your bill as a separate item, unless your business is exempt.

The government introduced the levy to encourage businesses to reduce their carbon footprint, in line with the UK’s commitment to reach carbon neutral – net zero – by 2050.

The CCL changes every year. You can see the latest rates on GOV.UK. Certain types of businesses may be exempt from paying the Climate Change Levy.

What are the different business electricity tariff options?

Business energy suppliers offer both fixed-rate and flexible tariffs for electricity. Unlike household energy, you can’t opt for dual fuel gas and electricity tariffs for business use.

But you can negotiate on price, so it’s worth shopping around to get a cheaper tariff for your individual business.

The most common types of business electricity tariffs are:

Fixed-rate

The amount you pay per each kilowatt-hour (kWh) of electricity is fixed and will stay the same throughout your contract. You’ll know exactly what you’re paying for the energy you use, and you’re protected from fluctuating prices.

There’s no price cap on business energy, so it’s always worth comparing quotes to find a suitable plan before you sign up with a supplier.

The downside is that you won’t benefit from a reduced tariff if wholesale prices fall. Fixed-rate tariffs also tend to be on longer contracts, so you could be tied in for a minimum of 12 months or more.

This means you won’t be able to switch suppliers until your contract is up for renewal. And when you do switch, your new contract won’t start until your current one ends.

Flexible rate

Also known as ‘variable contracts’. Flexible tariffs reflect the market, and the price can rise or fall depending on the wholesale price of electricity.

That means you could make savings when prices are low. But you could also end up paying more than you would have done on a fixed-rate, if the wholesale price of electricity rises during your contract.

The main types of flexible business energy tariffs are:

Out of contract – rollover or evergreen contract

If you don’t arrange for a new contract to start when your current one expires, your supplier will put you on an out-of-contract rate. This is known as a ‘rollover’ or ‘evergreen’ contract.

These are flexible rates, which means you’re no longer protected from price rises. They’re usually among a supplier’s most expensive rates. So, it’s advisable to arrange a switch before your current contract ends.

Commercial electricity suppliers are no longer allowed to lock microbusinesses into rollover contracts for more than 12 months.

This means they can no longer charge exit fees or include no-exit clauses in automatic rollovers. This could make it easier to switch business energy suppliers for some microbusinesses that were previously tied in.

Deemed rate

You’ll be put on a ‘deemed contract’ by the supplier if you’re using electricity, but you haven’t yet agreed to a new contract. This could be the case if you’ve recently moved business premises and haven’t yet chosen a supplier for that property.

Deemed rate tariffs tend to be much higher and should only be considered as a short-term solution.

The good news is you can switch to another supplier for any reason, or at any time, without giving notice or paying a termination fee.

Flexible tariffs are usually more expensive than fixed rates. So it’s always best to shop around and compare electricity plans to avoid paying more than you need to.

Why should I switch business electricity suppliers?

You can choose to switch your commercial electricity supplier for many reasons, but the primary one is to find a better or cheaper deal.

Energy rates are always changing. It makes sense to compare business electricity prices and switch to the lowest business electricity rate you can find when it’s time to renew. That’s especially true if you’re on a deemed contract or out-of-contract rates and cheaper plans become available.

It’s not always about cost though. You might choose to switch business electricity supplier for:

Better customer support

Goof tariffs that better suits your needs

A supplier that provides technology that allows you to monitor and adapt your power usage to reduce your bills

A renewable energy tariff that supports your sustainability values.

What should I consider when switching business electricity suppliers?

When considering switching electricity suppliers, businesses might want to consider:

A supplier’s customer service

If the offer is the cheapest price

How environmentally friendly the supplier is

The notice period terms if you choose to switch or end a contract

Whether you’ll have to pay any additional costs, like maintenance charges

If you’re using an energy broker, how their fee works with a contract – for example, is it a one-off charge or an addition to your usage costs in a contract?

How can I reduce the cost of my business electricity?

There are many simple actions you can take to reduce the cost of your business electricity, and some won’t even cost you a penny. As a bonus, some may reduce your business’s carbon footprint too. For example:

Switch off the lights

Lighting can be responsible for up to 40% of a building’s electricity use. Turn off lights in areas that aren’t in use all the time or fit occupancy sensors. And switch to energy-efficient LED lightbulbs. These use just a fraction of the power that standard lightbulbs do.

Optimise use of office equipment

Turn off your office devices when you’re away from your desk and at the end of the day. Set printers and copiers to power down when not in use.

Switch from PCs to laptops – which use a lot less energy – and optimise brightness on monitors. Always consider the energy ratings of any new equipment.

Find out more about energy-saving devices for your business.

Educate staff

Encourage your staff to do their bit to cut down on energy use with some simple steps. This can range from only boiling the amount of water needed in the kettle and only running the dishwasher when it’s full, to switching off lights and office equipment when they go home.

Shop around for a better deal

If you’ve been on the same tariff for a while, it may not be the best value for money any more. Shop around for business electricity plans and move on to one that’s better suited to your business.

Use smart meters

Monitoring your business’s electricity use with smart meters and other technology will help make your bills more accurate. You’ll understand your business’ usage patterns better, and may see ways you can cut back.

Commit to going green

Energy-intensive businesses can sign up for a government Climate Change Agreement (CCA).

By doing so you agree to reduce the amount of energy you use over a specified timeframe. Then, if eligible, you could receive a discount on the Climate Change Levy (CCL). Reducing your energy use should result in cheaper bills too.

Compare business electricity quotes before your contract finishes

Sort a new deal before your current contract ends. The switching window is usually 90 days before the end date. This is the earliest point that you can start comparing and arranging a new contract without penalty.

It could mean you secure a cheaper rate if prices are on the rise. And it will stop you from getting rolled onto your supplier’s more expensive out-of-contract rates.