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Increasing energy bills are squeezing the profitability of small businesses across the UK. If you do not adopt the correct approach, you could be spending hundreds or even thousands more annually than necessary on your electricity bill. This full guide will show you precisely how to identify the cheapest electricity suppliers for small business so you can reduce energy costs while delivering reliable electricity for your activities.
Energy bills are now one of the largest operational costs for small businesses in the UK, and can represent, on average, between 5-15% of total revenue. Electricity costs fluctuate wildly due to market volatility and regulatory changes, which means picking the wrong supplier can cost you thousands per year. Smart business owners are mindful that simply picking the cheapest advertised price is no longer enough to choose suppliers for their business energy needs.
Introduction to Electricity Suppliers for Small Businesses
Why Choosing the Right Supplier Matters
It’s possible to save between 20-40% on your annual electricity cost when you have the right energy supplier. Knowing that the most reputable electricity supplier is not always the one with the cheapest rates, it is imperative that you compare and review your options to position yourself as an educated and smart business owner.
Commercial energy contracts look different from residential contracts. Business rates change more frequently than residential rates, and commercial electricity suppliers often offer complex packages and rates that can’t be replicated by a residential supplier.
Common Challenges Businesses Face with Energy Costs
Small businesses often face unexpected price increases and lengthy contract terms. Many owners don’t know that once fixed-term contracts expire, they are automatically switched to a variable rate, which is significantly more expensive.
Knowing your business’s energy profile allows you to make an informed decision about who you contract with. Understanding peak usage periods, seasonal changes, and expected growth are all factors that will guide you to a likely better-value supplier in the longer term.
What Are the Key Factors in Electricity Suppliers Comparison?
Analyzing the cheapest electricity suppliers for small businesses, evaluating a variety of different factors aside from the advertised rates. Often, the cheapest advertised price does not accurately correlate to the cost once standing charges, exit fees, and other services are accounted for. The factors below should be discussed with suppliers during the negotiating stage:
1. Pricing Structures and Hidden Stipulations
A fixed-rate contract can help shield buyers from fluctuations in pricing, but in the end, it costs more on a net basis. The decision between an electricity fixed rate vs. variable rate will often depend on the buyer’s risk tolerance and the current market conditions.
Variable rates can provide flexibility but expose businesses and operations to sudden and unexpected changes in pricing based on current market rates at that given time. When obtaining electricity from different suppliers, standing charges, connection fees, and costs to read meters can negatively increase total costs, and these may vary from supplier to supplier.
2. Reliability and Customer Service
The operations of a business depend on the reliable supply of power, as well as the immediacy of customer service issues that may arise. The cheapest electricity sources for small businesses will have to usually come at the expense of reliable customer service satisfaction.
The features found in customer service may vary from supplier to supplier, including emergency support availability, dedicated account managers servicing or managing the account in case of any emergencies, and overall functionality through the supplier’s online portal. In some cases, these features may be a big deal when seeking support or follow-up for a billing issue.
3. Contract Flexibility and Length
Contract terms can range from 12 months to five years, with longer terms usually yielding a better pricing rate. Length, while it can matter, features such as early termination fees and automatic renewal clauses should be taken into consideration before signing and agreeing to their terms.
Additional flexibility, without a term, can allow for better pricing depending on growth or the expansion of the business; however, in regard to flexible pricing, it can sometimes become more expensive for an organization to go without a contract, as the contract provides hedging against demand and weather seasonality.
How Do Commercial Electricity Providers Differ from Domestic Suppliers?
Commercial energy suppliers focus on the specific energy needs of businesses, providing services and options that are not provided by a domestic supplier. Basically, they understand how businesses use energy and adapt their products to suit them in any segment of the sector.
How They Are Different From Domestic Providers.
Business energy suppliers can provide half hour reads on their meters, detailed analytics on consumption, and energy management consultancy. These value added services not only help businesses better optimise usage patterns but also identify areas for cost savings.
In terms of credit, a certificate of credit for a business would usually suffice for good business credit terms, and this would be a period of 30 days to a substantial amount of money, which assists a small business in managing its working capital compared to immediate direct debits for a domestic customer.
What Are The Additional Benefits Of A Specialist Business Energy Supplier
In addition, specialist business suppliers hold an in-depth understanding of the applicable regulatory requirements across multiple jurisdictions that affect commercial energy users. They can manage the complexities behind different billing arrangements in addition to all costs and pricing, including what should or should not be billable. They can also provide advice to businesses on grants and schemes for energy efficiency or similar.
Many suppliers focused on the business community would also have advice about carbon reporting tools or procedures, as well as renewable energy certificates, which are just another tool for sustainability objectives with broader possible tax advantages.
What Should You Know About Power Suppliers in the UK Market?
The UK energy market has more than 50 power suppliers in the UK who serve small and medium-sized enterprises (SMEs). Because of the number of options out there, prices can vary significantly between energy providers. Therefore, companies can potentially save money by using this competitive market to their advantage, and the assessment of each supplier’s capabilities becomes increasingly important.
Traditional Suppliers
The “Big Six” companies (British Gas, EDF, E.ON, npower, ScottishPower, SSE) have an extensive network of services, but will not usually provide the cheapest electricity supplier for small businesses.
Medium-sized suppliers like Opus Energy, Total Energies, and Haven Power tend to focus their services on commercial customers and tend to provide competitive quotes with additional services aimed at businesses.
Independent Suppliers and Green Suppliers
Independent suppliers often provide the cheapest rates or the cheapest electricity supplier for business applications, but the trade-off may be the rest of their financial or customer service stability.
Green suppliers will provide renewable electricity certificates/certifications and/or carbon neutral options. Green suppliers used to issue premiums, but many now offer rates equal to or cheaper than traditional suppliers.
How Do You Identify the Most Reliable Electricity Supplier?
A trustworthy electricity supplier offers a competitive rate and reliable service. Reliability encompasses challenges with billing, responsive customer service when assistance is needed, and continuity of supply during supplier and network issues.
Customer Ratings and Reviews
- Independent review sites, such as Trustpilot and Citizens Advice, can provide a useful indication of supplier performance.
- Look for prevalent themes, rather than isolated customer complaints.
Track Record of Reliable Supply
- The supplier is only part of a reliable energy supply, as the distribution network operator (DNO) has the most impact.
- Each supplier’s response to any emergency or disruption also varies in regard to communication with customers and the action they take.
Potential indicators of financial stability include: their credit rating, annual turnover, and a growing customer base. It is tempting to use the lowest household energy tariffs offered by start-up suppliers, but they may be untested when the larger energy market faces stress conditions.
How Do I Find the Cheapest Electricity Supplier?
Finding the cheapest electricity suppliers for small business might include a methodical procedure for comparing business electricity suppliers based on total cost rather than the headline rate. This will involve obtaining current use figures and being familiar with contract conditions.
Online Electricity Comparison Services
- For online business fuel comparisons, business energy comparison websites give you quick initial assessments of electricity suppliers, but generally do not include all suppliers.
- With brokers, some deals are not made available on public comparison tools, and to leverage the competitive supplier market, it is worth seeking a broker.
- Government-supported electricity comparison services ensure no commission bias towards the energy suppliers.
- The focus is on consumer protection rather than maximising referral fees earned from suppliers.
Negotiating better business energy deals
- Negotiating directly with a supplier may lead to better contract terms than their advertised electricity rates.
- If you can present multiple quotes, you will put pressure on suppliers and show that you are a serious buyer.
- When negotiating business energy contracts, annual use, terms of payment, and terms of contract length that suit your business should be considered.
- Identifying budgeting with your organisation will identify the supplier who will likely also offer better rates to businesses that might demonstrate long-term stability and growth.
Avoiding overpaying for electricity charges
- Following the expiration of a business electricity contract, suppliers often default to automatic renewals at the current rates.
- This sometimes represents the most expensive form of variable rate. It may be beneficial to set a calendar reminder to compare your options a few months before the contract automatically renews.
- Participating in Group Purchasing Initiatives could be a wise way for smaller businesses to access rates typically afforded to larger customers.
- An invoice might result in a lower average unit rate with only a few hours of commercial use per week.
- In many cases, local trade groups will combine purchasing as a cost-saving measure, and trust will be generated from the group.
Frequently Asked Questions
Q: What makes comparing commercial electricity suppliers different from comparing home electricity suppliers?
A: When comparing business electricity providers, you need to factor in demand charges, penalties for your power factor, and half-hourly pricing, which are irrelevant for domestic customers.
Q: How often should I compare commercial energy providers?
A: You should assess your energy supplier every year and compare each commercial energy supplier around three to four months prior to your contract expiring to avoid automatic rolling onto the higher default rate.
Q: Are the cheapest power suppliers in the UK the best?
A: Not always – very cheap rates could indicate poor quality customer service, hidden fees, or a financially unstable electricity supplier that could leave your business in the lurch.
Q: What is the difference between fixed rate electricity contracts and variable rate electricity contracts?
A: A fixed rate contract defines the cost and provides price certainty, but could potentially cost you more in your business energy bills initially. A variable rate contract could save you more money, but it exposes your business to fluctuations in market prices.
Q: Is switching to commercial electricity suppliers worth it for savings?
A: Yes – businesses typically save, on average, between 15% and 30% on their business electricity bill by switching from the higher default rate to the cheaper and more competitive market rate.
Conclusion – Choosing the Best Electricity Supplier for Long-Term Savings
When searching for the cheapest electricity suppliers for small business, it is important to weigh what your savings will be in light of service certainty and contract flexibility. When you compare total cost and not just headline cost, you can ensure the best value for your own specific priorities for your new supplier. Normally, a small business can continue to create savings from an ongoing market review and proactive contract management together with your energy comparisons, and often this can add up to significant savings whilst allowing the business to maintain its growth.
Here at Price Buddy, we know that navigating the competitive energy market can feel daunting, especially for a busy business owner. We simplify all of the complexities by providing comprehensive comparisons to help you understand the “total cost of ownership” for each of your supplier comparisons, not just their headline rates.
