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What is Cheaper? Business or Domestic Electricity?

Friday, August 6th 2021

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Most UK businesses have restructured their operations due to the impact of COVID-19 over the past 18 months. As part of this restructure, business electricity contracts should be checked to ensure your business is still getting value for money. 

The first step in finding savings on overheads is to understand how you currently pay for business electricity. In an economy which is recovering from the pandemic, new business owners may have wondered if business electricity is cheaper than domestic electricity.

As we’ve discussed in the past, if it’s been a while since you last switched business electricity contracts, you are likely to find significant energy savings by switching your energy supplier. 

How much are business electricity rates?

Typically, business electricity is cheaper than domestic electricity. However, this may not always be the case. 

With business energy contracts, customers are tied to the contracts, unlike with domestic energy. You can only cancel your current business energy contracts if you reach your end date or move business premises.

What will happen when my business electricity contract expires?

As many as 50% of small businesses are on rollover contracts, often forgetting to renew their contracts within their renewal window. Rollover contracts are typically 80% more expensive, which could significantly increase your overheads if your business has not renewed.

In terms of the difference between the energy itself, and its supply to homes and businesses, there is no discernible difference in the commodity. However, energy suppliers will differ in their rates for energy between domestic and commercial energy consumers.

To help you determine whether you should switch to a different energy contract, it is important to know how your business uses electricity, as well as the different options available to you from suppliers.

We will help you identify the areas in which your business can select the best contract for your individual requirements, and we’ll focus on how you can make the most of any potential savings that new business energy contracts can offer.

How much do businesses typically pay for electricity?

According to the Department of Business, Energy and Industrial Strategy, non-domestic energy consumers spent the following on their energy:

Very Small Businesses: 17.16 pence per kWh

Small Businesses: 15.43 pence per kWh

Small/Medium Businesses: 14.33 pence per kWh

Medium Businesses: 13.22 pence per kWh

Large Businesses: 12.92 pence per kWh

Very Large Businesses: 11.82 pence per kWh

Extra Large Businesses: 11.77 pence per kWh

-Average for all businesses: 13.48 pence per kWh

Is business energy cheaper than domestic energy?

To contrast the 13.48 pence per kWh paid on average by all UK businesses in 2020, the average UK household paid 17.37 pence per kWh.

It’s clear that cost savings for energy can be made for businesses who understand their energy requirements, but finding the best tariff for your business will require knowledge of the different variables which are stipulated in energy contracts from suppliers.

How are business electricity contracts different?

Firstly, businesses have an option to secure either fixed or flexible energy contracts. Subject to the energy market, flexible contracts will fluctuate in price at various points throughout the contract. Fixed contracts, however, will apply the same rate throughout the term of the contract, irrespective of energy market fluctuations.

Both models have their advantages, but the best approach for your business will depend on a range of factors.

For example, a fixed energy tariff will work best for a business that wants predictable energy costs and the ability to budget for overheads ahead of time. For businesses with consistent energy consumption, a fixed energy tariff will ensure that your energy bills will be roughly the same each month.

On the other hand, a flexible tariff ensures that businesses are able to take advantage of the energy market when prices drop, but can pay higher rates if the market then rises. There are inherent risks within flexible energy contracts, but the largest cost savings will depend on a business’ appetite for risk.

It’s important to note that businesses typically consume more energy than the average domestic consumer. Therefore, being smart about signing with the right supplier on the right contract can lead to significant annual savings.

What are time-of-use tariffs?

A time-of-use tariff means that you pay an off-peak rate during certain hours, and a more expensive tariff during the rest of the day.

If your business operates outside of traditional business hours, or has the capacity to perform energy-intensive tasks during off-peak hours, you could save on your electricity bills by opting for a tariff plan that allows you to take advantage of your working hours.

However, the downside to time-of-use tariffs is that any energy consumption taking place during peak times will carry a heavier cost, and operating appliances or machinery could diminish any cost savings made.

It’s important to fully understand your energy consumption before opting for this tariff so you aren’t caught out by unexpected charges. Installing a smart meter or a cloud-based energy monitoring solution will give you full oversight of your business energy patterns, which will help simplify the process of switching to a time-of-use tariff.

Which other factors contribute to my business electricity prices?

There are many factors which will determine the price that you pay for business electricity. For example: 

Type of business: any business that runs outside of peak hours is likely to be offered a lower price for their business electricity from suppliers.

Geographical location: cheaper energy tariffs are usually found in major cities due to scale.

Credit rating: the greater your credit score, the more likely a supplier will offer you a cheaper tariff.

Business size and consumption volume: the more energy that your business uses, the more likely you are going to be able to negotiate for a price that suits you.

Contract length: in some cases, business energy suppliers will offer cheaper prices for longer term business electricity prices.

How can I find the right energy supplier for my business?

Finding the right business energy supplier can be daunting, especially in a competitive energy industry. 

Before signing a new contract, you may want to consider bundling your gas and electricity through one supplier for convenience. Additionally, if your corporate social responsibility strategy requires improving your carbon footprint, you may want to look for green energy. 

The key to understanding which supplier is suitable for your business is to look at your own business electricity behaviour. This will help you make the most of your energy contract to maximise savings.

Finding an energy partner with industry expertise and excellent supplier relationships is the best way to ensure you optimise your business energy supply.

Find an expert business energy partner

One of the best ways to save money on your energy contracts is to find an independent energy consultancy that can connect you with the most appropriate business supplier for your business.

At BusinessEnergyQuotes.com, our team of experts will help you find energy deals that cater to your specific business circumstances, and help you save money in the long run.

Our Services team is also on hand to help you understand how you’re currently using your electricity, and can identify areas where energy is not being used efficiently.

Part of Northern Gas and Power, the UK’s largest energy consultancy, we have helped over 20,000 businesses take their first steps towards net zero carbon goals – and provided insight into how technology can revolutionise and optimise workflows.

Contact us today to find out more about how our business can save you money. 

FREQUENTLY ASKED QUESTIONS

Are business electricity rates cheaper than domestic electricity rates?

Though there are a number of different factors to consider, generally, businesses will pay less for electricity than domestic consumers.

Whilst unit rates are typically more expensive for domestic consumers, they are not subject to price fluctuations or VAT charges. 

What’s a good price for business electricity per kWh?

The price of your business electricity per kWh will depend on the type of business you operate. 

In 2020, extra large businesses spent over 5 pence less per kWh than very small businesses.

Small businesses should look to pay below 17 pence per kWh, according to the latest figures from 2020, while extra large businesses could find deals as low as 12 pence per kWh. However, the market remains volatile and is constantly subject to change.

How do I change my business energy supplier?

You can move onto a new contract 120 days before the end of your current one.

If you are ready to switch business energy suppliers, head to BusinessEnergyQuotes.com and browse within ten seconds for your new, cost-saving gas and electricity contract.

All you need is your postcode or meter number and your monthly spend and current contract end date to see a raft of the best deals in the UK.

We’ll do the hard work, finding the best rates for your business by comparing quotes among 21 trusted business energy suppliers to ensure you get the best prices. Once you’ve found the best supplier for you, we’ll confirm the switch with your current and new energy supplier so that your service is uninterrupted. We do the work, you remain in control!

Need help choosing a plan, or want to make an enquiry?

We are always available for any help and assistance you may need, or to answer any queries. Give us a call, or if you prefer email simply use our form.

Call us on: +44 (0)330 0300 200