Keeping overheads low is a big part of running a business, but with energy prices rising exponentially in recent months, this is becoming more and more of a challenge for business owners.
However, there are steps you can take to ensure that the energy contract you choose is the most competitive one for your business needs. By understanding the various aspects surrounding your energy contract, you can make smart and informed decisions which are in your business’s best interest.
What kind of contracts are available for businesses?
Securing the right contract type for your business is essential for avoiding overpaying on your energy. Generally speaking, there are two main kinds of energy contract available: a fixed tariff and a flexible tariff.
A fixed contract charges a set price per unit (kWh) for the duration of the agreement. This fixed price contract refers to the unit rate and standing charge, rather than the actual cost of energy use, which will change according to your usage.
Fixed contracts are hassle-free, and often offer the most affordable prices. You’re also protected from rises in wholesale prices, and fixed rate units make budgeting for energy use more straightforward. However, you’ll have to pay an exit fee if you find a better tariff elsewhere, and you’ll miss out on a better deal if wholesale prices fall. You could also rollover onto a more expensive plan if you fail to get another contract organised when your current one ends.
Flexible energy contracts or variable rate tariffs differ from fixed options as unit rates are tied to market activity. If market prices rise, you pay more, if prices fall, you pay less. This means it’s possible to benefit from reductions in wholesale energy prices, and you can leave any time without exit fees. However, there is always the risk that prices will rise – a risk that has seen fruition in recent months.
Choosing the right kind of contract for your needs
Time is of the essence when it comes to changing your energy contract. The sooner you move your energy to a cheaper tariff, the sooner you can start saving money. Business energy prices are constantly changing, so you need to strike while the iron is hot when you spot a good option.
But while speed is important, so is doing your research. Regular meter reading can give you a clearer idea of your overall business energy usage, showing you what to prioritise when choosing your next contract. Installing a smart meter or AMR device can provide even more accurate, up-to-the-minute data.
You should also ask yourself what you’re looking for when searching for a new contract. Is it simply a matter of lowering your prices, or are you hoping to avoid price hikes in the future, experience better customer service, or make your business more sustainable? Knowing your priorities gives you a clearer idea of what to expect from your new agreement.