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Protecting your business against energy price rises

Energy prices are moving up

For any business owner, keeping costs down to a manageable level is crucial to the success of their company. Unfortunately, certain costs – such as energy, especially if you are on the wrong type of contract – offer little control over the price you pay.

Before Christmas, we saw a dramatic fall in wholesale energy prices that dominated the headlines for weeks. The assumption was that this fall in wholesale prices would have a knock-on effect on the prices that customers paid - but this assumption was only half accurate.

Not with the big six? You could be affected…

The way that suppliers purchase their energy varies depending on their size. As such, we saw smaller suppliers passing savings onto their customers much earlier than the big six. This is because larger suppliers, such as British Gas, purchase large quantities of energy months in advanced. This meant any savings that these larger suppliers experienced would be delayed in being passed on to their customers. Smaller suppliers on the other hand, purchase wholesale energy over much shorter terms, and can therefore pass savings on to their customers much quicker.

Customers of the bigger suppliers have only just begun experiencing the benefits of the lower energy prices caused by the fall in wholesale prices at the end of last year. On the other hand, customers of smaller suppliers have been enjoying lower energy prices for some time, but these are likely to begin rising again based on past trends and other factors external to the energy market.

If you are a customer of one of these smaller suppliers, and you’re concerned about energy prices rising in the coming months, it’s recommended that you switch to ensure that any imminent price increases don’t have a negative impact on your business’s ability to operate.

It may be the case that you are unable to switch, because you’re not within your contract’s renewal window. If this is true for you, you can explore additional ways that you can protect your business against energy price rises below.

Choose your contract carefully

Being on the right tariff type for your business can go a long way in helping to protect yourself from energy price rises.

There is not just one type of tariff out there for small businesses, and unit rates, perks and drawbacks can vary between energy plans. The contract an energy supplier will offer to you can vary depending on your consumption habits, the country that you live in, as well as the supplier themselves. But regardless, you should consider the different options carefully, and weigh up the pros and cons.

Some of the tariffs that you may come across include:

  • Fixed rate tariffs – This means that the rate you pay is fixed for a given period of time. Fixed tariffs can be beneficial – particularly if you find a cheap unit rate – as you can secure the price you pay, making you immune to price rises. But, there’s a chance that the price of energy could drop while you are on a fixed tariff, meaning you’d be unable to benefit.
  • Variable rate tariffs – On a variable tariff, the price you pay for your energy changes with the market, and could increase or decrease at any given time. This can be great if market prices drop, as your energy will be cheaper as a result, but if they rise, you will be stuck paying those rates.
  • Feed in tariffs – These tariffs apply to those who have the facilities to generate their own energy. They allow you to combine the energy that you produce with energy from the grid – and can even give you the option to sell any excess energy back.

Know the market

If you want to keep your business afloat when it comes to energy, you should make sure you have a good understanding of the energy market and how it works. With a good working knowledge, you’ll be able to make the most of good opportunities and deals when they arise, and make educated choices.

For example, if you have a larger-sized business that has a high consumption rate (what constitutes ‘high consumption’ is often supplier-defined), then you may be able to get better rates for your business energy than those who consume less.

If you are a high energy user, it may be worth considering hiring an account manager to take care of your business’s energy for you, to make sure that you’re always getting the best deal and making informed decisions. Sometimes, energy suppliers will appoint an account manager for you – which could be another factor to include in your choice of supplier and energy deal.

Take advantage when you can

The energy market is more often unfavourable for energy consumers than it is advantageous, and so when there’s a good deal on the market, you should take it if you can. For example, if the price of energy is particularly cheap around the time you are looking for a new supplier or deal, then you should consider buying in bulk. You may be able to pay one, up front lump sum for one year’s worth of energy, for example. It’s worth noting that the option to buy in bulk may only be available to businesses that consume over a certain threshold of energy.

This can give you all the benefits of have a fixed rate tariff, without the drawbacks of being tied into a long term contract. Even if it may seem like quite an investment, it could well be one worth making, so take the time to crunch the numbers and see if it is at all possible for your business.

Generate your own

This may not be a feasible option for all businesses – especially the smaller ones that may not be able to afford investing in sustainable energy technology – but it should still be considered all the same.

If your business can dedicate funding to invest in renewable energy technology – such solar or wind power – then you could reap the benefits for years to come. Some business owners that have taken the renewable-energy-plunge not only generate enough energy to power their businesses – meaning that they no longer have the overhead cost of buying energy from a supplier – but they actually generate an excess of energy, and sell it, creating another revenue stream for the business.

Feed in tariffs are widely available from suppliers all over the world, and are almost always a good way to reduce the cost of energy, and protect against future price rises and market fluctuations.

Though there may be no guaranteed way to safeguard your business against a changeable and somewhat erratic marketplace, such as the energy market – there are steps you can take to lessen the impact of price rises and other changes. Taking the time to learn about the energy market your business is involved with, keeping up to date with energy news, and having a good understanding of your business’s energy needs can make a huge difference in the way you approach your gas and electricity bills. It’s also a good way to help you choose the energy deals you want your business to be on, and can even ultimately affect the amount that you pay.

Remember, for more information on what deal is the best fit for your business energy, call Make It Cheaper on 0800 970 0077, where our savings experts are waiting to advise and switch you on to a better deal.