Five tips for paying as little as possible for business energy
How you can avoid paying more than necessary for an unavoidable business cost
Keeping costs to a minimum is crucial to the success of any business, but you have little or no control over some overheads - business rates and vehicle fuel being prime examples. In a sense, energy bills fall into that category, because we can do very little about the fact that prices seem to keep going up with alarming regularity.
However, you need to be aware that you are nottotallypowerless to affect this cost, in the sense that you can take measures to ensure you are paying the minimum amount possible.
Failure to do this can often mean paying 30 per cent more than necessary, which - depending on the nature of your business and the amount of energy you use - could amount to thousands of pounds eating away at your annual profit figure.
1. Know how much you should be paying - 10p is too much
To identify whether you should be paying lessright now, you first need to dig out a recent bill or contact your supplier and find out your unit rate. The current rule of thumb is this: 10p per kWh is too much for electricity; 4p per kWh is too much for gas. A higher unit charge also tends to go hand in hand with a higher daily standing charge.
Energy suppliers will not be proactive about prompting you into action because thelast thingthey want to do is let you know you're free to shop around.
2. Understand your business energy contracts - are you a rollover victim?
Commercial contracts are fundamentally different to standard domestic arrangements firstly because there is no such thing as a 'dual fuel' tariff in the business energy world, so gas and electricity are always separate. Crucially, too, they are almost always fixed for a period of one, two, or three years.
This means you generally have two contracts that come to an end on a fairly frequent basis. When that happens, business customers roll over on to the supplier's standard rate unless they take proactive action. This is the reason why many businesses are overpaying by that 30 per cent mentioned above.
3. Know when your renewal window opens - don't suffer from rollover again
It's easy to fall into the "rollover" trap because knowing your contract end date (CED) is one thing, but knowing when your 'renewal window' opens is another. This varies from supplier to supplier (ie it's not a standard four weeks leading up to your CED, for example) - and it's your only opportunity to negotiate a new contract, whether that's with the same supplier or a new one.
4. Suppliers love yourinertia- the onus is on you (not the supplier)
Energy suppliers will not be proactive about prompting you into action. CEDs are not published on all your bills and you'll generally only get one letter that informs you that your renewal window is set to open. The reason for this half-hearted approach is that the supplier is happy for you to roll over onto a standard rate - thelast thingthey want to do is lose your custom by being overly assertive about the fact that you're free to shop around.
We've been lobbying the industry regulator Ofgem for some time to put pressure on suppliers to make CEDs more visible. Measures are slowly creeping in, but until there's full compliance you'll have to be fully engaged to know when to act.
5. Switching services support yourengagement- there is help out there...
Using a switching service for your energy supply can be extremely beneficial because, unlike the supplier itself, a switching service actuallywantsyou to take action at the right time. This means they will do everything possible to make sure you do not roll over onto inflated rates. The solution may be to set up a new fixed-term contract with your existing supplier but, because a third party (unlike the supplier) is totally impartial, it could also mean switching. During your renewal window you are completely free to shop around, and there is absolutely no chance your gas or electricity supply will be interrupted due to a change of supplier.
There are six major suppliers - and at least six smaller ones - competing for your business, so recruiting a service that offers knowledge of thewhole marketalmost inevitably leads to an energy deal you're happy about.
Image credit: HowardLake
Jonathan Elliott is Make It Cheaper's CEO and founder. He recognises that small businesses are the lifeblood of the British economy, and is passionate about making it easy for them to save time and money, boost their profits and improve prospects for growth. As a vocal campaigner for fair treatment of SMEs by utility companies, Jonathan collected ‘SME Consumer Champion’ & ‘Most Trusted’ at the 2013 Energy Live Consultancy Awards.