Variable business energy rates

There are a number of reasons why you could be overpaying, such as letting your old energy contract expire without arranging a replacement, and not switching to the best deal available.

What types of business energy deals are available?

Different businesses have different demands. As a result, there are different types of energy tariffs to meet these varying needs. Business energy fixed tariffs and business energy variable tariffs are the two main types of energy deals:

• Fixed-rate contract – A fixed-rate tariff sets the cost per unit (kWh) that you pay for your energy for the duration of the contract.
• Variable-rate contract – Business energy variable tariffs mean that your unit rate is linked to market activity and can increase and decrease throughout the duration of your contract. It’s more difficult to calculate your bill through usage on business energy variable energy tariff rates.

Whether you’ve signed up for a fixed-rate contract or you’re on business energy variable energy tariff rates, it’s important to keep your eye on the ball. If you let your current deal end without switching or agreeing to a new one, you could find yourself on a less competitive type of contract.

• Deemed rate tariff – Deemed rates are similar to out-of-contract rates, but are used by suppliers when a business moves into new premises without signing a new contract. These are more expensive than fixed rates, but you can switch by giving 28 days’ notice.
• Rolling contract – A rolling contract ties you into a new, year-long contract at higher rates. You can sometimes negotiate a new contract on blend and extend terms, which allows you to agree to lower rates by signing up for a new long-term contract with your current supplier. These new rates are usually not as competitive as others you could find elsewhere on the market. Rolling contracts aren’t as common as they used to be, but you should always check the terms of any contract you sign and keep an eye on its end date. 

Whatever the size of your business, you’ll know that cutting costs is vital to its success. The extra charges incurred with over-priced tariffs add up month-on-month, depriving your business of money that could be better spent elsewhere. It’s important to move to a cheaper contract as soon as possible.

Should you switch to a variable-rate energy deal?

Which is better, business energy variable tariffs or fixed-rate tariffs? It all depends on the individual circumstances of your business.

On a fixed-rate contract, your business is guaranteed to pay the same amount per kilowatt hour for the duration of its contract. This means that you can estimate in advance how much you have to pay for energy each month, making planning your business’s finances much easier. 

While this will protect your business from rising energy costs, if prices fall, you won’t be able to take advantage of cheaper rates unlike customers on the best business energy variable rates. Fixed-rate contracts usually charge large penalty fees to end contracts early – that’s if you’re allowed to leave your deal early at all, as many commercial contracts don’t offer this option.

Variable business energy tariffs, on the other hand, allow for more flexibility. Generally speaking, if you can identify that there’s a downward trend in energy prices, then the best business energy variable rates will allow your business to profit from it. Temperatures, supply and demand and weather conditions can all affect business energy energy tariff rates which can go up and down each month.

Even with the best business energy variable rates, there’s a level of risk involved so it’s important to assess whether your business’s finances are strong enough to weather rate rises. Unlike fixed-rate deals, the best variable rates usually don’t employ cancellation fees for terminating contracts early.

What happens when your business energy contract ends?

If you don’t arrange a new deal when your current energy contract expires, you’ll be pushed onto a more expensive tariff until you can cancel your initial contract and renegotiate a better deal.