Different Business Energy Contracts
Business energy contracts vary to suit different needs, objectives, and budgets. With energy costs on the rise due to market factors, it's crucial to secure the best deal. Comparing business gas and electricity prices by looking at average rates can also be a smart move to ensure you're getting a competitive offer.
We are here to simplify the understanding of various energy contracts, helping you find the right one for your business. We'll explain what energy contracts are, discuss the main contract types, and guide you on where to discover business energy deals and cost-effective options.
Different Energy Contracts Available
Various types of business energy contracts are available, including the following ones.
Deemed and out-of-contract Tariffs:
When your business energy contract ends, you might be automatically placed on deemed or out-of-contract rates. The same happens if you move to a new business location without a contract in place.
These rates are typically much higher than what you paid on your previous contract, so it's essential to switch to a new deal promptly. Deemed rates can change at any time as decided by the supplier, while out-of-contract rates are usually fixed for the contract's duration.
To avoid these high rates, make sure to switch to a new contract before your current one ends. You can contact your energy supplier or can compare tariffs online to make this transition smooth.
Fixed Tariffs : With fixed-term contracts, you get a consistent price for each kilowatt-hour (kWh) of energy you use, regardless of market fluctuations. This stability can simplify your business energy budgeting, as you'll always have a clear idea of your expenses. These contracts generally span two to three years.
Yet, because you're committed to a fixed price, you might end up paying more if energy prices drop during your contract. Exiting the contract early could also entail a fee.
Variable Tariffs : In the market of energy, "variable" relates to the price you pay. A variable contract means that your monthly energy cost can change, following the wholesale prices of gas and electricity. In simple terms, it's connected to what's happening in the energy market.
For those with a variable contract, it's vital to grasp how the wholesale energy markets operate. The two primary types of variable contracts are pass-through contracts and fixed-price contracts.
Pass-through contract :These contracts move in sync with wholesale energy prices. When prices rise, your bill goes up, and when they fall, your monthly payments decrease.
Fixed-Price Contracts :A fixed-price contract protects you from price hikes because the rate you pay for each kWh remains constant for a set time, typically one or two years. This assures that even if wholesale prices surge during this period, your bill stays the same.
Rollover :Rollover contracts are quite common in business energy. With this type of contract, your existing supplier automatically renews your agreement when the fixed term ends.
It can be hassle-free if you prefer not to search for a new supplier. However, it's important to know that this might not always get you the best deal. Before committing, carefully review the contract terms, as some suppliers may extend your commitment beyond your initial agreement.
For micro businesses, rollover contracts typically won't last more than 12 months.
How will You get the best contract for your business?
To find the best business energy supplier for potential cost savings and improved services, follow these steps.
Research and compare suppliers, review your current contract, request a customized quote. Compare offers, make your decision, utilize the cooling-off period if needed, provide a final meter reading, and enjoy a smooth transition, which takes about 21 days with no energy supply disruption. Regularly monitor your bills to ensure they align with your new contract's terms and pricing.