If you’re new to running a business or you’re thinking of starting one then a massive component you have to consider is your energy. Who will you choose as your supplier? How much will it cost? And how does it differ from my energy at home?
This is a quick-fire guide to help you compare business energy with domestic energy.
Whilst there are many small differences between business and domestic energy, the two main differences are the VAT you pay and the fact that businesses can’t get their gas and electricity supply under the same deal.
Domestic energy users only have to pay 5% VAT on their usage, whereas businesses have to pay 20% VAT. This is because businesses earn more than households, although knowing that doesn’t make it any easier to accept as a business owner.
Domestic energy users also have the advantage of having a dual fuel tariff – when they buy both gas and electricity under one contract - if they wish. Dual fuel tariffs are often cheaper than getting separate gas and electricity deals. However, businesses can’t get dual fuel tariffs, which means two bills, not one.
All is not lost though because historically business owners stand to save more on their energy than domestic users. As long as you understand there is a difference between business and domestic energy then the battle is already halfway won. Now you just have to spot the differences.
Domestic energy prices are more stable due to suppliers buying their energy in long-term blocks. The amount you are charged is based on your geographical location and sometimes by your form of payment, for example by direct debit.
Business energy prices change more frequently due to fluctuations in the wholesale energy market. They also vary based on individual companies’ approaches to commercial risk. The price you pay will be based on your location, business type, contract length and some other factors like your credit score and demand profile.
Domestic energy users are not subject to any charges. Businesses will be subject to the Climate Change Levy, renewable obligations and other charges. Don’t worry though - your suppliers will include these levies in the prices you’re quoted. It’s just nice to know where your money is going.
Business contract lengths can vary from 1 month to up to 5 years. When you get a business energy deal you won’t get a cooling off period, as you are deemed to be in a position to enter contracts willingly with full knowledge of the terms and conditions. So, you need to be careful when you compare business energy deals, as you won’t be able to get out of your contract early. You stay for as long as your contract is valid and the price you pay is fixed.
Domestic users can have 1-month long rolling contracts, but most energy suppliers offer fixed contract periods. Having a cooling off period is common for domestic users to stop customers from entering a contract that isn’t right for them. Prices are variable – they change month to month – unless you have a contract. Then they become fixed. You also get the option to leave anytime during your contract but you have to pay an exit fee, which is normally a months charge plus extra.
Now you know the key differences, it’s time to get an energy deal. Make sure that you shop around for a business energy deal that’ll benefit you. Energy comparison sites like usave are a must. We make the process simple for you and we are committed to helping you find the best business energy deals available.
Don’t just take the offer as you see it. Haggle. Try ringing the energy supplier directly. See if they’ll give you a better deal by mentioning a better price from a direct competitor. Suppliers love undercutting each other so it can’t hurt to try.