Running a business means getting acquainted with lots of new things, the most confusing of them all is business energy. There’s no difference between the power that runs through your plug sockets at home and then power that turns on your computer at work. Instead, the differences can be found in the pricing structure and contract details. You’d be forgiven for thinking that energy is energy, so you should pay for it in the same way as you do at home, but there are some important differences you need to be aware of. Follow our helpful guide below, and if you’re still unsure, simply get in touch with a member of our team, and they’ll happily talk you through the key differences.
Domestic energy contracts will quite often be rolling contracts, which means if you move house, you can either take the contract with you or take up a new contract in your new home. Business contracts will almost always come on a fixed-term contract, usually lasting one, two or three years. Energy companies have been naughty in the past and automatically rolled their customers onto lengthy contracts, but that practice is slowly starting to change.
When you agree to a domestic energy contract, particularly if it’s fixed term, you will be given what is known as a ‘cooling off period’. This is usually around 30 days, and during this time you will be able to cancel your contract without any cancellation fees if you change your mind. With business energy, there is no cooling off period, as business customers are considered to be more clued up on the terms. Therefore, it’s important to make sure you fully understand the terms of your contract before accepting it.
Business energy prices are always fluctuating, as they are linked to wholesale prices. Your energy price may change daily, but the overall energy price will usually be lower than domestic energy because the suppliers buy it at a wholesale price. Domestic energy usually costs more, but the price will only change once or twice a year. The key difference in pricing is down to the way the energy is supplied: domestic customers are linked to the same price as everyone else in their region, so negotiating for a better price isn’t an option.
Although business energy might be available at a lower cost, there are additional charges which domestic customers do not have to pay. While domestic customers pay VAT at a rate of 5%, business customers pay 20% VAT. Another charge to consider is the Climate Change Levy, which is currently charged at £0.47p/kWh for electricity and 0.164p/gas.
Overall, business customers tend to save more money on their energy because of their buying power and ability to negotiate low rates for a fixed period. However, there are additional charges that domestic customers do not have to pay. If you’re still unsure about how business energy works, get in touch with a member of our friendly team today and they’ll guide you through the important steps.