Breaking Down Business Energy Contracts: Understanding Your Options

You have to break down business energy contracts in order to understand your options. There are different types of business energy contracts as options to choose from. Understanding these options will help you to make the best decision for your business. 

In order to meet the demands and needs of different industries and businesses, various business energy contracts were created. It is important to understand what each of these business energy contracts is and how they work. Each of them will have different pros and cons that will influence your choice. 

There are different utility brokers that can help you to choose the right business energy contract to meet all of your business needs. These brokers know how to compare providers so that you get the best possible deal for your business. Using a broker lets you focus on your business while they do the research for you. 

Different Types of Business Energy Contracts

There are five different types of business energy contracts. Each of them caters to different demands and requests that businesses might have. There are pros and cons attached to each type of business energy contract. 

Variable

This contract type is linked to market activity, meaning that your unit rate can increase and decrease throughout the duration of your contract. If the market price increases, so does your bill. It is difficult to calculate your bill based on usage if you’re on this contract. If your business isn’t opposed to risk, then it can benefit from when the market price falls. But it will need careful monitoring and planning from your side.

There are no exit fees. You’re not tied to a contract, so you can leave at any time. If the market prices are low, you will benefit from reduced business utility bills. Although, the energy market prices tend to rise over time, not fall. Budgeting for your energy bill is difficult when you don’t know how much it will be every month. Having to research the energy market the whole time takes time away from your actual business. You can switch to a different energy contract whenever you want.

Fixed

This type of contract charges a set price per kWh for the duration of your contract. This doesn’t mean that your monthly bill will stay the same, as only the unit rate and standing charge are fixed. The actual cost of your bill depends on average monthly usage. The contract type is hassle-free and affordable. 

With this contract type you’re protected from rising energy market prices, but you’ll miss out on better deals if the market prices fall. There is a wider selection of fixed-term energy contract deals. Typically, these contract types are the cheapest. Although, if you want to leave the contract early, you have to pay an exit fee. The automatic rollover at the end of the contract may also result in a more expensive deal.

Deemed

This contract type happens when your current tariff ends without switching suppliers or arranging a new deal. When this happens, your supplier will place you at their most expensive rate. It is advised that you try to find a new business energy contract as soon as possible. A deemed contract also applies when a business first moves into a new premise. Even though this contract is so expensive, they provide fair terms and conditions and have extra regulatory protections. 

Although there are no termination fees when exiting a deemed contract, the contract itself can be very expensive.

Rollover or Evergreen

When your current plan ends it automatically rolls over into a new one for the next term. This is why it is called “Rollover”. As a consequence, your new contract for the year could charge you higher rates. 

It’ll be easier to sort payments because you’re staying with the same supplier. Because there is no need to switch suppliers and find a good energy deal, it is hassle-free. Although, payments can increase as utility companies take advantage of businesses that don’t switch contracts or suppliers. If you want to leave the contract early there will be termination fees. 

28-Day

This is a rolling 28-day energy contract for businesses that haven’t switched since the energy market was deregulated. If you want to end this contract, only one month’s notice is needed. Its variable rates are subject to market fluctuations. When you exit the contract there are no termination fees. Unit rates can increase, meaning you’ll be charged more. 

Choosing Your Business Energy Contract

Business energy contracts are different from domestic energy contracts. They are usually longer, with contracts being in place for up to five years. There is usually no cooling-off period. It is important to make sure that you find the right business energy contract for your business. There are steps that you can follow to ensure the correct choice.  

Don’t waste time. If you know that your current business energy contract is close to ending, you have to start looking for new deals. If you see a cheaper deal, then you have to ask about switching as soon as your previous contract ends. The market process could have increased by the time your contract expires, and you could lose out on a good deal. If you wait too long, your current energy supplier could place you on a rollover contract, and your chance to get a better deal will be over. 

Determine what you want. Before you switch, you have to decide what you want from your new business energy contract. A fixed-term contract will provide you with stability and predictability. A green supplier will increase your business’s green credentials. If you know exactly what you want, you will find the right energy contract for your business.

Calculate your current business energy usage. Make sure that you have precise information about your current energy consumption. Take regular meter readings, whether it is a smart meter or a traditional meter. This will help you to negotiate the best new business energy contract. 

Use a utility broker. Instead of spending time away from conducting your business, you can employ a utility broker. A utility broker can search for the best deals and contracts for your business in your stead. This will also make the process less stressful for you because you know that an expert is handling the situation for you. 

Conclusion

This article breaks down business energy contracts to help you understand your options. The five different types of business energy contracts are Variable, Fixed, Deemed, Rollover or Evergreen, and 28-Day. The process of choosing your business energy contract is also explained. The functions of a utility broker are also briefly touched upon.