Is your business paying too much for energy?

Author
Jason Smith
Owner | Businesselectricityprices.org.uk
6th January 2017

Although TV and radio bombard us with messages to switch our home gas and electricity bills, plenty of us don’t do anything about it. The same goes for businesses. Research and face-to-face conversations tell us that it just takes too much effort to do anything about it.

But did you know that if you’ve never switched tariffs, you could actually cut your bills in half by spending two to three minutes of your time investigating your options?

First, some facts:

  • A whopping 63% of businesses don’t intend to switch tariffs in the coming year, with one third of that percentage thinking their current prices are just fine
  • 43% of businesses believe competition is limited in the market
  • 65% of businesses invest time and money in energy efficiency measures

The last bullet point is important to discuss. Although energy efficient programmes use less fuel, meaning lower bills and less waste of natural resources, the ROI on these schemes is lower than simply switching your supplier.

While it’s good to note companies are taking their environmental duties seriously, a typical programme run well only reduces consumption by approximately 10-15% after many months of investment and organisational change.

However, a business that let their contract automatically renew last year could save 50% on their current rates in just a few minutes.

What can South West businesses do to lower their energy costs?

1. Check prices on an annual basis

Businesses should always check the current prices three months before the end of their current contract. They can do this themselves or use the services of an energy broker (such as my company). Brokers don’t charge for their services and will perform pricing checks automatically on your behalf, so you don’t need to remember when your contract is up for renewal.

Other options to check your own prices include:

  • An online comparison site, which usually shows the top five options
  • Entering your details into each energy provider’s sites one by one
  • Telephoning each company for their prices

Usually, your current provider won’t give you a new quote, as you’ve probably already received their renewal offer. That’s the price they’ll offer you, unless you try to negotiate a cheaper one.

2. Manage contract terminations and switch to cheaper rates

As all standard business tariffs are written into legally binding contracts. You’ll actually need to formally cancel your current agreement before moving onto a new one.

This is easy to do. Simply post or email a termination letter to your current provider. Here’s an example letter. Your energy broker can do all of this for you.

You can’t cancel over the phone or via your online account. It must be done in writing (or email). If you don’t follow the process, you’ll end up with even higher rates—see the pitfalls below.

3. Check that you have the right meter in place

Larger businesses with one meter type should investigate whether changing to a day and night tariff could save them more money. Electricity is cheaper at night, but you need a different meter type to take advantage of those savings. If your company uses electricity at night, and you only have one tariff rate, then make the change with your current supplier.

Even smaller businesses can take advantage of a meter swap. The current government rollout of “smart meters” enables the user to use their consumption data for further analysis. They also receive more accurate bills, because the new meters are read automatically. Many suppliers will offer the swap for no charge. Ask your supplier about a smart meter to make the change.

The hidden problems in the industry

The contract termination process could land you with extremely higher prices that falls into two main areas:

1. Rollover and renewal contracts

If you don’t terminate your current contract and let it lapse, then the prices from the start of the new term are increased. These increases vary by supplier, but could be up to 70% higher than your current tariff. Then each year, they escalate again.

Once you’re in a rollover window, you are able to change supplier without any penalty. (Previously, you would be tied in for at least another year, but all the suppliers outlawed this particular practice). Renewal rates are similar. If you accept renewal rates, you’re under contract for at least one additional year. You should never accept any renewal offer due to the high charges.

That’s why many of the comparison sites have headlines like “Savings of 60% or More.” Those savings are real if you’ve never done anything about your contract.

2. Out of contract rates

The real pain comes if you actually terminate your contract, but then do nothing about a new agreement. Immediately, you’ll fall into the most expensive rates. You should be contacted about this change, but don’t rely on any communication. You should sign on to a new business electricity contract immediately. See examples of out of contract rates from a recent renewal letter.

Takeaways

Always compare your options before you let your current contract renew. It’s easy to do nothing, but that’s going to cost your business dearly. With the average gas and electricity bill for small businesses running at approximately £3,000 per year, a 60% saving soon adds up. Those savings drop right into your profits as well.


About the author

Jason Smith runs the operations at Businesselectricityprices.org.uk (BEP) helping small and large businesses keep their energy costs low. Follow BEP on Twitter: https://twitter.com/B2BEnergyAdvice.

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