Business energy contracts set the price you pay and the terms of your energy supply. They can last for months or years, so it is important to understand the deal before you agree to it.
The cheapest-looking rate is not always the cheapest contract. You also need to check standing charges, other costs, contract length and what happens when the deal ends.
Check Your Current Contract
Before comparing new deals, check what you already have. Find your unit rate, standing charge, contract end date and any rules about leaving or changing supplier.
You should also know roughly how much gas or electricity your business uses each year. This makes it much easier to compare quotes fairly.
Fixed or Variable?
A fixed-rate contract gives you more certainty because the agreed energy rates are fixed for a set period. However, this does not mean your bill is fixed. If you use more energy, you will normally pay more.
With a variable-rate contract, the rate can change. Your costs could fall, but they could also rise, so check how and when the supplier can change the price.
Whichever type you choose, make sure you know what is included in the quoted rate.
Deemed Contracts
A deemed contract can apply when your business uses energy without having agreed a contract with the supplier.
This often happens when you move into new premises. The existing supplier continues to provide energy, but you have not yet chosen a deal.
Deemed rates can be expensive, so contact the supplier and check your options as soon as possible.
When a Contract Ends
Do not wait until the last minute to think about your next contract.
Depending on your circumstances, you could move onto different rates if your existing deal ends without a new arrangement in place. These are often called out-of-contract rates.
So, record the end date when you agree to a contract and check your options in good time.
What Affects the Price?
Business energy prices can vary from one business to another. Your quote may depend on how much energy you use, where your premises are, your meter and supply type, when you use energy and the length of the contract.
Market prices also matter. As a result, a quote available today may be different from one offered at another time.
Larger businesses can have more complex pricing, but the basic principle is the same: compare what the contract is likely to cost your business overall.
Compare the Whole Cost
The unit rate is the amount you pay for each kilowatt-hour (kWh) of energy. The standing charge is normally a fixed daily amount.
Both matter.
For example, a contract with a lower unit rate could have a higher standing charge. That may still suit a business using a lot of energy, but it could be less attractive for a small site with low use.
Other charges may also apply, so compare the expected total cost rather than one attractive figure.
Compare Like With Like
When comparing quotes, use the same annual energy use for each one.
A simple starting point is:
Annual energy use × unit rate + standing charges + other costs
Also check whether each quote treats VAT and other charges in the same way.
This makes it much easier to see which deal is actually cheaper.
Think About Contract Length
A longer fixed contract can give you greater certainty because you know the agreed rates for longer. However, you may also be tied to those rates if the market changes.
A shorter deal lets you review your options sooner, but the next contract could cost more or less.
There is no ideal length for every business. The important point is to understand what you are committing to.
Check Before You Agree
A business energy contract can be agreed in several ways, including over the phone. Do not assume a telephone conversation is only an informal quote.
Before saying yes, make sure you know the price, contract length, start and end dates, and whether any charges can change. You should also understand any fees and what happens when the contract ends.
If something is unclear, ask before agreeing.
Do Not Rely on a Cooling-Off Period
Do not assume you can agree to a business energy contract and simply cancel it a few days later.
Business energy contracts do not generally come with the cooling-off rights people may expect from some consumer purchases.
So, check the deal carefully before you agree to it.
Using an Energy Broker
An energy broker can help you find and arrange a business energy contract. This may save time, but you still need to understand the deal being offered.
Ask which suppliers the broker compares and how the broker is paid. Also check whether commission is included in your energy price or whether you will pay a separate fee.
A broker may provide a useful service, but do not assume the service is free simply because there is no separate bill.
Check What a Broker Can Do
A broker may ask you to sign a Letter of Authority, often called an LOA. This can allow the broker to get information or deal with suppliers for you.
Read it before signing.
In particular, check what the broker is allowed to do, how long the authority lasts and whether it allows contracts to be agreed on your behalf.
Moving Premises
If your business moves, contact your existing supplier and take final meter readings.
Then take opening readings at the new premises and find out who supplies the property. You may initially be on a deemed contract until you arrange your own deal.
Do not assume your old energy contract automatically moves with you.
If Your Energy Needs Change
Your energy use can change during a contract. Longer opening hours, new machinery, electric heating or EV chargers could all increase demand.
This may increase your bills even when your rates have not changed.
Large electrical changes can also affect the amount of power your premises need. We explain this separately in Supply, kVA and Maximum Demand.
Keep Your Records
Keep copies of your contract, quotes and important emails or letters. If you use a broker, keep the broker agreement and any Letter of Authority too.
Also record the contract start and end dates somewhere your business will notice them.
Good records make it easier to compare future deals and deal with any problems.
If Something Goes Wrong
If you think your supplier or broker has made a mistake, gather your records and raise the problem with them.
Keep copies of bills, contracts and messages, along with notes of important phone calls.
The protections available can depend on the size and type of business, so check which rules apply to you if the problem cannot be resolved.
Before Choosing a Contract
Start with three things: your current contract, your annual energy use and your contract end date.
Then compare the full cost of each offer rather than focusing on the lowest unit rate. Check the contract length, what can change, any broker costs and what happens when the deal ends.
Most importantly, make sure you understand the agreement before you accept it.
Key Points
- Know your current contract and annual energy use.
- Compare the full cost, not just the unit rate.
- Check what is fixed and what can change.
- Record the contract end date.
- Do not rely on having a cooling-off period.
- Check how any broker is paid and what they can do for you.
- Keep copies of contracts, quotes and important messages.
Important Information
Energility provides general information to help you understand energy, household and business costs, services and ways to save money. It is not financial, legal, tax, technical or professional advice.
Prices, tariffs, grants, government schemes, regulations and other information can change. Costs, savings and calculator results are estimates and your actual results may be different.
Before making an important financial decision, signing a contract or carrying out significant work, check the latest information and consider getting advice from a suitably qualified professional where needed.
Energility may receive a commission or other benefit from some links or services. Where this applies, we aim to make it clear. This does not increase the price you pay unless stated otherwise.
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