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Choosing a business energy tariff
Choosing the right business energy tariff is essential for managing costs for your business.
Businesses that don’t actively choose the right business energy tariff can pay enormously expensive out-of-contract rates. Shockingly, these out-of-contract rates can be over twice as expensive as fixed-rate tariffs on offer on the market.
The key decision for small business owners when comparing business energy quotes is choosing between a fixed or variable tariff.
What is a business energy tariff?
A business energy tariff is a contractual agreement between a business and an energy supplier. An energy tariff tells you how much you’ll pay per kWh used and how much your daily standing charge will be during your energy contract with your business energy supplier.
Here are the key parts of a business energy tariff:
- Unit price – Defines the cost of each kWh of energy supplied; this can either be a fixed price or a variable rate that changes with market conditions.
- Standing charge – A fixed cost, in pence per day, for the supplier maintaining a connection to the mains.
- Term – The time in months or years the tariff will remain in effect.
Which business energy tariff should you choose?
The key decision for small business owners when comparing business energy quotes is choosing between a fixed or variable tariff.
Fixed Energy Tariff
In a fixed energy tariff, the cost for each kWh of electricity or gas during your tariff will be fixed, typically for one to three years.
Variable Tariff
A variable tariff will change based on wholesale energy rates. If market rates go up, your rate will be higher; if they go down, your rate will be lower.
Should I choose a fixed or variable tariff?
Here’s the important difference between simple fixed and variable tariffs paid by most businesses:
- Fixed tariff – The cost for each kWh of energy used during your tariff will be fixed, typically for one to three years.
- Variable tariff – The cost for each kWh of energy used will change based on movements in wholesale energy rates. If market rates go up, your rate will be higher; if they go down, your rate will be lower.
A fixed energy tariff provides certainty over the cost of your energy bills, protecting your business against future rises in the price of energy.
Business electricity and business gas suppliers typically offer cheaper fixed tariffs to attract new customers to switch business energy suppliers.
On the other hand, businesses on variable tariffs will benefit from falling wholesale energy prices.
Our graph below compares the unit price paid at a fixed rate versus the unit price paid at a variable rate in a few different scenarios.
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Our experts have produced a full guide to help you decide whether to fix energy prices until 2024.
What other factors should be considered when choosing a business energy tariff?
The overall price is obviously the main focus, but what else should you consider when choosing a business energy tariff:
- Contract length – The number of years your business energy tariff will remain in force.
- Payment method – How your business agrees to pay for its business energy bills, usually either by direct debit or BACS.
- Early exit fee – Whether there is an exit fee for leaving the contract early.
- Automatic renewal – Business energy tariffs will define either a standard variable or rollover tariff that will automatically apply if no termination notice is applied.
For more information, here’s our guide on what happens at the end of a business energy contract.
What are the different business energy tariff options?
Before you compare business energy prices, you should consider which tariff type meets your needs.
Here’s our comprehensive list of the types of tariffs to consider when comparing business energy prices:
- Fixed rate business energy tariff
- Variable rate business energy tariff
- Extended business energy tariff
- Flexible approach business energy tariff
- Pass-through business energy tariff
- Time-of-use business energy tariff
Fixed rate business energy tariff
A fixed rate tariff is the most popular tariff for SMEs, where a business will pay a fixed unit cost plus a daily business energy standing charge.
Your monthly bills may vary over the year, depending on your energy usage, but the unit rate per kWh of energy consumed will remain fixed. Fixed rate contracts allow businesses to forecast energy costs easily. We’ve produced a guide to business energy bills to help you understand monthly fees in a fixed rate energy tariff.
A fixed rate contract is a safe option that most businesses opt for when switching business energy providers. The available fixed rate tariffs depend on the current state of the energy market, so it’s important to compare your current tariff against the market to see if you can get a better deal.
Variable rate business energy tariff
A variable rate tariff is often described as a “freedom” or “flexible” tariff. With a variable rate business energy tariff, you’re not locked into a contract for a specific period, and you’ll be free to switch to another tariff at any time.
In a variable rate tariff, the amount you pay per kWh on electricity will regularly change to reflect current wholesale market conditions.
Commercial energy suppliers typically use the variable rate tariff as their deemed contract, so when a fixed-rate tariff ends, you’ll automatically transfer onto a variable rate tariff.
Extended business energy tariff
The extended tariff option allows a business to extend an existing tariff’s term and fixed unit costs with your current business energy supplier.
If you’re happy with the service your current energy supplier is providing you, then this is a recommended route. You’ll be rewarded for loyalty with an extended tariff, but it is always worth reviewing and comparing business energy suppliers in the markets as business energy prices are constantly changing.
Generally, extended tariff options are only available if the market price of energy is decreasing.
Flexible approach business energy tariff
The flexible approach tariff is a tariff that enables you to buy energy in bulk in advance. The benefits of this tariff are that you already know how much you’ve paid for the commodity, which means that, as a company, you will benefit from the wholesale prices.
It works well for larger businesses that can afford the initial down payment and want to benefit from low wholesale prices. When the bulk payment of energy is used, the flexible tariff leaves businesses exposed to increases in the cost of energy.
Pass-through business energy tariff
The pass-through tariff allows your business to split your bill between the wholesale price and other energy charges. In a pass-through tariff, you’ll pay separately for:
- Wholesale energy costs
- Network costs
- Retail fees for your supplier’s service
The pass-through tariff is riskier as your supplier will directly pass on the costs they incur to supply your commercial property. If the wholesale energy cost goes up, you’ll be paying more than if you entered a fixed-term contract.
Time-of-use business energy tariff
Sometimes also known as the Economy 7/10 tariff, with a time-of-use tariff, you’ll pay two different rates for energy used, “peak” and “off-peak”.
In a time-of-use tariff, your business benefits from lower business energy rates during the evening and night hours when there is less demand for energy.
To benefit from a time-of-use tariff, you’ll need either a half-hourly meter or a dual-rate meter.
Rollover business energy tariff
All business energy tariffs define what will happen when your tariff ends if you haven’t made any other arrangements. Some business energy suppliers have an automatic rollover mechanism where your current tariff will extend for an additional year at a fixed price per kWh defined by your supplier.
Automatic rollover business energy tariffs is a deemed contract and is legally binding. Unfortunately, rollover tariffs can be enormously expensive. Here’s our complete guide to rollover business energy contracts for more information.
How to get the best business energy tariff
There are hundreds of business energy tariffs on offer, so finding the one best suited to your company can seem tricky.
Our commercial energy experts are here to help by using our simple business energy comparison service. With three quick and easy steps, you can access the best business energy tariffs:
Enter your business postcode above
Use our smart address finder to locate your business details. We’ll then search for your energy supply data.
We present your energy tariff options
Using our relationships with suppliers, we’ll present you with an array of business energy tariff options.
Complete a hassle-free tariff switch
Our business energy experts will handle the switch for you. Sit back and enjoy your new business energy tariff.
What are the benefits of a fixed-rate business energy tariff?
Here we list the key benefits of fixed-rate business energy tariffs:
Price stability
With a fixed-rate tariff, businesses can lock in a set price for their energy supply over a specific period, typically one to five years. This provides price stability and protects a company from potential energy price fluctuations. It helps in budgeting and financial planning as the energy costs remain predictable and don’t vary with market changes.
Budget control
Businesses can accurately forecast and manage their budgets by knowing their exact energy costs. It’s particularly beneficial for small and medium-sized enterprises (SMEs) with limited resources and a need for cost certainty.
It allows businesses to allocate their funds more efficiently and make informed decisions regarding their energy and investments.
Protection against market volatility
Various factors influence energy prices, including global demand, geopolitical events, and weather conditions. These factors can lead to significant price volatility in the energy market.
Businesses can shield themselves from these fluctuations by choosing a fixed-rate tariff which maintains stable energy costs regardless of market conditions.
Long-term contracts
Fixed-rate tariffs often involve signing a long-term contract with an energy supplier. While this commitment may initially seem restrictive, it can benefit businesses looking for a reliable energy partner.
Long-term contracts provide stability and a dedicated energy supply, ensuring uninterrupted service and minimising the hassle of switching suppliers frequently.
Comparative analysis
Businesses with fixed-rate tariffs can easily compare energy prices and offerings between different suppliers.
This empowers them to make informed decisions by evaluating customer service, renewable energy options, contract terms, and additional benefits provided by various suppliers.
Simplified billing
Fixed-rate tariffs generally offer clear and straightforward billing structures. This simplifies the process of monitoring and analysing energy bills.
As well as upsides, there are downsides linked to securing fixed rates. These involve dips in the market and early exit fees.
The most popular business energy tariffs
Below, we’ve prepared a list of the most popular business energy tariffs offered by the biggest business energy suppliers.
Fixed-term business energy tariffs
EDF Fixed for Business Tariff
EDF Fixed for Online Business Tariff
E.ON Fixed Business Plan
Engie Guard Business Energy Tariff
Engie Simple Business Energy Tariff
British Gas Fixed Price Energy Plan
Total Gas & Power Smart Fix
SSE Energy Solutions Protect
SSE Energy Solutions Choice
Flexible business energy tariffs
EDF Freedom for Business Tariff
E.ON Energy variable price plan
Engie Balance Business Energy Tariff
Engie Freedom Business Energy Tariff
Engie Fair & Square Business Energy Tariff
British Gas 30 day Rolling Energy Plan
Total Gas & Power Market Match
SSE Energy Solutions Shaping
Green business energy tariffs
EDF Renewable for Business
EDF UK Renewable
EDF Select Renewable
E.ON Next Business Tariffs
British Gas Renewable Business Energy Plan
Opus Energy Opus Advance
Opus Energy Advance Plus
Total Gas & Power Eco-Energy
SSE Energy Solutions Protect – 100% renewable
Drax Fix Complete
Drax Fix Clarity
Drax Flex Complete
Engie Core Green Tariff
Engie UK Green Tariff
What is a green business energy tariff?
A green business energy tariff is a tariff that is sourced from renewable energy sources, such as wind, solar, hydro, or biomass. Your energy supplier will also typically contribute to environmental schemes as part of the deal.
Green energy tariffs typically involve a slightly higher price than standard tariffs, as the cost of generating electricity from renewable sources is generally higher than from non-renewable sources such as fossil fuels.
Business Energy Tariffs – FAQs
Here, we answer the most common questions surrounding business energy tariffs. In this section, we explore everything you need to know to compare business energy tariffs.
Is there a cooling-off period for business energy tariffs?
A cooling-off period allows you to cancel the contract within a certain timeframe without penalty.
Unfortunately, business energy suppliers do not offer a “cooling-off period” as they have to buy your energy from the wholesale market in advance when you first sign a contract with them.
This means you must read your contract and ask any questions to ensure you understand and are happy with what you are signing.
Check out our complete guide to cooling off periods on utility contracts.
How can I find the cheapest business energy tariff?
When finding the cheapest business energy tariff, it’s important to understand that the prices depend on your business’s usage, size and location.
For example, ‘Supplier A’ may be the cheapest for small businesses in the South East, while ‘Supplier B’ may be the cheapest for large business energy consumers in Scotland.
To find the cheapest business energy tariffs, use our business energy comparison service to compare the latest business electricity rates and business gas prices from our panel of trusted suppliers.
Business energy quotes are only valid for a short period due to the constant changes in the energy market, so before getting your quotes, make sure you are going to be able to make a quick decision. If not, compare again when the time is right to get refreshed quotes.
Read our guide to business energy contracts.
Can I get a business energy tariff with no standing charge?
Yes, depending on your meter type, some suppliers may offer a business energy tariff with no standing charge. However, most business energy suppliers that do offer tariffs with no standing charge have a much higher unit rate of business energy per kWh than a typical tariff.
We recommend that you look at your average business energy usage and calculate the cost over the year to ensure it doesn’t cost you more than expected.
That way, you’ll get the cheapest tariff for your business.
Can I get a renewable business energy tariff?
Yes, you can get renewable business energy tariffs. Most business energy suppliers offer renewable tariffs for customers looking to reduce their carbon footprint.
The fuel mix of renewable business energy tariffs will only provide energy generated from inexhaustible sources. Renewable energy tariffs in Britain are typically powered by:
How are business energy tariffs calculated?
A business energy tariff sets out the way business energy charges are calculated. For a simple fixed rate tariff, your monthly business energy bills will be calculated as follows:
- Fixed charge – A daily standing charge multiplied by the number of days in the month.
- Energy used – The fixed unit rate multiplied by the number of units kWh of energy consumed in the month.
- VAT – Your two business gas charges above multiplied by 20%.
To demonstrate how rates get calculated on your business energy bills, our business energy experts have built the following interactive calculators:
How can I find business energy tariffs for multiple sites?
Typically, a company will have a separate business energy tariff for each energy supply point (MPAN/MPRN). However, for businesses with properties across the country, managing each separately can become a massive administrative burden.
The multi-site business energy meter solves this problem. A multi-site tariff is a single contract that encompasses several individual supply points. The quotation process for multi-site properties can be complicated and requires bespoke quotes from business energy suppliers.
Our business energy experts are here to help arrange a multi-site energy tariff. Simply enter the details of your head office in our business energy tariff comparison box above, selecting “multiple properties”. We’ll then work to collect multi-site tariff quotes for your business.
What’s a blend and extend business energy tariff?
In 2023, a little-known business energy tariff is fast becoming a popular option – the blend and extend tariff.
The blend and extend tariff is a mid-contract option where you’ll agree to extend the duration of your current fixed tariff while benefiting from a reduction in your fixed energy prices per kWh.
In the autumn of 2022, electricity prices soared, and many businesses entered into fixed contracts, locking them into expensive rates. Since then, the cost of energy has fallen significantly. A blend and extend option allows these businesses to partially benefit from the falling prices.
For more information, here’s our article on getting out of a business energy contract.
Can I see every business energy tariff when I enter my business details?
No, business energy tariffs are tailored to different sizes of businesses. A factory using millions of pounds of electricity yearly will have many more options than a small retail business.
Our business energy comparison service will provide you with a range of tariff choices based on the specific energy requirements of your company.
Most businesses choose the security and simplicity fixed rate business energy tariffs.