A GUIDE TO BUSINESS ENERGY CONTRACTS
Publish on: 11/28/16 3:19 PM
Written by Elizabeth Ireland
Renewing/switching your business utility contract is highly important in order to prevent paying out-of-contract rates. This used to be a complex and sometimes risky process due to the strict guidelines suppliers imposed. However, in April 2015 Ofgem altered the termination process to make it more straightforward. Businesses can now notify suppliers of their termination at any point in the renewal window and give 30 days notice instead of 90. Additionally suppliers are required to provide customers with information regarding their supply and prices, 60 days before their contract ends. This information will allow businesses to compare rates and find the best energy deal for their needs.
Out-of-contract rates occur when a business’s utility contract expires and either, an alternative contract hasn’t been agreed, or a contract has been terminated – in order to switch supplier – but a delay has prevented the new supply from taking effect in time. As a result, the supplier will still be providing the business’s energy, so will charge out-of-contract rates. These rates are significantly more expensive, sometimes more than twice as much, as agreed rates. Switching suppliers for large businesses or for small one can often be a lengthy and sometimes complicated process. Therefore, it is vital that you are aware of your contract end date and arrange an alternative in good time.
A deemed contract takes effect when a supplier provides energy to a customer, who doesn’t have a contract in place. This situation usually arises when a customer moves into a new premises and consumes energy, thus activating a deemed contract with the energy supplier. Rates on a deemed contact are considerably more expensive, on average 80% more, than agreed rates. For that reason, it is advisable to arrange an energy contact prior to moving into new premises. If you’re paying deemed rates for your business utilities, negotiate a new energy contact as soon as possible. A supplier cannot prevent any business on a deemed contract from switching supplier at anytime. Similarly they cannot expect a business to give them advanced notice.
VARIABLE & FLEXIBLE CONTRACTS
Variable and flexible contracts are similar, as neither offers the same level of security that a fixed contract does. This is because their rates fluctuate in line with market price changes. They do, however, both offer flexibility, as you aren’t tied into them for a set period of time. You may leave these contracts at anytime, but will need to provide your supplier with 30 days notice. The main difference between flexible and variable contracts is the reason why the customer is placed on them, rather than on a fixed contract. A flexible contract is chosen by the customer, whereas a variable contract is offered by the supplier when they are unable to provide a customer with a fixed contract. This could be due to a variety of reasons, such as;
LENGTH OF CONTRACT
You can fix your energy rates for between 1-5years. Meaning you will be tied into a contract with the same supplier for that length of time, which may seem rather daunting. Your supplier may also offer you attractive, lower rates for a 1 year contract. Consequently, you may be inclined to only agree to a one year deal. However, this may not be the most cost effective option for your business. The energy market is extremely volatile and energy prices can be subject to drastic change, rising as much as 15% in a single year. Therefore, if you only enter into a 1 year contract, in addition of having to go through the hassle of sourcing another deal in 6-12 months time, prices may rise significantly, leading to more expensive utility bills for your business.
WATT WE CAN DO
Watt Utilities is a family-owned utility brokerage located in Manchester. We have a dedicated team of utility specialists, who have helped over 855 thousand business pocket over £120 million in savings since 2000. Our team can help guide you through the process of switching/renewing your utility contract; and as we work alongside a large number of the UK’s leading suppliers we can offer current tariffs at the best rates, that are perfectly suited to your business’s needs. If you are looking to switch or renew your business energy contract today, click here!