It’s an uncertain and turbulent time in the energy market and small businesses are not exempt.
A significant post-lockdown demand for gas, especially in Asia, has led to a major increase in wholesale gas prices. British Gas owner, Centrica, expects price rises to last two years.
More than half (54 per cent) of UK SMEs are already spending £3,000 or more a year on energy, according to Tyl by Natwest. In fact, 65 per cent of SMEs are spending up to one fifth of their total business costs on energy consumption.
April will already be a vulnerable time for small businesses who may be forced to close due to the price rises, as well as a rise in National Insurance due to commence during the same month.
As the market is so precarious at the moment, we won’t be covering specific deals. Instead, we’ll tell you how you can find the best energy supplier for your small business.
Quick guide to finding the best small business energy supplier
Saving money on small business energy
Operating a business from home: should I go for a domestic or business tariff?
If you run your business from home, you won’t need a business energy contract and could claim tax back on some of your home energy cost.
Businesses do tend to have lower energy costs per unit and the larger the business, the smaller the unit rate in general. That said, home owners pay 5 per cent VAT on their energy where businesses pay 20 per cent so savings could be made there. Businesses also pay the Climate Change Levy (CCL). It doesn’t apply if businesses use renewable energy. What’s more, they may only pay 5 per cent VAT if they use less than an average of 33 kWh of electricity and 145 kWh of gas a day. (That’s the equivalent of 12,045 kWh of electricity and 52,925 kWh of gas a year, which is well above the amount of energy most people use at home).
You also don’t pay CCL and only pay 5 per cent VAT if you have a residential element to your business. That is to say, you run a B&B, a campsite or a care home.
You’ll need to use a lot of energy at home to justify moving to a business tariff, 50 per cent as a threshold marker. Taking meter readings at the beginning and end of the day will give you a better idea of how much of your home energy is used for your business versus your normal domestic usage.
It’s best to compare domestic and business tariffs to find out what’s best for you – remember to include the VAT and CCL in your final tally.
Refer a friend
You may have seen these before as they’re a useful pull for consumer credit cards and other services. Refer a friend schemes give you and/or your friend a reward if you switch to their energy supplier. They’re normally financial incentives like cash or in-account credit.
They’re not normally as big a draw for business customers but if it’s layered on top of a good deal then that could be a winner for you.
Remember the little things
Small changes really do add up. Start with direct debits and paperless billing to cut down your costs.
What you should be researching to find the best energy supplier
You’ll have an idea of this already, but here’s a recap. Take notice of:
- Customer service ratings
- Fixed vs variable
- How long the contract is
- What type of energy is used
- Rates and fees
- Protections (such as price cap if you run your business from home and have a domestic energy tariff)
Find out how long it will take to switch – it’s normally within 17 days but will be done within 21 at the most.
While you’re here, it’s more than worth your while to make sure that you’re clued up on your rights in the event of:
Which small business energy suppliers are out there?
Bulb is in ‘special administration’ at the moment meaning that it still operates as Bulb but is being run by someone else. The firm promises green energy with no contracts.
Good Energy offers 100 per cent renewable energy and is carbon neutral.
Octopus Energy has 100 per cent renewable energy rates and no ‘extortionate’ out-of-contract fees. Fixed tariffs last for a year.
SSE supplies 100 per cent renewable energy, sourced from its own wind and hydro assets. It has fixed energy plans for small business budgets.
With Utilita there are no hidden fees and you get a dedicated business account manager. Customer support is available through a number of channels, including high street energy hubs.
Where to get further help
Citizens Advice will give you independent guidance online, over the phone or in person for free.
The Extra Help Unit raises complaints with energy suppliers on behalf of individuals and microbusinesses across Great Britain. When referred, you’ll be assigned a dedicated caseworker who will act on your behalf until your case is resolved.
If you have an energy-related problem, are in a vulnerable situation and your business:
- Has fewer than ten full time equivalent employees and an annual turnover or annual balance sheet total of less than €2m a year, or
- Uses less than 293,000 kWh of gas per annum, or
- Uses less than 100,000 kWh of electricity per annum
The first step is to call the Citizens Advice Consumer Service on 0808 223 1133.
Energyadvice.scot is geared at microbusiness consumers, offering free, practical advice and information on energy-related matters.
Resolver is a web-based service which is suitable for most disputes with your energy supplier. Just submit a dispute online and Resolver will help you through the process.