The NGP Guide to Business Energy Contracts
In this guide, we discuss all you need to know about business energy contracts, including contract types, non-domestic energy bills, and what to look for when procuring energy for your business.
What’s in a non-domestic energy bill?
Business (or non-domestic) energy bills are quite different from domestic energy bills and often include more details. They may appear to be complicated at first, but once you know the individual items, they become easier to understand.
To begin, these are the three most important things in your energy bill:
- 1. Standing charges – This charge is applied to all business electricity tariffs (but not all business gas tariffs). It’s the same amount each day irrespective of how much energy is actually used.
- 2. Unit rate(s) – This is the amount you pay for each kWh of energy you consume.
- 3. Contract end date – Ofgem requires for this to be written on energy bills. This is important because once your business energy contract starts, you are locked in for the duration of the contract.
In the table below you will find other types of charges and details about them. Each supplier will use a different layout and different names for charges on their bills. In general, though, these terms are very common for most business electricity bills.
What am I paying for with my business electricity?
The price you pay for business electricity includes more than just the energy commodity. There are several non-commodity items that make up your monthly energy bill. Below is a general breakdown of what you pay for in your electricity bills (you can find a further detailed breakdown here).
The price you pay for your gas and electricity is made up of several elements, including more than just the energy itself.
Below we’ve detailed how the cost is typically broken down, according to recent Ofgem data.
Wholesale energy costs have increased on the back of record gas prices, leading to consequent rises in power prices. They now make up the bulk of energy costs in a typical bill.
Network costs cover the building maintaining the infrastructure around the UK. Operating costs cover charges incurred by suppliers to deliver billing and metering services. Policy costs are charges related to government schemes to save energy, reduce emissions and encourage take-up of renewable energy.
Business energy contract types
Typically, businesses choose between a fixed term or a flexible (otherwise known as a variable) rate tariff for their energy contracts.
On a fixed tariff, you pay a set rate for every unit of energy consumed over a fixed period of time. Fixed-term contracts are usually between one and five years. Longer term contracts usually cost more, but offer more security and time for you to budget and manage your energy appropriately.
On a flexible tariff contract, your energy rates can change depending on market behaviour. Wholesale energy prices dictate the costs you pay on your bills throughout the length of your contract. This is usually a more expensive method than fixed-rate tariffs. But consider this: if market prices fall, so do your bills.
Northern Gas and Power provide flex purchasing services for businesses. Our Flex Purchasing team of energy experts, headed by Latif Faiyaz and Ramnikh Kular, manages the risk and trading of customers’ energy portfolio.
Here are two other types of business energy contracts:
- Deemed rate – A deemed contract is enacted when you move into a new site and use electricity before agreeing to a contract with the supplier.
- Rollover – These are used if you don’t negotiate a new electricity deal at the end of your current contract.
Why choose a fixed-price contract for your business electricity?
In a volatile market, a fixed contract provides your business with more control of your energy budget. They are a good choice for your business if energy is not a major cost. Knowing that the unit rate for energy is locked in for your energy contract will help you budget and manage your energy usage.
Why choose a flexible contract for business electricity?
If energy is a major component of your business’ costs and operations, then a flexible contract may be best for you. Flexible contract purchasing offers consumers the opportunity to take advantage of market volatility.
Rather than fixing prices for one to three years, flexible purchasing allows businesses to take opportunities in market movements whilst protecting their budget against any market upswings.
Taking full advantage to lock in lower prices for your flexible contract requires research and time – things which most businesses without a full-time energy manager do not have. Our Flex Purchasing team provides the following flex purchasing service:
- Risk management and trading of a business’ energy portfolio.
- Full energy strategy development for businesses.
- Long-term budget planning.
- Management of evolving forecasted consumption.
- Flex Purchasing Team works closely with businesses to enhance their energy effectiveness.
- Development of renewable on-site generation for business’ net zero targets.
- Regular position and market reports.
How to search for the best deal
Procuring the best electricity contract for your business requires a careful understanding of your energy needs and of the volatile energy market. Both of these tasks are time consuming. You may not have the time or resources to scrutinise everything about a supplier or their energy contracts on offer. This is where we can help.
We offer a range of fixed solutions for business gas and electricity to match your exact business requirements. When you procure your business energy with us, you also get a dedicated account manager who looks after everything about your business energy, including looking over energy bills, your existing contracts, energy data, supplier queries, and more.
There is also BusinessEnergyQuotes.com, our fast and easy-to-use business energy price comparison tool. By entering just your business’ postcode or meter number and your current contract end date (if applicable), you will receive business energy offers available from dozens of suppliers nationwide.
Other important things to know about business energy
What happens at the end of the contract?
When your business energy contract ends, you are automatically placed onto a more expensive out-of-contract rate. This is also known as a rollover contract. This is why it is important to know your contract’s end date, as you do not want to be paying for tariffs for which you did not negotiate.
Suppliers are obligated to inform you of new deals as your current deal comes to an end. If you procured your business energy through us, you can rest assured knowing your account manager will be actively searching for the best deal for your business.
Unit rates for business energy are often cheaper than for household energy
Business energy is bought in bulk, due to the volumes required. Business energy suppliers purchase enough energy to last throughout your contract. The advantage of this is that you are usually paying cheaper unit rates for energy. The disadvantage is that, as discussed further below, ending your contract prematurely is costly to your business.
Contract lengths are longer than domestic contracts
Business energy contracts are established for an agreed term, lasting as long as five years or more. During this time, you will not be able to switch energy suppliers or move into a new contract. You must wait until you have reached the renewal window stage of the contract before shopping for a new deal. The renewal windows are usually one to six months before the end contract date.
No cooling-off period and exit fees
When you enter into a domestic energy contract, you have what is called a cooling-off period, or period in which you may decide to leave the contract without suffering any consequences.
Business energy suppliers do not offer this flexibility. With this in mind, it is important to be certain you are satisfied with the terms, conditions, and energy supply that your business energy contract offers. Should you anticipate any scenario that may trigger you to leave your contract early, it’s worth considering the exit fees or terms and conditions that may exist with your chosen supplier.
To help you avoid any unforeseen complications or risks to your energy that would lead you to exit your contract altogether, it pays to have the energy experts at Northern Gas and Power work with you throughout the procurement process.
Peak-hour prices and rate variation
Some suppliers can charge you different prices for each unit of energy depending on the time of day. These are usually broken down by day, evening, night, and sometimes weekend prices. Day rates are usually the most expensive rates. If your supplier has rate variations, it is important to know these so that you can schedule your energy-intensive operations smartly.
Energy management technology provides huge quantities of energy data to businesses. This granular data is used to make wise energy management decisions. ClearVUE, our proprietary energy management and targeting software and hardware solution, displays a business’ energy consumption data down to a minute of granularity. The system has features that help you verify if you are using energy wisely during peak production periods. This leads to better energy management, bigger savings, and less carbon emissions.
Green business energy
Most renewable energy comes either directly or indirectly from sunlight, wind, geothermal, and bio-energy. These can be used directly for heating and lighting, for generating electricity, and for hot water heating, solar cooling, and a variety of commercial and industrial uses.
Suppliers will often offset carbon emissions from the energy they supply by supporting carbon reduction projects. Other suppliers operate their own wind and solar farms.
Get in touch with us
At Northern Gas and Power, we offer a range of energy procurement solutions that match your exact purchasing requirements to best fit your organisation’s needs.
Save time and reduce hassle in procuring business energy by working with us. We make it simple for you to choose the most cost-efficient energy contract over the most advantageous period.
In addition, we provide constant monitoring and proactive research of supplier products and terms and conditions. This is so we can advise the most suitable business energy product for you.
Give us a call on +44 (0)3 300 300 800 to get started.