Energy is just one of the things that business owners have to consider whenever their energy deal is coming to an end.
Many believe that choosing an energy supplier is a complicated process if you’re a business, but it has become much easier over the years. There are lots of different types of business energy contracts and it is often advised for a micro business customer to do some research before committing to a contract.
The challenge for many business owners is finding the time to do this research. That’s why are experts are more than happy to provide advice without any bias to help companies find the right energy contract.
First of all, it is important to understand how the government classifies different businesses. At Power Compare, we provide our micro-business customers with all the information they need to find discount deals and secure a suitable contract.
What Is a Micro Business?
There are over almost 6 million businesses in the UK, and 95% of them are micro-businesses. This term was first created in 2010 when the government acknowledged the fact that micro-entities has separate and distinct requirements from SMEs. The growing number of micro-companies showed the government that they needed protection from the competitive energy market. This new classification offers micro owners more protection against complaints, billing, and contracts.
Micro-organisations are not the same as small businesses. The government has created a clear set of guidelines for micro-businesses. If your business falls under 2 or more of these categories, it is a micro-entity.
- An annual turnover of £632,000 or less
- £316,000 or less on the balance sheet
- Fewer than ten employees
Are Micro Business Energy Contracts Different?
It can be difficult for micro-business owners to stay up to date on the latest government guidelines.
Gas and electricity contracts are far more relaxed in comparison to most business energy contracts for SME businesses.
Ofgem has established rules that make micro-organisations contracts more similar to domestic energy contracts. These regulations mean that it is difficult for energy suppliers to take advantage.
When it comes to typical business contracts, business owners have a responsibility to read the terms carefully and act accordingly. It is the responsibility of the energy supplier to inform them of any important changes.
The energy supplier must notify their micro gas and electricity consumers about notice periods and the contract end date. They also have to inform their micro-entity customers at least 3 months before the end of their deal. This means that there is less chance of being rolled over onto an expensive new energy deal after the contract end date.
In July 2015, the government changed the maximum termination notice period for micro-business energy contracts from 90 days to 30 days. Suppliers have to provide consumers with clear information about termination windows. Micro-entity owners know the exact dates that they can terminate their contracts without paying exit fees.
It is the supplier’s (or third party broker’s) responsibility to create clear contracts. They must highlight terms and conditions and give consumers written confirmation about their new contract within 10 days of signing. Micro-business renewal processes are far simpler than SME renewals.
Average Micro-Business Energy Contract Prices
The average price of micro-entity electricity is 16.17p per kWh.
Micro-businesses in the UK use an average of 5,000 to 15,000 kWhs of electricity each year, which equates to anywhere from £900 to £2,244 a year.
They also use an average of 5,000 to 15,000 kWhs of gas each year, which creates an annual price of anywhere from £400 to £820.
Types of Micro-Business Energy Contracts
There are lots of micro-business energy contracts to choose from. The market for micro-entity tariffs is very competitive. Here are the most popular choices when selecting a new energy contract:
Fixed Rate Tariffs
As the name suggests, fixed contract customers can expect a consistent business electricity and gas rate. The unit price will remain the same throughout the length of the contract. This is the ideal choice for business owners who want a consistent price that will not fluctuate with wholesale energy prices. We recommend fixed contracts for startup business owners who do not want to be surprised by massive fluctuations.
Variable Rate Tariffs
Variable-rate tariffs are also called standard variable tariffs. Business owners on this type of tariff can expect fluctuating unit rates. The unit rates change in accordance with wholesale energy prices. Most business owners avoid this type of tariff because it is unpredictable.
No Standing Charge Tariffs
This type of tariff eliminates standing charges. The downside to no standing charge tariffs is that the unit prices are higher.
Green Energy Tariffs
Green energy tariffs provide people with a carbon-neutral alternative to the other gas and electricity options on the market. Lots of business electricity suppliers now offer 100% carbon-neutral energy, which means that your business can be at the forefront of clean, green energy.
Frequently Asked Micro-Business Energy Questions
What Happens When My Micro-Business Energy Contract Ends?
If you do not secure a new contract once your contract ends, you will be put on a standard variable tariff. You will be given a notice period from your energy supplier. In this window, you should compare business energy prices. You could save money by switching energy supplier during this period.
You may be able to negotiate a better rate with you current supplier rather than switching energy supplier.
The government has established regulations to ensure that micro owners are protected from common contract pitfalls. Your supplier is obligated to notify you about the end of your contract. They must give you at least 3 months notice by law. This regulation means that micro-entity owners are not as likely to fall victim to expensive default tariffs.
Micro-business renewal procedures are simple. Suppliers give their customers lots of notice, which means that micro owners can choose to renew or switch with more than enough time. Simply tell your supplier that you want to renew your contract, and let them do the rest. Suppliers and even third parties are legally obligated to make sure that micro-business energy contracts are transparent.
What Is a kWh (kilowatt hour)?
A kilowatt-hour (kWh) is a unit of measurement of energy usage. One kWh is equivalent to the amount of energy you would use if you turned a 1,000-watt appliance on for one hour. This rule is not true for every kind of appliance. A 50-watt appliance would need 20 hours to use 1 kWh.
What Affects the Cost of My Business Energy?
Micro-business energy bills are different for each company. Lots of different factors can impact the cost of your energy bills. When it comes to gas and electricity prices, it is important to consider where your business is located, the size of your business, and the type of business that you run.
You should consider:
- the location of your business premises
- what your current electricity bill and how much energy you’re using
- Contract details and the length can impact process
- activity of the energy market including wholesale energy prices
- announcements from the energy regulator
There are many more considerations. We would always advise to compare energy prices regularly to ensure you’re getting the best deal.
Do I Need to Move to a New Supplier to Get a Better Deal?
You do not have to move to a new supplier to secure a better deal. You might be able to get a better deal on utility bills if you switch to a different tariff with your current supplier. Depending on wholesale energy prices, it might be much cheaper to move from a standard variable tariff to a fixed rate tariff.
Most business electricity suppliers will offer new customers discount deals to secure their loyalty. It might be more cost-effective to switch suppliers.
How Do I Switch Business Energy Suppliers?
As suppliers recognise micro-businesses as a distinct class in their own right, tailored tariffs are becoming more and more popular. In the ever-evolving world of energy, it is important for business owners to stay on top of the latest developments. At Power Compare, we encourage customers to switch energy suppliers when better deals hit the market.
With our comparison generator, it has never been easier to switch micro-business energy contracts and suppliers. Put your details into our generator, and find a contract that suits your circumstances in under a minute. Once you have found a tariff, we will handle the rest.