When entering into a business energy contract, here are the four important details you need to know. Who supplies your energy, the unit rate and the standing charge, the contract end date and your termination window.
You also need to understand the different types of business energy contracts and most importantly how to read your energy bill. Knowing the type of metre you have at your business can also come in handy with regards to your electricity bill.
Let's dive into how to make sense of business energy contracts.
How Does Your Contract and Tariff Work?
It can be a little confusing at first when you sign your business energy contract but here's some information to help you understand what exactly it consists of.
The unit rate is the amount of money that you will be paying for the usage of energy, this energy is calculated at per kilowatt hour (kWh) of electricity.
The standing charge is the daily fixed costs that is included in your bill that will be charged for the maintenance of your metre.
The Agreed Supply Capacity (ASC) is factored into the contract of those businesses that use higher consumptions of energy and this amount is agreed upon by the business and the supplier when entering the business energy contract to set a maximum amount of energy usage.
If you exceed your maximum set capacity, you might be charged an excess fee or have your power cut for overloading the system. On the other hand if you are not using as much energy as you have stated in the ASC then you can consider changing your tariff as you are paying for more energy than you are using.
Different Types of Business Energy Contracts
There are different types of business energy contracts so you need to understand which one you are entering into.
Fixed
A fixed contract is when you are charged a set rate per unit for the energy used when you have a fixed contract.
Variable
A variable contract is when you are charged a market related rate per unit of energy used.
Deemed and out-of-contract
A deemed contract refers to when you move into a new business building and haven't agreed to an energy supplier contract but are still being charged for the usage, and an out-of-control is when your contract has ended but you have still been receiving energy from your previous supplier.
Rollover
A rollover contract is when you haven't found a new supplier before your current contract ends and you haven't made provision to renew it.
What Are The Different Types of Metres?
Here are the different types of metres that you can find at your business.
Two rate metres
These are dual rate metres. They offer two different unit prices depending on the time of the day and when your energy usage peaks.
Three rate metres
This metre is referred to as the Evening, Weekend and Night metre. This metre has a cheaper charge rate over weekends and at night, while the day rates are more expensive.
Standard single rate metres
These only have a single rate and one measurement period. These metres were also the most common up until the smart metre had been developed.
Smart metres/half hourly
These metres have become more popular than the standard metres as these provide accurate readings of your energy consumption and send them straight to your supplier. They also provide evidence to show at which times you use more energy which can help your business cut costs.
Former multi-rate metres
These metres have been phased out and have been upgraded to half-hourly metres.
What To Do When Your Contract Ends
As the time nears your contract expiring, your supplier will reach out and give you a renewal period in which you have the option of renewing your current energy supply by offering you a variety of options that they have on offer for your business energy needs.
You can also choose to find a newer energy supplier by using a business energy comparison website where you might look for a cheaper supplier or one that has a better option suited to your business's needs.
However, if you don't make a decision on either moving to a new supplier or renewing your current contract, you will be automatically put into a deemed contract which is costly as these charge an out-of-contract tariff.
How Do You Read Your Electricity Bill?
These are the following information that will appear on your business electricity bill. These bills are similar to the electricity bill you will receive for your homes.
- Your details
- Your account number
- Bill date
- Billing period
- Vat number
- Bill number
- Type of charge
- Metre Point Administration Number
- Metre Serial Number
- Contact Details
You will also have a breakdown of the costs included in the electricity bill:
- Vat Charges
- Outstanding Charges
- Total amount due
- Billing period charges
- Cost breakdown
Extra Costs and Levies Found On Energy Bill
On the bill you will also notice the extra costs and levies that are charged to your account. On your bill you should find two charges: the standing charge and the unit rate per kWh.
There is also the Climate Change Levy (CCL) and businesses are automatically taxed for this levy as it is supposed to help lessen the amount of carbon emissions businesses release into the environment.
Other extra costs added to your energy bill are made up of:
Carbon reduction commitment (CRC Efficiency Scheme)
This is charged on each tonne of carbon that businesses release into the environment.
- Distribution Use of Systems (DUoS)
This is the charge added to your energy bill to upkeep maintenance for the distribution network of the energy supply from the national grid to the business.
- Transmission Network Use of System (TNUoS)
Paid to the national grid for upkeep of both the distribution and transmission networks.
- Contracts for Difference (CfDs)
This charge is worked into the flexible rate of your energy contract if you enter into a contract with a low carbon contracts company which supports businesses who produce a low-carbon output.
This also protects businesses when renewable energy is generated and might experience a loss.
How is the Cost Of My Business Energy Contract Determined?
These are the many factors that go into how your business energy plan is calculated.
- Usage
The amount of energy your business uses will be charged by the tariff your business is on.
- Location
Depending how far you are from your supplier, transmission and distribution networks also affect the costs of your energy bill.
- Business sector
The type of business you have and the industry you are in will also affect your energy costs.
- Dual-Fuel Contracts
This depends on whether you have your gas and energy and water supply under one supplier or multiple suppliers.
You might end up with a huge discount from one supplier or find individual suppliers with low charges.
- Credit Score
If you have a good credit score, this will help you have access to the best supplier deals as your credit score proves that you are able to meet your payments.
- Timing
This is dependent on the wholesale prices within the energy market and they affect the suppliers unit rate.
Conclusion
Knowing how to read your energy bill and understanding your business energy contract can save you a lot of money in the long-term.
This way you can avoid unnecessary costs such as getting put into an out-of-tariff contract because you might have missed your renewal window or forgot to get a new supplier.
Be sure to do thorough research to ensure that you are getting the best energy contract that is suited to your business needs.
