At the end of 2019, Ofgem in its “2019 State of the Energy Market” report, stated that more than a third of the UK’s micro businesses pay more for each unit of gas and electricity than larger businesses. These small businesses often have a bad deal when it comes to business energy, and in extreme cases can pay up to three times the average unit than their larger business counterparts.
In contrast to the domestic energy sector, business energy contract terms are usually negotiated with suppliers, and bespoke agreements made between them depending on usage. The more energy a business uses, the better placed it is to negotiate favourable prices and terms. Microbusinesses however, with typically low usage volumes lack the bargaining power to strike the best deals with some suppliers (or so they think) and according to Ofgem, in 2019 very small businesses paid almost twice as much as the average cost across all business customer segments.
If you’re a microbusiness and you haven’t shopped around for energy quotes in the last 12 months, there’s a high chance you’ll be paying too much for your gas and electricity. Follow our key tips to ensure you’re getting the best deal for you.
1. Are you a microbusiness?
There’s a fair amount of confusion as to what actually constitutes a micro business. However, answering this question is critical because microbusinesses benefit from different rules than larger enterprises. For one, microbusinesses can give notice at any point during their contract and if they’re on a fixed tariff, the energy supplier must state the contract end date on every bill.
In relation to the energy industry, you’re classified as a microbusiness of you meet one or more following criteria:
- The business employs less than 10 full time employees and its annual turnover is less than €2 million
- The business consumes less than 100,000 kWh of electricity per year
- The business consumes less than 293,000 kWh of gas per year
Most energy companies will ask whether you qualify for microbusiness status at point of sale, however the responsibility lies with the customer to tell the supplier so it’s important you know where you stand. Also remember that if your business grows, you might no longer qualify for microbusiness status and you should tell your supplier immediately.
2. Dedicate someone to the job
One of the reasons why larger companies often secure more favourable rates than small businesses is because they’ll often have an employee whose responsibility it is to manage the organisation’s energy contracts. This person will keep track of when contracts are coming to an end and routinely scour the market for better deals.
In Ofgem’s “2019 State of the Energy Market” publication, it reported that more than a third of microbusinesses are on expensive default contracts, simply from not knowing when their contracts were coming to an end and planning accordingly.
It’s important that smaller organisations dedicate this responsibility to someone who can make sure that regular market comparisons are made, otherwise you may be stuck on a significantly higher rate for a long time.
3. Create a list of what’s most important to you
Most businesses have a wish list when it comes to selecting their energy supplier, but there’s more to an energy contract that works for you than just low price. Do you get frustrated when you can’t get through to someone in customer services? Does your existing supplier send you bills that are impossible to understand? These types of frustrations are common and understanding these will help you to narrow down your search. Run through the quick checklist below to get a deeper sense of what type of company might best suit your needs:
- Are you looking to lower your price?
- Are you looking to fix your price for a period of time?
- Are you looking for a supplier with a UK call centre/customer service department?
- Do you value easy to read bills?
- Do you want a company who will take care of the entire switching process for you?
- Is it important that you use renewable energy and reduce your carbon footprint?
4. Compare and switch
Armed with all the information about your existing supply and a checklist of what you’re looking for, it’s now time to compare suppliers. Many energy companies will guarantee to beat your renewal rates and many will also be prepared to negotiate with you. Don’t underestimate how important your business is to an energy supplier. You may only consume a small amount of energy at present, but your business may grow.
In addition, in a saturated market, energy companies are acutely aware that they are in a competitive market and that happy customers refer others. A good energy supplier will value its reputation and thrive on word of mouth as well as positive recommendations, so you should expect to be treated with the same courtesy and helpfulness as any other business.