For all intents and purposes, a micro-business is defined by the EU as one having less than ten employees or a turnover less than £1.8 million (actually defined as €2million). This definition would cover most of the 4.4 million businesses operating in the UK.
Ofgem made changes in the contract terms that energy suppliers provide for these companies so that the renewal and switching of contracts are now made clearer. The energy company contracted must communicate that a contract is coming up for renewal.
Before this change, the time for switching or negotiating a new contract may have been hidden in lengthy terms and conditions. The contract would renew automatically for another year under more expensive trading terms and was impossible to switch. The change made is for new contracts and is not retrospective.
What Types of Tariffs are Available?
The competitive landscape is vast in this market, so you have access to a range of pricing options to keep your costs low. Currently, only fixed prices are available for contracts lasting one, two or three years. Only some companies offer variable tariffs in limited numbers.
If you haven’t shopped around for quotes for 12 months or more, then your rates are too expensive. This is due to contracts being automatically renewed with increases of between 30% to 60% in some cases.
How do You Contract the Correct Tariff?
There are several options available to you to maintain your current levels or keep within current inflation increases.
Energy companies rely on inertia much like insurance companies. So don’t feel you need to be loyal because customer churn is inherent in their strategic model.
- Telephone your current energy provider and ask for the best deal.
- Use a specialist web based service to check the whole market.
- Contact an energy broker who will investigate on your behalf.
Those are the main options available which all have advantages and disadvantages.
The first two require your own time and effort and you may miss out on some deals depending on the service you use. Simply contacting your current provider means missing out on a significant part of the market place.
Additional Discounts and Savings Tips
Further savings can be made by paying your bills by monthly direct debit. Normally, quotes include this discount so if you select to pay manually, an additional 2%-5% will be added to your invoice.
A dual fuel tariff could incur a small reduction but it’s prudent to get separate fuel quotes as well and calculate the totals for each.
All companies have so-called “win back” teams to keep customers with their supply. If you have received a lower quote from your current provider, then call them and mention you’re leaving.
Most will undertake an instant price match policy while others offer incentives to stay. BGB can offer £160 to stay loyal.
What Information is Required?
Most services simply require your postcode and premises number or name. For improved accuracy your meter point reference number (MPAN) which identifies your exact supply helps.
Choosing the Right Tariff for Your Micro Business
Once you have got quotes from the energy companies you’re ready to choose your most favoured option. You’ll have likely received a fixed price quote for a fixed term as this is how most business energy prices are calculated.
Depending on what is happening with wholesale prices it can be difficult to decide how long to commit to a contract for. Our advice is probably to go for a one-year contract length, although most providers can offer up to a three-year contract with fixed pricing.
Some tariffs may come with a standing charge which means you’ll pay a fixed amount no matter how much electricity you use. Others will have a split tariff so that the initial units are charged at a higher rate then once you have used those a reduced unit price comes into effect. It really depends on how much electric your business uses as to whether a standing charge or not is right for you.
You’ll probably also be offered a green tariff whereby your supply comes directly from renewable sources such a solar or wind power. These tariffs are more expensive, but you’ll know that your power is not producing carbon emissions.
You could also be exempt from the carbon offset tax, which can save more for your micro business.
Most small businesses won’t fall into the brackets because of the low usage.
A Climate Change Levy, or CCL, is payable by all companies in the UK. The tax is automatically added by the supplier to the bill before VAT and is approximately 5%.