What can I do to reduce my energy bills?
Whilst the UK government is doing what it can to help UKÂ businesses struggling with their energy costs, there’s a chance you could switch energy provider and save. Get in touch to discuss how Swoop can help bring energy bills down and potentially save on VAT.
Want extra advice on how you can reduce your businesses costs?
We’ve put together a dedicated task force to help UK businesses navigate these challenging times and help reduce their outgoings where possible. Email energy@swoopfunding.com to see how your business can benefit.
Even when not in use, ‘vampire’ machines and devices such as computers, printers, and copiers, continue to burn energy in ‘sleep mode’. Turn off everything you can at the end of the business day.
You can’t make savings if you don’t know what is using what or where the wastage is. A business energy audit runs a fine-tooth comb over the business, revealing all the areas where savings can be made.
Don’t fiddle with the heating and A/C controls. Constant adjustment wastes energy and costs money. Set a comfortable temperature and let the thermostat to the rest.
Even with the cost of installation, it may work out cheaper in the long run to heat your premises with natural gas than higher priced electricity.
Warm and cool air needs to circulate to be effective. Obstructing the air flow from vents with furniture or other obstacles will make your heating and A/C less efficient and consume more energy.
Air conditioning is costly to use, with the typical central A/C unit consuming 3500 watts per hour when running. Other cooling methods, such as desk and ceiling fans run for a tiny fraction of this energy cost. A/C systems also need clean air flow for best efficiency. Changing filters every six months can cut 5 to 15% off your air conditioning’s energy consumption.
It costs money to heat water. Consider ways to lower the hot water use in your place of business. This means everything from leaky hot water taps to over-filled kettles and unnecessary vehicle cleaning.
It may not reduce your business energy consumption, but it could lower the price you pay per unit. If you can switch supplier without incurring a penalty, shop around for the best quote available.
A word from Andrea
"Domestic energy users have the benefit of being able to compare quotes and policies from a number of providers based upon their usage. Unfortunately, this doesn’t carry over to business energy users. Business energy quotes are bespoke to each company and their needs, so it is advisable to use a broker where possible to secure the best deal."
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The business energy market works differently than the system for domestic users. Contract terms, unit rates, cooling off periods, and the ability to switch supplier are all affected, and they make the purchase of commercial energy significantly more challenging than buying for home use. Here are the essential points you need to know:
Because businesses typically buy energy by contract and the price is tailored to their needs, current rates for gas and electricity can vary enormously. However, July 2022 figures for ‘deemed contracts’, (out-of-contract deals that usually offer the most expensive type of energy from providers), indicate business-use electricity costs at £0.17 to £0.19 per kWh, plus standing charge of £0.25 to £0.35 per day, and gas prices at £0.03 to £0.06 per kWh, (no standing charge). These rates do not include VAT, which is currently 20% for most business users.
Businesses do not qualify for the energy price-cap set by Ofgem, which only applies to home supply. This makes them particularly vulnerable to the surge in energy costs. To help reduce the sting of business energy price hikes, the government has introduced the Energy Bills Discount Scheme, providing a discount on wholesale gas and electricity prices for all non-domestic customers (including all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals) whose current gas and electricity costs have been significantly inflated by rising energy prices.
Ofgem, (the Office of Gas and Electricity Markets), is the government regulator for the supply of energy to UK business and domestic users. The much-publicised ‘price cap’ is the maximum price that home-users may pay per year for average gas and electric consumption. (Home users who use a lot of energy will pay more than the price cap). The cap is reviewed every six months and it may go up and down. However, it does not apply to commercial users.
Businesses do not qualify for the energy price-cap set by Ofgem, which only applies to home supply. This makes them particularly vulnerable to the surge in energy costs. To help reduce the sting of business energy price hikes, the government has introduced the Energy Bills Discount Scheme, providing a discount on wholesale gas and electricity prices for all non-domestic customers (including all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals) whose current gas and electricity costs have been significantly inflated by rising energy prices.
The business energy market is complicated, with a range of different tariffs, terms, and conditions. Businesses must take care when selecting their commercial energy provider. Choosing the wrong contract could be a costly mistake. The main types of tariff are:
Most businesses choose this type of deal. There may be a range of tariffs to choose from, but they will all offer a fixed unit cost and standing charge. Your bill will vary each month depending on how much energy you use.
Unit price and standing charge are based on market rates and can go up or down. Bills vary according to consumption and market rates and charges.
Lets you extend your current contract with the same supplier – essentially, carry on as you were. Some providers will offer lower unit costs to customers who show loyalty by extending their contract.
You bulk-buy your energy in advance. A safe bet when prices are steadily increasing, but riskier in times of high volatility. Despite the upfront payment, this type of deal can offer large savings, as it lets you benefit from wholesale prices.
A more complicated tariff that lets the customer split their bill between the energy wholesale price and other, variable costs, such as the Transmission Network Use of System (TNUoS) charges, National Grid levies and Feed-in Tariff charges that can all change up to four times a year. Essentially, you are gambling that these variable costs will go down to lower your overall bill. Not recommended for businesses that need price certainty.
Additionally, Ofgem provides added contract protection for micro businesses, and there are other tariffs that apply for business energy users without a formal contract:
If your contract expires and you do not switch supplier, or agree a new deal, you will be moved to this rolling , out-of-contract tariff. Deemed Rate contracts are one of the most expensive ways to buy business energy.
An obsolete rate for businesses that have not switched supplier since the UK energy market was deregulated.
A different kind of deemed rate contract – used when no alternative has been agreed before your current contract’s end date. Also one of the most expensive ways to buy business energy.
Business energy bills are based on a wide range of factors and there are many types of contract to control costs, (see above). This makes it difficult to calculate an average bill. However, data from BEIS (The Department for Business, Energy & Industrial Strategy) for the first quarter of 2022, reveals the following pricing per kWh:
Business size | Electricity per kWh average cost | Gas per kWh average cost |
---|---|---|
Very small | 19.44p | 5.10p |
Small | 19.90p | 3.33p |
Medium | 17.35p | 3.98p |
Large | 17.25p | 3.53p |
Very large | 17.18p | 4.66p |
The prices shown above do not include VAT at 20%, nor do they include the Climate Change Levy, (an environmental tax charged on the energy that businesses use).
High prices and increased volatility in the UK energy market may be here to stay, which makes it even more urgent for businesses to get the best deal they can. However, the myriad of tariffs, fees, contract terms, and providers present a vast number of variables. Getting the right deal to suit your exact business needs can be challenging.
Take the headache out of switching. Get in touch for an impartial chat and see how much you could swipe off your energy bill.
Similar to its predecessor the Energy Bill Relief Scheme, or EBRS, the Energy Bill Discount Scheme is designed to help UK businesses by limiting the per-unit price businesses pay on their gas and electricity bill.
Now expired and replaced by the Energy Bills Discount Scheme, the Energy Bill Relief Scheme capped the wholesale cost of energy for UK businesses between October 2022 and March 2023.
Because energy providers buy gas and electricity in bulk for commercial users, business energy is almost always cheaper than domestic supply. However, businesses that let their energy contract expire without switching to a new provider or establishing a renewal contract, will find themselves moved to a Deemed Contract or Rolling Contract. These tariffs are usually the most expensive ways to buy business energy and unit prices can be higher than those for domestic users.
If you are near the end of your current contract, or you can switch energy supplier without penalty, it is certainly worth shopping around to get a business energy comparison. A new contract may reduce your gas and electricity tariffs, lock in price-certainty, and lower the amount of VAT you pay. Upload your current energy bill to Swoop and let us find the best deal for your businesses needs.
The Climate Change Levy is an environmental tax charged on the energy that businesses use. It’s designed to encourage businesses to be more energy efficient in how they operate, as well as helping to reduce their overall emissions.Â
The CCL applies to businesses in the industrial, public services, commercial and agricultural sectors, and is charged on ‘taxable commodities’ for heating, lighting, and power purposes. However, CCL has been waived for the duration of the government’s energy support plan for businesses.
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The big six energy suppliers are the largest providers of energy in the UK. They provide electricity and gas to businesses and residential users. The companies in this elite group are British Gas, EDF Energy, EON, Npower, Scottish Power, and SSE.
There is no mandatory cooling off period for commercial energy contracts. This means businesses must ensure their new or renewal deal is right for their specific circumstances before they sign on the dotted line. Trying to get out of an unsuitable contract after signing can be difficult and expensive.Â
Fixing your business energy price can provide price-certainty and be the best financial move when energy costs are rising. However, if energy prices go into a sudden reversal, you could be stuck paying more per unit than you should be. The question is, is a price drop likely anytime soon? If you feel uncertain about the future direction of energy prices, seek a fixed price deal for only one or two years, and hope that that energy costs have fallen by the time the contract expires.
Yes. You can prepay your business energy with a Flex Approach Tariff. This type of contract lets you bulk-buy your gas and electricity in advance, and offers the potential for large savings, as you may benefit from wholesale prices.
The number of suppliers of renewable energy for business has shrunk dramatically since the start of 2021, as dozens of providers have gone bankrupt, and their customers have been transferred to other providers. However, businesses seeking a greener energy deal can still secure a renewable energy contract from providers such as Octopus, Ecotricity, and Orsted.
Government, industry, educational, and charitable sources provide technical advice, materials, and finance to help UK SME’s achieve greater energy efficiency. Access to some of these benefits is on a case by base basis, so it is important that business owners research every option to find the best result for their organisation.
Ofgem provides an overview of all the options, but you can obtain energy saving advice from National Energy Foundation/You Gen, Energy Savings Trust, Small Business, and Gov Energy Technology. Government energy saving finance can be found here, while local councils and business initiatives may also offer energy saving financial support. You could get paid to generate your own renewable power via the Smart Export Guarantee, or secure a grant for the installation of green energy equipment. Lastly, grants may be available to you via charitable sources, or WRAP, a foundation to support the use of recycled materials.
There are no specific tax credits or rebates for choosing to buy renewable energy, but the government does provide tax breaks for the purchase and installation of energy saving equipment and systems.
If you suspect you’ve been mis-sold a business energy contract, either deliberately, or due to negligence or error by an intermediary or the energy provider, your options are three-fold:
Business energy claims are compensation cases against energy providers and intermediaries who have mis-sold business energy contracts to UK companies. (See above).
If you have the roof or ground space to accommodate them, solar panels are a good option for many types and size of business. Modern solar panels have a long lifetime and require minimal maintenance. Their installation can protect a significant portion of your business’s energy usage from increasing costs and put you ahead of growing legislation to curb emissions as the government tightens its focus on net zero.
Even though the upfront cost of installation may be higher than other investment opportunities, most businesses can expect to recover the full cost of the technology in 5 to 7 years. After that, your energy savings will be considerable, and you may even be able to make money by selling surplus energy back to the grid. For tax purposes, solar panels are a fully deductible business expense.
Read more: our in-depth guide to getting started with solar for business
A business energy audit is the process where a professional (auditor) assesses your business for any opportunities that could help save energy. The auditors will review your premises, plant, operating methods, and your current business energy contract. A good audit could pinpoint significant energy wastage and reveal the best ways to offset or correct those faults.
Businesses must pay VAT on the energy they use. The standard rate is 20% and although this is a business-to-business purchase, you cannot claim the tax back. Most businesses will pay the 20% rate, but some may qualify for a discounted 5% rate if:
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Ofgem, (the Office of Gas and Electricity Markets), is the Government regulator for the supply of energy to UK business and domestic users. They set the ‘price cap’ for the domestic market, regulate the operation of energy providers and distributors, and act as a watchdog on the energy industry to protect energy customers from malpractice by providers.
A kilowatt hour (kWh) is a measure of how much energy you’re using per hour. kW stands for kilowatt, a universal standard for measuring electricity. One kilowatt equals 1,000 watts. The h in kWh stands for hour – a measure of time.
The kWh is a unit if energy and your electricity provider charges you for every kWh you use. As an example, a machine that is rated at 3kWh will consume 3000 watts of power per hour. If you were paying 20p per kWh, the machine would cost 60p per hour to run.
No. Domestic users can choose a dual-fuel energy deal, but this option is not available for businesses, who must negotiate separate contracts for each kind of energy they require.
If your contract expires and you do not switch supplier, or agree a new deal, you will be moved to this rolling , out-of-contract tariff. Deemed contracts are one of the most expensive ways to buy business energy.
A rolling contract is also known as a rollover tariff. It is a different kind of deemed contract - used when no alternative has been agreed before your current contract’s end date. It is also one of the most expensive ways to buy business energy.
Multi-site meters, or multi-location business energy contracts, are a simple and efficient way to organise the billing for numerous meters. This could be the billing for meters housed in one large business site, or several meters across multiple business locations. Multi-site meters allow businesses to centralise their energy control and avoid the hassle of contracting with multiple providers and receiving multiple energy bills.
When your business moves premises, your current energy contract ceases from the date you move. Business energy contracts are linked to the supply point, which means your current deal will not transfer to your new address and you will need to secure a new energy contract for that location.
With difficulty. Your energy provider has already purchased enough energy from generators and gas suppliers to cover the period of your contract. If you pull out of the deal, they will be out of pocket. Therefore, unless you can prove you have been mis-sold your business energy contract, the only way out of the deal is to pay off the remainder of the contract term.
Switching will not interrupt your energy supply. When you change provider, the new vendor takes over your meter from the previous provider. This action is seamless and the consumer (you), will not notice the change until the new provider’s bill lands in your inbox.
Since the start of 2021, more than half of all UK energy providers have gone bust. In most cases, their customers – domestic and business – have been switched to new providers with no loss in service or supply. Here’s a list of the UK energy providers that have ceased trading or have gone into special administration since 01 January 2021.
2022 | 2021 | |
Bristol Energy Northumbria Energy Neo Energy Whoop Energy Xcel Power Together Energy   | Zog Energy Entice Orbit Bulb Neon Reef Social Energy CNG Zebra Power Omni Energy Ampower UK MA Energy BlueGreen Energy GOTO Energy Daligas | Colorado Energy Symbio Igloo Enstroga Green Avro People’s Energy Utility Point PFP Energy Moneyplus Energy HUB Energy Simplicity Energy Green Network Pure Planet |
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Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.
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At Swoop we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. Our goal is simple – to distill complex topics, unravel jargon, offer transparent and impartial information, and empower businesses to make smart financial decisions with confidence.
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