Should You Fix Your Energy Business Rates?

The last few years have seen significant changes and volatility in business energy rates and bills. Without the protection of a price cap for energy business rates like there is for consumer energy prices, it can be a real challenge for businesses of all types and sizes to know whether they are on the best possible energy deal. There is also the important question of whether or not companies should fix their energy costs or opt for a variable tariff.

In this guide, we look at the current market context for energy business rates and the pros and cons of the various ways businesses can approach business gas and electricity, helping you make an informed choice that is right for your company.

Why Do Business Energy Rates Change So Often?

There are several reasons why the energy rates that businesses pay can change so often, especially if the business isn’t currently on a fixed tariff for their business electricity or gas.

The rates that businesses pay for their energy aren’t subject to a price cap like residential energy, so business energy suppliers can change what they charge at any time unless the business customer is on a fixed rate deal.

The live wholesale energy prices change frequently, which means that the amount it costs business energy suppliers to buy gas and electricity for their customers is also subject to change, and these costs are passed on to customers.

The global energy market can be significantly affected by world events, such as Russia’s invasion of Ukraine in 2022, with large energy export markets disrupted by war breaking out. The UK and some other countries no longer buy gas from Russia due to sanctions put in place after the invasion. This contributed to an increase in demand for energy from other sources, which pushed prices up. Current instability in the Middle East can also be a consideration in terms of demand and prices.

Other factors affecting business energy price changes in the UK include infrastructure i.e. high reliance on imported gas and oil, along with lower reserves and energy storage capabilities than many other countries. Periods of unexpected cold weather can also increase demand and push prices up.

Will Energy Business Rates Continue to Rise?

Unfortunately, no one knows exactly what the future holds when it comes to business energy prices, as there are so many variables that can come into play. As mentioned, anything from weather conditions to world events and political situations can cause global energy wholesale prices to rise, which means business energy rates also go up.

However, data from Cornwall Insight, energy market analysts, indicates that business energy bills are likely to remain substantially above the levels seen in 2020/21 over the next few years, although hopefully below the peaks of 2022-23.

Is There Any Help Available for Business Energy Bills?

There have been government schemes in operation in recent times to help some businesses with the costs of energy, but most of these have now expired and there is currently no active government support available to most companies in the UK.

However, there is the Energy Bills Discount Scheme support for Energy and Trade Intensive Industries (ETIIs), which is designed to help eligible businesses by offering a discounted rate for business electricity and gas units on a percentage of what they use. There are strict eligibility criteria for this scheme based on the company's sector and the specific nature of the business's activities. The 2024 deadline to apply has now passed. Find out more about ETII support.

Businesses that are struggling to pay their energy bills should always contact their supplier in the first instance to explain the situation and ask if there is any support available. Suppliers can work with businesses to agree on a payment plan and may be able to offer further help to reduce costs.

Find out more about what businesses can do if they are struggling to pay energy bills.

While it won’t help businesses with their current energy bills, there may be some government-backed or local authority grants available for companies to use to help them invest in energy efficiencies that will help lower bills in the future.

Can You Save Money on a Variable Business Energy Tariff?

While opting for a fixed-rate business energy deal brings some certainty to how much you’ll pay for the energy your company uses, a variable tariff could sometimes be a better fit for your specific requirements, depending on your individual business and your approach to risk.

With a variable rate tariff, the price you pay for the energy your business uses can change at any time, which means it could go down if wholesale energy prices are reduced. It also means that your unit rate can go up if the wholesale rates increase. In practical terms, this can mean that even if you use the same amount of energy in two billing periods, you could end up with two quite different bills.

This is a major reason why many companies choose to opt for a fixed business energy contract, as it can make it easier to budget for bills.

Should You Opt for a Fixed Price Business Energy Plan?

A way for businesses to have some certainty about their electricity rates is to opt for a fixed business electricity tariff from a supplier. This means that the unit rate and standing charges will be fixed at a specific level for the duration of the contract. This way, the business knows that if they use the same amount of electricity in a billing period, they won’t get an unexpectedly higher bill.

It’s important to note that a fixed price business electricity plan doesn’t mean that the overall bill is fixed or capped. It simply means that the unit rate and standing charges are fixed. A business that uses more electricity will pay more.

The same applies to fixed rate business gas contracts if your company uses gas.

It’s important to check your current energy situation with your supplier and whether you are under contract or have been moved onto a deemed contract for energy once your old contract expires. If you are still under a fixed-term contract with your current provider, then it’s likely that there will be exit fees to pay if you want to leave your agreement early to switch to another supplier. Depending on the potential savings you could make with a new fixed energy deal from a different supplier, the benefits of switching could still outweigh exit fees. If you’re coming up to the end of your current contract, now is a great time to look at your options.

We can quickly get quotes from different suppliers based on your company, location and usage to find out if you can save by switching to a fixed business energy deal.