Energy costs are still a major issue for individuals and companies across the United Kingdom. Rising demand, restricted supply, a lack of available storage space, and the ongoing situation in Ukraine are all contributing factors.
The government has established the Energy Bill Relief Scheme to assist company owners in coping with rising energy prices.
For the next half-year, this innovative plan will maintain wholesale electricity rates at £211 per megawatt hour (MWh; one MWh is equivalent to one thousand kWh) and wholesale gas prices at £75 per MWh. In addition, a cap is placed on the total amount of savings the government is willing to offer. This is now fixed at a rate of £405 per MWh for electricity, while the rate for gas is £115 per MWh.
This will apply to all consumers of non-domestic energy providers, including charitable organizations and organizations in the public sector. The contract your company is under will determine the extent of the price reduction your company will be eligible for.
The most important thing that can be learned from the statement made by the government is that it would collaborate with various suppliers to ensure that all companies can migrate to a fixed contract while the plan is in effect.
If your current contract expires within the next six months, it may be beneficial to compare business energy prices to determine whether you can get a fixed rate before the plan ends.
What Are Fixed-Price Energy Tariffs?
Fixed-price energy tariffs are the most effective method for stabilizing your monthly energy costs for one or two years. If you believe that the cost of one unit will continue to rise, you may protect yourself from the whims of a volatile market by signing up for an energy plan with a set rate.
Although fixed-rate plans typically have a duration of between 12 and 24 months, this does not guarantee that your monthly price will remain the same. You can only fix the amount you pay per unit, not the number of units you buy. The same as it has always been, your monthly bill will increase according to your energy consumption.
The standard variable-rate tariff is the other primary kind of available energy arrangement. These allow for market movements, which means that an increase in global energy costs might result in greater bills than expected, but if the prices decrease, you will be paying less than you would have otherwise.
How Does the Fixed Tariff Differ from the Variable-Rate One?
Your monthly energy cost will be affected by fluctuations in the market if you have a variable-rate plan. If there is an increase in energy prices worldwide, you may anticipate that your monthly expenses will be more than usual. On the other hand, if prices go down, you will spend less.
The answer to whether you believe that the cost of energy will go down or up throughout the contract period will determine whether you should sign up for an energy tariff with a fixed price or a tariff with a variable rate. You also need to evaluate whether or not a fixed pricing tariff will provide your company with the sense of security that comes with a set price.
What Is the Business Energy Price Cap?
There will not be a price cap on commercial energy under the Energy Bill Relief Scheme. As an alternative to placing a ceiling on rates, the government has decided to reduce providers’ wholesale prices for electricity.
Because of this, the maximum amount that providers will have to pay for electricity over the next six months is capped at £211 per megawatt-hour (MWh), while the maximum amount they will pay for gas is capped at £75 per MWh (or 21.1p per kWh of electricity and 7.5p per kWh of gas).
However, the discount the government is willing to grant is capped at a certain point. This indicates that even after the reduction has been applied, your costs will be higher than they would have been with lower rates.
Are the Energy Prices Expected to Go Up or Down?
Even though energy costs fell in 2020 when the COVID-19 epidemic peaked, industry analysts, anticipate that electricity demand will increase in 2021.
In the following weeks and months, an increase in the cost of energy is anticipated because we are adjusting to a new working world.
An energy tariff with a set price might be helpful in situations like this. When you lock in the cost of your energy at a consistent rate right now, you safeguard your company against the possibility of seeing price increases over the next year.
Things to Consider When Choosing an Energy Tariff
There are many different energy tariffs available to businesses, and if you pick the wrong one, your company can end up paying more than necessary for its gas and electricity. In addition, because agreeing on commercial energy implies that you are bound to the terms of the contract for its whole, you run the risk of overpaying for a period ranging from one to five years.
When switching providers, you must remember that the rates you’re offered will depend on factors such as the amount of energy you use, the location of your business premise, and whether or not your company is in good financial shape. If your company has a poor credit score, you may be required to pay higher rates because your company is viewed as a higher risk.
It is also essential to know that commercial energy suppliers do not offer dual fuel packages. Even if you agree with the same gas and electricity supplier, these will still be considered two different energy contracts. Click here to learn more about your options when fixing energy prices.
So, Why Should You Fix Your Business Energy Prices?
In light of the present state of affairs in the world, opting for an energy tariff with a fixed price might help your company save hundreds, if not thousands, of pounds.
Consultation with a reliable energy provider is the most effective technique to tackle your company’s requirements. In order to identify the finest energy supplier in this extremely competitive industry, there is no silver bullet solution that can be applied universally because the requirements of each company are unique. You may identify the vendors who offer the most value for your money by performing a quick price comparison. When negotiating the finest plan for your present needs, you must have an open mind and extensive study.