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What Are The Types Of Energy Contracts?

The current energy crisis in the UK means that many businesses are looking for ways to save money on their energy bills. This usually means finding a new business energy contract.

But what are the different types of energy contracts, and which is the best one for your business?

At Business Energy Comparison, we’ve compiled this guide on the different types of business energy contracts. We’ve also provided some useful tips to help you find a contract that satisfies your business’s needs.

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Fixed Energy Tariffs

A fixed-rate business energy contract sets the price you pay for your energy for a certain amount of time. Typically, the time period is 12 to 18 months. You’re able to switch energy providers at the end of the contract but if you decide to switch early, you’ll most likely have to pay exit fees.

Fixed-rate tariffs are great for controlling your budget and the rates for these contracts are usually lower than the rates for standard default tariffs.

One thing to bear in mind is that only the unit rates are fixed. So, if you use more gas and electricity than usual your energy costs will be higher.

Fixed-rate business energy contracts are particularly useful during times when the energy market is very volatile. (For example, the ongoing energy crisis in the UK.)

If you’re currently on a fixed-rate business gas or electricity tariff then you won’t be as exposed to the current price increases as other businesses. This is because your cost per unit is fixed and won’t go up if the wholesale price of energy rises.

At the end of your contract, you’ll either need to switch business energy suppliers or agree to a new contract with your current supplier. If not, you’ll automatically move onto a contract with higher rates (more on this later).

Variable Energy Tariffs

A variable energy contract is linked to the activity of the energy market. This means that the amount you pay for your unit rates can go up and down throughout the length of your contract.

If the market prices go up, then you’ll end up paying more for your energy. If they go down, you’ll pay less.

Variable business energy contracts make it hard to predict what your energy bills will be each month. Even if your energy usage remains the same your bills can vary widely due to fluctuations in market prices.

Due to the current UK energy crisis, variable rate tariffs are not the best choice for businesses at present. They leave you exposed to soaring wholesale energy prices.

If you currently have a variable business electricity or gas contract, then you should consider finding a new energy supplier. You can then agree to a contract that has more favourable rates.

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If you fail to agree to a new energy contract with your energy provider – or don’t switch suppliers – before your contract ends, then you’ll be placed on a deemed contract. When this happens, energy suppliers make their customers pay their highest possible rates.

This type of business energy contract also applies if your business moves to new premises.

To avoid deemed business energy contracts, make sure you agree to a new energy tariff before your contract ends. This could be with your current supplier or with a new one. If not, you’ll be paying very high rates for your business utilities.

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Rollover Energy Tariffs

Rollover energy contracts occur when your current contract ends and your supplier automatically rolls you over onto a new business energy contract. As with deemed contracts, the rates for rollover gas and electricity tariffs are very high.

Fortunately, it’s easy for businesses to avoid this type of business energy contract. You just need to make sure that you cancel your contract within the specified time period so that your supplier doesn’t automatically sign you up for a new one.

If you do end up on a rollover contract then you’ll usually be tied to it for at least a year.

Before your contract ends, you should compare large or small business energy tariffs to find the best deal for your business.

Evergreen Energy Tariffs

‘Evergreen’ energy tariffs are essentially the same as rollover contracts. If you have a fixed-rate contract then you’ll automatically be placed onto an evergreen tariff when it runs out. As with rollover contracts, you can easily avoid this by agreeing to a new contract before your current one runs out.

These types of energy contracts also have very high rates and should be avoided. Once you’re on an evergreen contract, you’ll be stuck with it for at least a year.

How To Choose The Right Energy Contract For Your Business

Choosing the right business energy contract is absolutely vital. Unlike domestic energy contracts, most business tariffs are in place for up to five years. Plus, there usually isn’t a cooling-off period during which you can change your mind.

So, you need to be sure that you make the right choice.

Let’s take a look at some tips for choosing the right contract:

Know what you want

Before you start looking for a new contract, determine exactly what it is that your business needs. There is no one-size-fits-all.

If you want predictability and stability then a fixed-rate tariff is the best choice. Looking to reduce your carbon footprint? Then you should go with a green energy contract. If you think that wholesale energy prices are going to drop soon, then a variable rate tariff might be optimal.

Act quickly

Make sure you’re aware of exactly when your current contract is due to end. When your contract enters the ‘switching window’ you’re free to start negotiating deals with other suppliers.

Don’t wait until the last minute to do this. If you do, you might not agree to a new contract in time. This means you’ll end up on a deemed or rollover contract.

Keep track of how much energy you use

You should take meter readings regularly and track your business’s energy consumption. Then, when it’s time to find a new contract, you’ll know what the needs of your business are. This makes it easier to find a deal that suits your business.

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Compare Business Energy Tariffs With Business Energy Comparison

Before you switch to a new supplier, you need to compare energy tariffs. Whether you’re looking for a small or large business energy contract, this allows you to secure the best rates on the market.

There are several different types of energy contracts that you can choose for your business. Which one is best for you depends on your business’s specific needs. Generally, fixed-rate tariffs tend to be the best option for most businesses.

One of the easiest ways to find the right contract for your business is to use an energy broker or consultant from Business Energy Comparison. They’re experts in the field and will help you to compare rates to find the cheapest contract for you.

Start your journey and compare business gas and electricity rates with Business Energy Comparison today. Use our price comparison tool and in less time than it takes to make a brew, we’ll compile your best prices from the UK’ s best suppliers.

Frequently Asked Questions

What happens to my energy contract if my business moves to new premises?

If your business moves to a new building, your energy contract will end on the day that you move. A business energy tariff is tied to the supply point so the contract doesn’t transfer to the new building.

This means you’ll either need to agree to a new contract or you’ll be placed on a deemed contract.

What happens if I cancel my business energy contract early?

Business energy contracts usually have specific timeframes in which you can cancel them. If you cancel a contract outside of this window, then you’ll have to pay an exit fee. These fees tend to be very expensive.

If you want to cancel your energy contract, you need to send a notice of termination letter to your supplier within the specified timeframe.