For many start-up owners, keeping their business running without clocking up excessive energy bills is a top priority, especially for energy-intensive start-ups such as high street stores, restaurants, workshops, and warehousing.
As wholesale energy prices increase opens in new window, some small business owners may struggle financially under their current energy contracts.
Unlike domestic customers, there’s no government-controlled energy price cap for small businesses, leaving some firms exposed financially as energy bills hit record levels.
While there is support for small businesses from the Energy Bill Discount Scheme opens in new window, which offers discounts to businesses, that support is scheduled to end on 31 March, 2024.
There are currently no announced plans for additional support for smaller businesses past that date.
However, if your energy contract is up for renewal or your business is on a standard variable rate tariff, you may be able to shop around and find a cheaper energy deal by switching energy suppliers.
Assessing your start-up’s energy needs
Before beginning the process of switching your energy provider, it could be worth understanding your start-up’s current energy usage and needs.
By conducting a business energy audit, you could be better able to identify areas of your business that are driving up energy costs and where you could implement cheaper or more efficient alternatives.
To carry out an energy audit, consider analysing data such as:
- your existing energy costs opens in new window, such as monthly or quarterly payments
- how much energy your business uses, which can be found on your utilities bill
- how energy is used, such as for cooking, refrigeration, lighting, and heating
- where you might be able to reduce usage, such as using LED lighting.
Understanding your needs and consumption – such as whether you are more reliant on gas or electricity, and when energy is used, such as during the daytime or overnight – could help you choose a more appropriate energy tariff.
Being a micro business may affect what tariffs and contracts are available to you, as well as greater protection such as the length of any rollover contracts and allowing you to tell a supplier that you want to switch ahead of the end of your contract.
Your start-up might be classed as a micro business if it uses less than a certain amount of energy per year, or if it employs less than ten people and turns over less than £2 million.
Many start-ups fall under the label of being a micro business – check to see if your business is classified by visiting the Citizens Advice website opens in new window.
You could also consider your start-up’s ESG goals opens in new window when switching your energy provider – is there a greener energy provider who could help your business work towards its environmental goals while also keeping your overheads low?
How to search the market
There are several things to consider that could help you find the right energy supplier for your business:
- contract terms and length – how flexible are their terms, how long are you locked in, and are there any penalties for early cancellation?
- pricing – is it cheaper than your current provider, and do they offer fixed or variable rates?
- quality of customer service – will they provide quick, accurate support when you need it?
- billing and payments – do they have a straightforward process?
You may also want to consider if energy providers have green energy options and if they provide additional support, such as energy management tools.
Where to find information
Most energy suppliers should have websites opens in new window with information to help business owners make informed decisions.
Energy price comparison websites could also provide valuable information for making an informed decision, but some comparison sites may promote sponsored listings to the top of their results, and most usually take an affiliate payment opens in new window from the provider for introducing your business.
However, energy comparison sites can help you quickly compare prices from different suppliers, as well as useful information such as customer ratings and scores for customer service opens in new window.
Some will include prices as monthly and annual costs.
Compare these to your existing bills – it can be a good idea to add up your payments from the previous 12 months to calculate a total annual cost, and also divide by 12 to get an average monthly payment to help you compare prices.
That’s because energy usage can vary during the year, such as increased use of heating in winter.
You may also find more energy price comparison information through trade bodies or organisations, which may also provide membership-exclusive discounts from energy suppliers.
Energy contracts
Understanding your energy contract is key to keeping your costs as low as possible.
Many energy contracts fall into one of two camps – fixed-rate or variable:
- a fixed-rate contract means the amount you pay per unit of energy will be the same throughout the duration of your contract, making it easier for you to estimate costs
- a variable contract means the cost per unit of energy will change based on market value, so you may pay more or less for some months even if your usage remains the same.
Business energy contracts could last anywhere between one and five years depending on a number of factors, including your business’s size, industry, energy needs, and the supplier.
As a start-up owner, you could opt for a longer contract to secure better rates, but that means you might be locked into a more expensive contract if wholesale energy prices fall.
Check if there are any penalty fees in your contract for early cancellation in case you do want to subsequently switch.
It might be worth asking your current provider to match a lower price to keep your business, especially if you’re happy with their service and are only looking to lower costs.
Make sure you read and understand any terms and conditions in your energy contract, and seek clarification from the supplier if anything isn’t clear.
How to switch energy providers
Once you have found a new energy supplier, you will need to gather details such as your latest energy bill with your current tariff, unit rates, standing charge, and average monthly or annual pay or energy usage.
If you are already in contract with a supplier you may not be able to switch to a new provider until it ends, or you may have to pay an exit fee.
It may be a good idea to start shopping around for a new supplier a few months before your contract ends and inform your existing supplier in advance of your plan to switch providers once the contract ends.
You will need to know your “switching window” when moving supplier – this is the period before the end of your fixed term contract where you have the right to switch without incurring exit fees.
This is because some energy tariffs are on a rollover contract, and may renew onto a new tariff with your existing supplier if you don’t notify them.
If your business is a micro business, a rollover contract cannot last longer than a year.
Once you have let your current provider know you wish to switch, you will need to give notice, confirm when your new energy supply will start, sign the contract with your new provider, and pay off any outstanding amounts to your old energy provider.
It can take around four to six weeks to switch suppliers, though you shouldn’t be subject to supply outages during this time.
As soon as you’ve signed your new energy contract, it could be wise to make a note in your calendar of the contract’s end date so you can plan accordingly and avoid potential disruptions.
Thinking of starting a business? Check out our free online courses in partnership with The Open University on sustainability in the workplace.
Our free Learn with Start Up Loans courses opens in new window include:
- Effective communication in the workplace opens in new window
- Succeed in the workplace opens in new window
- Leadership and followership opens in new window
Plus free courses on climate and sustainability, teamwork, entrepreneurship, mental health and wellbeing.
Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.
