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Business Energy FAQ

Your Questions Answered

Business Energy FAQ's

Your Questions Answered

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We’ve put together answers to questions we get as the most.

General Questions

General Questions

What are the primary differences between residential and business energy contracts?

Residential and business energy contracts are designed to cater to different usage patterns and requirements. Residential contracts are usually simpler with pricing structures based on tariff and time of use.

 

Business contracts are often tailored to the specific needs of the business, considering aspects like consumption pattern, peak demand, energy profile and many other factors.

How is the pricing structure different in business energy contracts compared to residential contracts?

For the domestic energy market, wholesale prices play a significant role in determining energy costs. Energy suppliers buy most of the gas and electricity in advance, and these costs are a substantial part of the overall energy bill. Energy supply companies have teams of traders and analysts monitoring price movements in the gas and electricity markets throughout each day. 

 

Gas and electricity flowing into households across the country today may have been bought by the energy suppliers anytime between now and as far back as 6 – 12 months ago.

 

For businesses many factors influence wholesale energy prices and there are several influences at play which determine the price you pay for gas or power. 

Gas markets are important as they influence wholesale power costs too, as we generate electricity from gas – but the country’s energy mix comes from reliable nuclear, some renewables (that’s wind and solar), some imported supply, and then gas and coal. 

Ultimately, the cost businesses pay for power is determined by the marginal generation unit. By this we mean whatever type of power, from whatever source, met the peak demand at that time. For example, the type of power required by peak demand may have been coal, which is more expensive, or gas, which is cheaper. 

 

This type of wholesale market movement gives businesses the opportunity to secure contracts as and when the market moves, unlike domestic energy contracts where the ‘energy costs’ are secured well in advance to shield consumers from volatile markets. 

Can businesses negotiate their energy contracts, and if so, how can they do this effectively during the energy crisis?

Yes, businesses can negotiate their energy contracts. It’s often beneficial to work with an energy broker or consultant who understands the market and can negotiate on your behalf. During an energy crisis, it’s especially important to monitor the market closely, prepare a strategy and focus on energy efficiency.

If a business has a variable tariff, how are the charges calculated and what factors can lead to an increase in costs?

Charges on a variable tariff can change based on the supplier’s costs. Factors like wholesale energy prices, network charges, and policy costs can all lead to an increase. Prices can change at any time with a variable tariff, but the supplier must notify the customer in advance.

 

Generally speaking, these types of tariffs are more expensive and used to ensure business are in contract. This way, the National Grid has a better view of demand and balancing forecasts.

When can I agree to a business energy contract?

You can agree to a business energy contract at any time. However, it’s often beneficial to start negotiating a new contract as early as possible before your current one ends. This can help you avoid being rolled onto a more expensive rate once your contract ends and ensure you make the most of the opportunity of time, when it comes to an effective energy procurement strategy.

Can I cancel my business energy contract?

Once you have agreed to a business energy contract, it’s usually not possible to cancel it without incurring a cancellation fee. Business energy contracts do not typically have a cooling-off period like residential contracts do.

How long does it take to switch business energy suppliers?

The process of switching business energy suppliers typically takes between 10 – 30 working days. The market is working to make this as quick as possible under the Faster Switching Programme. This time includes the notice period for your current supplier and the setup time with the new supplier.

What is a letter of authority?

A Letter of Authority (LOA) is a document that allows a third party, such as an energy broker, to negotiate and manage energy contracts on behalf of a business. The LOA outlines what the third party can and cannot do and is typically required before the third party can interact with energy suppliers.

What is a Smart Meter?

A Smart Meter is a device that records the amount of energy used in real-time and sends this data directly to the energy supplier. This eliminates the need for manual meter readings and can help businesses monitor and reduce their energy consumption.

What happens when I switch supplier?

When you switch suppliers, you first need to select a new supplier and agree to a new contract. Once this is done, your new supplier will coordinate with your current supplier to carry out the switch. This process includes settling any outstanding balance with your old supplier. Your new supplier will then begin providing your energy, and you’ll start receiving bills from them. It’s important to note that there should be no interruption to your energy supply during the switch.Yes, a supplier can object to a transfer in certain situations. Common reasons for objections include an outstanding debt on the account, the switch happening too soon before the end of the current contract, or the new contract not meeting certain terms or conditions. If an objection occurs, it’s crucial to resolve the issue promptly to proceed with the transfer.

Can a supplier object to a transfer?

Yes, a supplier can object to a transfer in certain situations. Common reasons for objections include an outstanding debt on the account, the switch happening too soon before the end of the current contract, or the new contract not meeting certain terms or conditions. If an objection occurs, it’s crucial to resolve the issue promptly to proceed with the transfer.

Energy Crisis

Energy Crisis

What caused the UK energy crisis and how does it affect the cost of my energy contract?

The UK energy crisis, has had a significant impact on both households and businesses, including the cost of energy contracts. Here’s a summary of the causes and effects:

Causes of the UK Energy Crisis:

  1. Increase in Wholesale Natural Gas Prices: The primary catalyst for the UK’s energy crisis was a dramatic increase in the cost of wholesale natural gas. This was driven by several factors, including a cold snap in Europe during 2020/21, rising global demand, and supply issues from Russia related to the conflict with Ukraine.

  2. Energy Supplier Bankruptcies: The rise in energy costs led to the collapse of multiple energy firms in the UK, destabilising the entire sector. These energy suppliers were unable to pass on these rising costs to their customers who were locked in on fixed-term contracts or protected by the energy price cap.

Effects on Business Energy Contracts:

  1. Rising Energy Bills: Businesses, like households, have been affected by the energy crisis by having to pay more for their energy bills. Businesses have less protection than domestic consumers when it comes to energy, as the Office of Gas and Electricity Markets (Ofgem) energy price cap does not apply to businesses in Great Britain.

  2. Impact on Business Operations: The Federation of Small Businesses (FSB) revealed that 28% of businesses that signed fixed energy contracts last year may need to “downsize, rethink their business model, or even close” due to the end of the more generous Energy Bill Relief Scheme (EBRS).

  3. Government Assistance: The UK government has implemented the Energy Bills Discount Scheme, which will run from 1 April 2023 to 31 March 2024 and replaces the EBRS. Eligible businesses and non-domestic customers across the UK will automatically receive a discount to their per-unit cost, up to a maximum discount and as long as wholesale prices are above a certain threshold.

In conclusion, the UK energy crisis was primarily caused by a surge in wholesale natural gas prices and has led to increased energy costs for businesses. The government has implemented measures to alleviate some of the financial pressure, but the crisis continues to pose significant challenges for businesses.

How are businesses particularly affected by this energy crisis?

Businesses in the UK have been significantly impacted by the energy crisis in several ways:

  1. Increased Energy Bills: Businesses, like households, have seen a substantial increase in their energy bills due to the surge in wholesale energy prices. This has put a strain on their finances and impacted their bottom line.

  2. Less Protection: Unlike domestic consumers, businesses do not benefit from the energy price cap set by the Office of Gas and Electricity Markets (Ofgem). This means they are more exposed to the fluctuations in energy prices.

  3. Long-Term Contracts: Business energy contracts are typically longer than domestic ones, often lasting up to five years. While some businesses with existing contracts were shielded from the immediate impact of rising prices, those that had to renew their contracts or were on variable tariffs have seen their energy costs increase significantly.

  4. Potential for Business Closure: The Federation of Small Businesses (FSB) has warned that a significant number of businesses that signed fixed energy contracts last year may need to downsize, rethink their business model, or even close due to the increased energy costs.

  5. Limited Government Assistance: While the UK government has implemented measures to help businesses, such as the Energy Bills Discount Scheme, there are concerns that this reduced level of support may not be enough to protect businesses from the rising energy costs.

In summary, the UK energy crisis has had a profound impact on businesses, leading to increased energy costs, potential operational changes, and even the risk of closure for some. Despite government interventions, the crisis continues to pose significant challenges for the business sector.

What support was and is currently available?

The UK government has implemented several measures to support businesses and non-domestic customers affected by the energy crisis. Here are the key schemes:

  1. Energy Bills Reduction Scheme (EBRS): This was an earlier scheme designed to provide relief to businesses struggling with rising energy costs. However, it has since been replaced by the Energy Bills Discount Scheme.

  2. Energy Bills Discount Scheme (EBDS): This is the current scheme that will run from 1 April 2023 to 31 March 2024. Eligible businesses and non-domestic customers across the UK will automatically receive a discount to their per-unit cost, up to a maximum discount and as long as wholesale prices are above a certain threshold. The maximum discounts are as follows:

    • Electricity: a maximum discount of £19.61 per megawatt hour (MWh), with a wholesale price threshold of £302 per MWh.
    • Gas: a maximum discount of £6.97 per MWh, with a wholesale price threshold of £107 per MWh.
  3. Support for Energy and Trade Intensive Industries (ETII): For non-domestic energy users that are ‘particularly vulnerable’ to high energy prices, there is a higher level of support under the EBDS. These users are classed as Energy and Trade Intensive Industries (ETII), which includes a selection of manufacturers, miners, libraries, museums, among others. The scheme for ETIIs runs as follows:

    • Electricity: a discount of £89 per MWh, with a wholesale price threshold of £185 per MWh.
    • Gas: a discount of £40 per MWh, with a wholesale price threshold of £99 per MWh.

While the standard level of EBDS support is applied automatically, businesses and non-domestic customers will need to apply for the higher ETII discount.

It’s important to note that while these schemes provide some relief, there are concerns that the level of support may not be enough to protect businesses from the impact of the energy crisis. Businesses are encouraged to explore other ways to manage their energy costs, such as improving energy efficiency and ensuring they are on the most cost-effective tariff.

You can find out more information on our Insights page.

Half Hourly Meters

What is a half-hourly meter?

A half-hourly (HH) meter is a type of electricity meter that records your business’s energy consumption in 30-minute intervals. This provides an accurate picture of your energy use, allowing suppliers to offer a tailored deal.

What is a DNO?

A DNO, or Distribution Network Operator, is the company that manages the cables in your local network. All power levels are agreed with the DNO.

What are Maximum Demand & Capacity?

Maximum Demand and Maximum Import Capacity are measures of the maximum amount of power that your business can draw from the grid. These are agreed with your local DNO and are important for accurately forecasting your total annual energy cost.

What is a Meter Operator (MOP)?

A Meter Operator is responsible for the installation and maintenance of your half-hourly meter. You can choose to use the majority of supplier nominated MOP agreements or pick your own.

Why do I need a MOP agreement?

A MOP agreement is necessary for the installation and maintenance of your half-hourly meter.

What is a Data Collector (DC) & Data Aggregator (DA)?

A Data Collector (DC) collects the data from your half-hourly meter, while a Data Aggregator (DA) processes this data into a format that your supplier can use.

What is the kVA Capacity Charge?

The Capacity Charge is a part of your bill that is based on the power load made available to your business from the grid.

Where can I find details of my MIC and my kVA charge?

Details of your Maximum Import Capacity (MIC) and kVA charge can be found on your energy bill.

What is a time-of-use tariff?

A time-of-use tariff is a pricing scheme where the cost of energy varies depending on the time of day it is used.

What is P272?

P272 is a mandatory industry change for electricity supplies in profile classes 5-8, moving them to half-hourly settlement.

What is Reactive Power Charges?

Reactive Power is a concept in electricity systems that refers to the difference between the electricity supplied and the electricity converted into useful power.

Best Practices

When should I start looking for a new contract?

Businesses should start looking for a new energy contract well before their current one ends. The exact timeline can depend on the terms of the existing contract, but a good rule of thumb is to start looking 6-12 months before the contract’s end date. This gives ample time to research options, negotiate terms, and avoid being automatically rolled into a more expensive default tariff.

What should I consider for my renewal?

When considering an energy contract renewal, businesses should evaluate their current energy usage, future energy needs, budget constraints, and the reliability and service quality of their current supplier. They should also consider the terms of the contract, including duration, billing requirements and product type (fixed, flexible, green etc…). termination.

What can I do to get the best rates?

Businesses can get the best energy rates by researching different suppliers, comparing their offerings, and negotiating terms.

Our Energy Health Check is a great place to start.

How can I ensure I'm not rolled onto deemed rates?

To avoid being rolled onto deemed rates (which are often much higher), businesses should make sure they renegotiate their contract or switch suppliers before their current contract ends.

Should I always choose the lowest rates?

While price is an important factor, it’s not the only one to consider. The reliability of the supplier, quality of service, terms of the contract, and how well the supplier’s offerings align with the business’s energy needs and goals are also crucial.

How can I reduce my energy costs?

usinesses can reduce energy costs by implementing energy efficiency measures, such as using energy-efficient appliances, improving insulation, and managing usage during peak demand times. They can also negotiate better contract terms or switch to a cheaper supplier.

Our low carbon technology solutions, such as Solar PV is considered as an excellent opportunity and investment right now.

Should I consider green energy contracts?

Green energy contracts can be a good choice for businesses committed to sustainability and reducing their carbon footprint.  It is important to ensure the quality of the supply mix when looking at green contracts as there are many different ‘green’ products available in the market. These products can also offer some marketing benefits for businesses looking to boost corporate social responsibility.

What should I do if my energy needs change?

If a business’s energy needs change, they should contact their supplier to discuss adjusting their contract. If the supplier cannot accommodate the changes, the business may need to consider switching to a different supplier.

Working with UtilityWorks will allow you to benefit from the tier 1 relationships we hold directly with energy suppliers.

How does market volatility affect my energy contract?

Market volatility can cause energy prices to fluctuate. If a business has a variable-rate contract, this can result in their energy costs going up or down. With a fixed-rate contract, the price they pay remains the same for the duration of the contract, regardless of market conditions however, there has been cases in the past and recently of some suppliers opening contracts and increasing contracted costs due to market volatility and unforeseen events.

What should I do if I'm moving to a new location?

If a business is moving to a new location, they should notify their energy supplier as soon as possible and start the (COT) change of tenancy process.

Should i consider dual fuel contracts?

Dual fuel contracts, where a business gets both electricity and gas from the same supplier, can sometimes offer cost and convenience benefits, however not all suppliers offer this.

It’s still important to compare offerings from different suppliers to make sure you consider best options available.

Start saving now on your next energy renewal

Discover how our free Energy Health Check can reduce demand and cost.

Start saving now on your next energy renewal

Discover how our free Energy Health Check can reduce demand and cost.