How to set up your business energy contract.
So, you’ve set up a small or medium sized business (exciting!) and now it’s time to sort your business energy contract. We’re here to make the process feel less confusing.
This straightforward guide will walk you through everything you need to know about setting up a new business energy contract, from understanding contract types to navigating the renewal process.
How do business contracts differ from domestic contracts?
It’s safe to say that business energy contracts are different to your standard home energy deal. The terms, pricing, and regulations for business contracts differ a fair bit. This is because businesses usually have different energy use patterns and needs. Plus, the energy market for commercial customers has different rules.
As a result, for business contracts, there are usually no cooling off periods, separate contracts for electricity and gas, and longer contract terms (up to five years).
Exploring different types of business energy contracts.
When it comes to the different types of business energy contracts, it’s true, there are quite a few! But making energy topics simple is what we’re all about. So, now, we’ll break down the main types of contracts you'll come across when setting up a business.
Fixed rate contracts.
Put simply, a fixed rate contract means your unit rate for energy – the price you pay per kilowatt-hour aka ‘kWh’ – is locked in for the length of your contract. This means the cost per kWh remains fixed no matter what happens to the wholesale market prices.
However, there is a downside. You might miss out if market prices drop a lot, and some suppliers charge exit fees if you need to quit the contract early. Always check the contract terms and conditions you have with your supplier. At E.ON Next, we don’t have exit fees because we like to keep things simple.
Variable rate contracts.
Then there are variable rate contracts. With this type of contract, your unit rate for energy fluctuates with market conditions. Some positives about this is the flexibility it offers and usually, no exit fees because you're not locked into a set price.
However, the main drawback is price uncertainty. Just be aware that your bills could go up or down (at times, drastically) depending on how the wholesale energy market is acting.
We don't offer variable rate business contracts. Instead, we do fixed 1, 2, and 3 year contracts.
Deemed contracts.
Then, there are deemed contracts. These contracts come into play when you move to a new premises and start using energy without formally agreeing a contract with a supplier. As a result, deemed contracts are typically charged at higher rates because they're not a negotiated agreement.
However, there’s good news! In these cases, you're usually allowed to leave a deemed contract immediately without paying a penalty, leaving you to find a more competitive deal.
Out-of-contract rates.
Out-of-contract rates apply when your fixed term energy contract ends and you haven't agreed a new deal, but the terms of your previous contract specify this transition. Much like deemed contracts, these rates are usually more expensive than fixed term contracts that have been negotiated.
Rollover or evergreen contracts.
We don’t offer rollover or evergreen contracts, but some suppliers do. Contracts of this kind automatically renew at the end of a fixed term contract – if you don't take action in time.
Luckily, 'microbusinesses' have some protection in place. Rollover contracts are capped at 12 months and the supplier must give notice. Staying on track with where you are in your contract will help you avoid situations like this!
Flexible contracts.
Flexible contracts are generally designed for larger businesses that use much more energy. These contracts let you purchase energy in batches, taking advantage of market dips. While they offer the potential for cost savings, flexible contracts are also more complex, so you’ll need a good understanding of the energy market.
Choosing the right energy contract for your business.
There are several important factors that come into play when picking the right business energy contract for your needs. Let's take a look at what to bear in mind.
Choosing your contract length.
We’ve already discussed contract types, so now it’s down to you when it comes to choosing your contract length. We offer 1, 2, or 3 year contracts, but some suppliers can offer up to 5 years. Longer contracts offer more price certainty, but you might lose out if prices drop during that time.
Unit rates and standing charges.
Ensure you’re clued up on unit rates – it’s what you pay for each kWh of energy you use. Then there’s the standing charge, a fixed daily fee that covers the costs of getting energy to your location, as well as maintaining the network, and other administrative expenses.
Exit fees and early termination clauses.
It's super important to understand any exit fees or early termination clauses before you sign a contract. These are charges you might get if you decide to leave your contract before the agreed end date. Top tip: always read the fine print to avoid any unexpected costs!
Stay ahead of renewal processes and notice periods.
Keep on track with your contract's renewal process and notice period. They’ll tell you when and how to let your current supplier know if you plan to switch or renegotiate. As a result, you can avoid being placed on expensive out-of-contract rates. Most suppliers are required to provide renewal reminders. Phew!
Beware of auto renewal terms.
Watch out for auto renewal terms, also called ‘rollover clauses’. These terms can automatically renew your contract for another fixed period, often at uncompetitive rates, if you don't take action within a specific window.
Know your meter type.
Your meter type can impact your billing and contract options. Larger businesses sometimes have half hourly meters that send readings every 30 minutes, impacting how your energy use is charged. On the other hand, smart meters provide more accurate billing by automatically sending readings. Explore your options before you get started.
Explore payment methods.
Different suppliers can offer different payment options. However, Direct Debit is usually the most common option and can sometimes come with discounts, while other options might include credit terms or online payments. Do some shopping around and decide what works best for your business.
Consider green energy options.
If the environment is important to your business, why not explore green or renewable energy options? Many suppliers offer renewable electricity for business customers on fixed tariffs, backed by Renewable Energy Guarantees of Origin (REGOs).
Setting up a business energy contract.
When it comes to setting up a new business energy contract, you might be wondering where to start? By following a step by step process, it’s much more straightforward and stress free than you’d think. Let's walk through it now.
Gather your information.
Start by collecting your recent energy bills, annual energy use data, and up-to-date meter readings to ensure accurate quotes and a smooth process.
Get some quotes.
Compare offers carefully and dive into the details. Consider unit rates, standing charges, contract length, and fees to find the best option for your business needs.
Read the terms and conditions.
It’s simple – always read the fine print! Pay close attention to contract duration, rates, fees, and renewal clauses. Plus, ask questions if anything’s unclear.
Understand the setup process.
Once you've chosen a supplier, they’ll manage the setup or switch (if you’re not a new business) for you. It typically takes around 5 working days for 'microbusinesses' and your supply won't be interrupted. Get a quote from us today.
If this isn’t your first business energy contract and you’re moving premises instead, check out the step by step at the end of our understanding business energy contracts guide.
Your business energy contract renewal options.
If your business energy contract is coming to an end soon, it's time to start reviewing your options. Understanding the renewal process will help you get ahead and find the best deals for your business.
Luckily, suppliers are legally required to provide renewal reminders and offer new rates, so you’ll have plenty of notice. This usually happens between 60 and 120 days before your contract’s due to end, giving you time to decide whether to accept the renewal offered or try to renegotiate terms with your current supplier. Of course, there’s always the option to switch to a new provider – it’s entirely up to you. We suggest shopping around and comparing suppliers.
Renew your contract with us.
We keep things simple when it comes to renewing your business contract. You can renew online (subject to eligibility) if you're within 67 days of your contract end date. Alternatively, you can call or email to renew up to 1 year ahead.
Understanding energy brokers and their fees.
Finally, let’s discuss energy brokers, who can be a big help in finding the right business energy contract. However, they come at a price, so it's important to understand how they work and how they get paid.
Energy brokers: what do they do?
Energy brokers act as intermediaries, comparing deals from various suppliers to find a suitable contract for your business. Basically, they do all the tedious work on your behalf, leaving you to get on with the important stuff.
How are their fees charged?
Energy broker fees are usually charged by the supplier. It’s often factored into the unit rate you pay for your energy over the contract's duration. Fortunately, Ofgem now requires that broker commissions are clearly disclosed in business energy contracts, making the process fairer and more transparent for all businesses.
What help is available if I have an issue?
If you face any problems with your energy broker, there are steps you can take. Firstly, try to resolve the issue directly with the broker. If that doesn't work, you can escalate your complaint to the Energy Ombudsman, which provides an independent service for resolving disputes between consumers and energy companies, including issues related to brokers. Citizens Advice can also offer guidance and support.
Ready to switch to us?
Looking to make the switch? Whether you're a small business or a larger organisation, compare our fixed business energy tariffs and consider joining us today.