Understanding Your Energy Contract: A Step-by-Step Guide

Business energy contracts enable companies to reliably power a wide range of appliances, fixtures & even machinery. However, understanding energy contracts can be tricky, especially when it comes to commercial energy contracts.

We’re here to help. Business Energy Claimline has put together this comprehensive guide to business energy contracts for entrepreneurs and business owners. We hope it helps to give you the facts you need to take control of your business energy costs.

Business energy can keep all of the following running:

• Desktop, laptop or tablet computers
• Electric lights
• Heating systems, including boilers and radiators
• Factory machinery

These are only selected examples. The point to take note of is this: your household electricity and gas needs will differ significantly from what you require from a commercial energy contract. 

This helps to explain why the UK Government has recently allocated £45.7 million for lowering corporate energy costs.

As slashing carbon emissions can drive down energy bills too, the Government has also launched the UK Business Climate Hub. This is an online resource aimed at helping companies to take various eco-friendly steps, such as:

• Fetching a higher number of supplies from green companies
• Reducing freight emissions
• Switching to renewable energy, e.g. solar
• Installing EV (electric vehicle) charging points

However, have you taken a close look at your existing business energy contracts? You are likely to need one for electricity and another for gas. This is because dual-fuel policies tend to only be an option with domestic energy contracts.

More to the point, your company could be paying over the odds on its energy supply. One potential culprit is the notoriously persistent problem of mis-selling in the commercial energy market.

Do your outgoings on energy seem strangely excessive? Have you recently arranged any business energy contracts via a broker? By contacting us, you can investigate whether you have a potential case and launch a business energy claim.

Get to Know the Different Types of Business Energy Contracts

When looking for a household energy deal, you will be presented with readymade tariffs and expected to choose between them.

In contrast, a business energy deal is tailored to the individual applicant and their energy usage. To understand more of the aspects that make business energy distinct from domestic contracts, check out our FAQs.

Still, it remains possible to sort business energy contracts into various categories — including:

Deemed and Out-of-Contract

You will typically be placed on a deemed or out-of-contract deal if you take up new corporate premises without signing an energy plan for the site.

As deemed and out-of-contract plans are usually among the most expensive energy deals, you don’t want to stay on any for too long if you can help it.

Fixed-Rate

This would entail you paying a specific, fixed amount for each unit (kWh) of energy the business expends on the contract. It can be shrewd for small businesses to obtain fixed contracts when wholesale energy prices are low.

Variable-Rate

When wholesale energy prices fluctuate, so will the monthly unit rate you pay for energy under a variable contract. Avoid agreeing a variable-rate deal if energy prices would likely rise significantly during the contract term.

Rollover

If a contract expires without any renewal provisions, the supplier may continue providing you with energy via a rollover contract. Since a rollover contract is relatively pricey, you should switch to an alternative as soon as possible.

Renewable energy

Through ‘going green’ with your business energy contracts, you can do your bit for the planet as well as future-proof your company from eco-friendly taxes and regulations that could be implemented further down the line.

Standard Business Energy Contracts Terms and Length

Key to understanding energy contracts for your business is knowing how long these plans typically last and other terms and conditions attached to them. Here are several distinctive features often typical of business energy contracts:

• Long length: Commercial energy contracts can run for as short as a few months or as lengthy as five years. A domestic energy plan on the other hand can come with a fixed term of just one month.
• Few chances for switching: While domestic consumers get a ‘cool off’ period where they can cancel an energy contract without being fined, you could struggle to get out of a business energy deal before its expiry date.
• Relatively high costs: If you source the contract from an energy broker, they could add their commission without telling you — a type of mis-selling that has long gone largely unchecked in the business energy market.

Some energy suppliers may offer brokers juicy financial incentives on the condition that they tie clients into long business energy contracts. As a result of pushing these long contracts, their clients can end up paying more for their energy than they really need to.

Do you think you may have been mis-sold your energy contract by an energy broker? Contact Business Energy Claimline today to see whether you’re eligible and find out what you could be owed.

Understanding Contract Pricing Structure

Here is a guide to the energy contracts’ pricing structure and how it can often be broken down into these smaller financial chunks:

• kWh rate: The ‘kWh’ here means ‘kilowatt hour’, a metric for measuring how much energy your company consumes. In this context, ‘kWh’ represents a ‘unit’, which is why the kWh rate can also be dubbed the ‘unit rate’.
• VAT: Domestic consumers are — compared to business owners — not liable to pay as much VAT on energy. That’s because business energy contracts do not come with the same exemptions, and instead carry VAT of 20%.
• Climate Change Levy (CCL): Though many businesses must incur the CCL at the main rates, you can pay a smaller Climate Change Levy in some circumstances outlined on the UK Government website.
• Standing charge: For every day of your contract, you will need to pay the energy supplier a standing charge for them to maintain their service to you. A supplier omitting a standing charge may hike the unit rate.
• Additional fees: If you decide to end the contract early, a termination fee may apply. Also, if you get the deal from an energy broker, they might make money from fees they insert into your energy bills.

Renewable Energy Options Going Forward

In this next part of our step-by-step guide to energy contracts, let’s explore renewable options for business energy. Renewable energy could be a potential business energy option to reduce your company’s carbon footprint, lower your corporate energy bills and even boost your brand’s appeal.

Various business energy contracts utilise renewable energy — with the following forms of potential options:

• Wind: Impressively, wind power was responsible for 26.8% of all electricity generated in the UK during 2022. Wind energy comes about from a wind turbine’s blades turning, resulting in kinetic energy.
• Solar: Solar panels — otherwise referred to as photovoltaic panels — capture sunlight and harness electricity from it. Contrary to what you may have assumed, solar panels can generate power even when the sky is grey.
• Gas: Yes, gas can be renewable. It can be made more eco-friendly with the addition of biomethane. Some business energy providers might also use carbon offsetting to provide ‘carbon neutral’ gas.
• Hydroelectric: This kind of renewable business energy can be created by allowing water to flow through a turbine and make it turn, leading an electric generator connected to that machine to kick into action.

All in all, renewable electricity can aid businesses in generating power more cost-effectively — as can an array of government schemes offering loans and grants for spending on energy efficiency equipment and measures.

Ending the Contract: Termination & Renewal

Business energy contracts can be hard to get out of, due to ‘tie-in’ clauses often included. However, you may be able to switch between business energy suppliers in the following scenarios:

Your Current Contract Lacks a ‘Tie-In’

Be careful here. Even if the contract’s wording doesn’t use the specific phrase ‘tie in’, it may still cite the same kind of clause, just in a different way.

You Have Recently Started Renting a New Workplace

In the process, you may have been lumbered with a ‘deemed’ tariff you didn’t specifically opt for. Thankfully you would be eligible to change with little fuss.

Your Existing Supplier Has Configured Your Energy Contract to Automatically Renew Itself Come a Certain Date

If this renewal provision is in place, you would still thankfully be able to abandon the contract while dodging termination fees. Indicate to the energy supplier in advance that you do not want to renew the contract as its existing term ends. 

To help yourself avoid getting caught out by an automatic renewal, remember the renewal date well beforehand. Also, be on the lookout for the supplier potentially sending you a renewal letter in the post as the date approaches.

Of course, if you are happy with the contract, you could just let it automatically renew itself. Need to manually renew a business energy deal? That might be an option via the supplier’s website, over the phone or by post.

Choosing the Right Business Energy Supplier

You might be looking to obtain business electricity and gas deals for the first time or find better-value alternatives to current business energy contracts. Either way, choosing between business energy suppliers can be arduous.

It is important that you don’t select a supplier purely based on the energy price. Here are several other factors you would be well-advised to weigh up:

• Customer service: Online reviews could give you valuable insights into this. Does the supplier have a history of replying promptly to customers’ concerns? Has the company garnered negative publicity in the news?
• Billing accuracy: The supplier might be able to ensure this by providing your workplace with a smart meter if there isn’t one there already. A smart meter can send readings automatically for up-to-date results.
• Free incentives for switching: Are you set to jump between business energy suppliers? It could sweeten the deal if you find a supplier ready to hand you free goodies — like cash — for making the change.

Business Energy Contract Review Checklist

How can you tell if you have the ‘right’ contract for your corporate needs? Of course, exactly what those needs are will very much depend on the nature of your business. Ideally, an existing or prospective energy deal will tick these boxes:

• Be low (at least relatively) in price
• Give you flexible, fee-free means of cancelling the contract
• Offer a ‘cooling-off’ period that would let you easily axe the deal early
• Save you having to pay extortionate additional costs
• Enable you to source environmentally friendly energy

Approaching an energy broker can help you to time-effectively secure an attractive deal. Still, remember to ask the broker how they will make money from it. Will it be via a one-off charge or regular payments?

Common Red Flags to Avoid in Your Energy Contract

Given the wide range of business energy contracts available, it can be worryingly easy to select the wrong one. Here are some examples of mistakes that company owners can make when choosing or using energy deals.

• Not reading the terms and conditions thoroughly: This bears emphasis because, as you may have few opportunities to drop the contract without paying a penalty, you should double-check the Ts and Cs beforehand.
• Misinterpreting the word ‘flexible’: The word ‘flexible’ might look appealing, but how is the supplier using it? It can mean a deal that is easy to cancel, but also one where the costs could perilously rise during the contract term.
• Ignoring unusually high energy costs: If those you incur are heftier than those you know are being paid by businesses similar to yours, this could be a sign that you are missing out on crucial financial savings.

As a well-reviewed legal firm based in St Helens that specialises in handling business energy claims, we would be happy to investigate whether you could have a strong one yourself. We could also pursue it for you.

Are You Eligible to Claim? How to Check

If you have always been pressed for time as a company owner, you could have opted to arrange business energy contracts via brokers.

Unfortunately, after finding you an energy deal that is to your liking, a broker may have added their own commission without telling you. This kind of commission is only legal if the broker discloses it to the buyer at the point of sale. This could leave you overpaying on energy broker commissions.

How can you ascertain whether you are eligible for compensation resulting from a mis-sold business energy deal? We urge you to closely consider your circumstances and seek our expert team’s thoughts.

What if you do turn out to have a claim? A lot of money could be waiting to be recovered if you:

• Sourced contracts for an energy-intensive business
• Landed especially lengthy contracts
• Used business energy contracts to power multiple locations

When you do initially reach out to us, be sure to provide us with the energy broker’s name as well as the address to which the possibly mis-sold contract is registered. That way, you can assist us in expediting your application.

Secure the Compensation Owed to You with Business Energy Claimline

This guide to energy contracts has explained various ways for businesses to save money on them — but comprehensively understanding energy contracts also means knowing when brokers may have concealed commissions in them.

Are you struggling to make ends meet with business energy contracts you originally arranged with a broker? It’s worth investigating whether the deals were mis-sold in a manner that has left you eligible for compensation.

If we do find this to be the case, you can trust us with all of the heavy-duty legal work necessary for bringing your claim to court. Just fill in and submit our contact form to launch your bid for a rebate.