DCP228 and Business Electricity
What is DCP228? DCP228 is a regulation to be introduced by Ofgem in April 2018 which will change the way busin...Read More
Long-term business energy contracts begin at 24 months and can last up to 5 years in some cases. Using a longer time period can provide strong price advantages for businesses, as well as renewal benefits.
Firstly, longer contracts allow businesses to lock in low energy prices for an extended period of time before they change. Gas and electricity rates change on a daily basis, and if prices were to suddenly increase, having a longer contract will delay your business from having to pay higher energy rates until it is time to renew.
Locking in energy prices also allows your business to budget more accurately when organising finances. Having an idea of what you are likely to spend on energy can provide a clearer insight into cost projections, meaning you can operate with greater accuracy.
However, this benefit is more applicable to customers who know how much energy they are likely to use within a 12 month period. If your actual usage amount exceeds the agreed usage within your contract, you could be facing high charges from your energy supplier.
Long-term contracts also allow you to stay with an energy supplier you are happy with for a longer period of time, and if you’ve found a great deal on energy rates, then you can enjoy them for longer. It also means you don’t need to renew your business energy contract as frequently either, which we understand can be a frustrating task.
SwitchMyBusiness.com allows you to switch without any hassle, finding and comparing energy tariffs from a wide range of gas and electricity suppliers to make sure you get the best deal for your business. Plus, when it’s time to renew your contract, we’ll call you to discuss your options and help you find another great energy plan.
Shorter contracts typically last no longer than a year, and are often initially cheaper than longer contracts. However, with short-term contracts, there is the risk of price increases occurring when it is time to renew your business energy tariff. Under these circumstances, this may mean your business would be paying more for its energy than if you had used a longer term contract.
However, shorter contracts do present a lot of benefits to businesses that longer contracts cannot offer. Short term contracts can be a great choice because:
When entering into an energy contract, you need to tell your supplier how much gas and electricity your business is likely to consume over the agreed period. This estimated usage figure may change over time as operations may expand or decrease, and if you have taken a multi-year contract with a supplier, this may cause problems for your business.
If you go over the usage amount you are contracted then you could face hefty charges from your business energy supplier which could increase your gas and electricity costs dramatically.
Using a short-length contract allows your business the flexibility to find a higher usage contract if its demands increase without as much time to wait between switching. Whereas a longer contract would delay this opportunity and you may end up incurring more charges over an extended period of time if your usage consistently exceeds the figure that has been agreed.
We understand that one energy supplier may work well for one business, but another business may not have the same positive experience with the supplier. Shorter term contracts can really help in this situation as it allows businesses the freedom to search around for a supplier they are happy with.
If a business customer is dissatisfied with the service they are receiving from a supplier, using a short-term contract means they do not have to wait too long before switching to a supplier who meets their needs better than other providers.
If you plan to move business premises soon, using a short-term contract is the most logical option. Short term contracts incur lower cancellation charges than long-term contracts, so if you were to move premises while still within an agreed contract, the charges you incur would not be as high.
As a new business, it can be hard to gauge how much energy you are likely to use if you have not been operating for long enough to produce appropriate estimations. Using a short-term contract in this situation can benefit your business by allowing it to monitor how much energy it is likely to consume within a year, and then you can find a longer term contract that is more suited to its usage needs upon renewal.
Short-term energy contracts are worth considering for new businesses as they can be relatively fragile, circumstances may arise where the business may not succeed. Suppliers are likely to apply a charge if you default on a contract, no matter what the reason is. So if your business does not last, you may still be out of pocket.
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