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Energy contracts can differ massively depending on if you’re a domestic or business customers, and this can make organising your business’s gas and electricity supply much more difficult if you are not familiar with commercial energy contracts.
In this guide, we explain the differences between business and domestic energy contract to help you understand why the process of organising both contracts is so dissimilar.
Contract lengths between domestic and business customers can vary greatly. Typically, domestic customers are offered gas and electricity contracts that last between 12 and 24 months. However, business energy contracts can be much more long term and run over 36+ months.
Businesses also find it much harder to cancel energy contracts, facing high fees from suppliers when trying to terminate contracts early. Domestic customers may also be charged when requesting an early termination, however they will not be as high as commercial cancellation charges.
Household energy contracts are more frequently allowed to rollover month to month after the agreed time period has finished, whereas business customers are usually placed onto Out-of-Contract rates if they do not renew or switch contract. This can be incredibly costly as Out-of-Contract rates are much more expensive than contracted energy rates.
Prices between domestic and business customers differ on several levels. Firstly, price fluctuation is much more common for commercial customers, with rates increasing and decreasing daily as driven by the market. Whereas domestic customers typically face price changes on an annual basis. This difference influences the choice of contract type for a lot of businesses, with many choosing fixed rate energy contracts over variable price contracts so that they can budget more accurately and are not hit if gas and electricity prices dramatically increase.Price fluctuation can make the process of organising business gas and electricity tariffs more confusing as energy quotes soon expire as prices increase and decrease. This is why we advise customers to act quickly when comparing quotes so they avoid the disappointment of losing deals they were happy with before prices changed.
Prices per unit of gas and electricity can appear to be cheaper for businesses than domestic customers. This is because suppliers are able to sell much higher volumes of units to businesses as they usually consume more gas and electricity than an average household. Businesses can also be offered energy rates tailored to their needs. Domestic customers are not offered tailored rates, and are charged the same rates as the rest of their region.
VAT is also different in business energy contracts compared to domestic contracts. Businesses are required to pay 20% VAT on their energy tariffs, as well as a Climate Change Levy (CCL). Domestic customers only pay a reduced amount of 5% VAT on their gas and electricity bills and are not required to pay a CCL.
Suppliers find it more difficult to predict business energy consumption compared to domestic users. Business customers will use gas and electricity at different times during the day, whereas domestic customers’ usage is much easier to predict due to typical levels of usage throughout the day. This is why suppliers offer separate rates to domestic and commercial customers as their behaviour is usually very different.
However with the introduction of half hourly metering, electricity suppliers can accurately monitor how much energy their customers consume. This will make negotiating future contracts much easier as suppliers can receive a clear picture of how much electricity potential customers consume.
Most people are familiar with cooling off periods offered by domestic energy suppliers. A business will set a period within which a customer has the option to cancel their contract if they no longer wish to continue with it. Business customers are not offered this option by suppliers, and must be absolutely certain that they want to enter into a contract as they are considered to be completely capable of understanding what they have agreed to with their chosen energy suppliers.
It is clear that comparing business energy tariffs to find the best deal can be a confusing task if you don’t know what to expect. However, SwitchMyBusiness.com is here to help! Our team of energy switching experts will happily guide you through the comparison process so you can be certain you’re getting the best quotes for your business energy plan. To compare quotes today, simply enter a few quick details in our online comparison service or call us directly on 0800 411 8830.
Kay was extremely helpful and…
"Kay was extremely helpful and efficient, in terms of both advice and setting up our account. Would recommend 100%."This review was posted by customer on the 24th of November 2020
After Scottish Power changed our…
"After Scottish Power changed our business rates half way through the contract we were in set up by Switch My Business, we spoke to Natalja and she helped us sort this issue. Unfortunately, Scottish Power wouldn't play ball and were not agreeing to let us out the contract. Natalja worked extremely hard to sort this out for us and even put a claim in with them for the out of contract rates they put us on as one advisor at Scottish Power said they would refund the difference then another said they would not, along with plenty of other issues and broken promises along the way. It was a long and pretty painful process but Natalja did not give up and we have won the claim against Scottish Power. Very happy with the service Natalja provided."This review was posted by Sara on the 19th of November 2020
Prompt & efficient service from Stephen…
"Prompt & efficient service from Stephen who really went into all the details in a very short period of time. I would definitely use SMB again. Thank you Stephen!"This review was posted by Jackie on the 18th of November 2020
"Dealt with Bhavni, she was also extremely helpful, patient and dealt with my case in a very professional way. Answered all my questions promptly and got the best rate for our business. Highly recommended!"This review was posted by S. Amin on the 17th of November 2020
Pleased with switch my business
"Pleased with switch my business, Arron was very helpful, found the best tariff and always responded quickly to emails."This review was posted by Eve Gallagher on the 16th of November 2020