Let’s talk about the importance of choosing the right small business electricity plans for your business. Whether you work from home, own a car shop, or decide to start your own cafe, there’s no denying that running a small business comes with its fair share of challenges.
From managing daily operations to dealing with customers and suppliers, your to-do list seems never-ending. Amidst all these responsibilities, the last thing you need is the added worry of utility bills, particularly electricity costs.
In most cities around the globe, selecting the right electricity company for your small business can make a world of difference. It can mean having extra cash to spend on essential supplies or being tightly constrained by a limited budget. We understand that keeping a business afloat, especially a small one, is no easy feat in today’s economy. The margin for error is slim, and you can’t afford to make costly mistakes.
That’s why making the right choice when it comes to your electricity provider and plans is crucial from the get-go, ensuring you don’t get locked into an expensive and inconvenient contract. So, in this post, we will show you the importance of small business electricity plans and how to get the right one for your business.
Table of Contents
Understanding Your Small Business Energy Contract
If you are in the market for the first time to shop for small business electricity plans, chances are that you might become overwhelmed by the number of terms and jargon you are not familiar with. And it’s important you understand what each of them means so you can choose the best plan for your business. So, let’s quickly clear the air on some key terms in your energy contract.
Billing period
This refers to the time between each billing cycle. Most times, you have the chance to negotiate this with your chosen electricity supplier when settling your contract. For small business owners, they may want to opt for shorter billing periods to help them keep their spending habits in check.
Unit charge
This is the amount you are charged per kilowatt-hour for energy used by your business. As a small business owner, your aim should be to go for a provider that offers low unit rates. In fact, that is what will set many providers apart when comparing them.
Standing charge
This is the daily fixed cost that is usually included in your monthly bill. It is there to cover the maintenance of your meter.
Agreed Supply Capacity (ASC)
This is not usually a major concern for most small businesses. But if your business is the type that consumes a high amount of electricity, you may want to pay attention to it. The ASC is the agreed maximum demand of electricity you agreed to be supplied by your provider. When you go above this agreed capacity, your power may be abruptly cut, or you can be charged excessively for it.
How Does Business Energy Differ From Domestic Energy?
If you’re a new business moving into your premises for the first time or simply unfamiliar with the world of business energy, it’s natural to assume that choosing a commercial energy deal is similar to selecting a household energy plan. However, there are significant differences between the two. Let’s explore some key distinctions between them:
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Cheaper Rates
When it comes to domestic energy, suppliers buy and sell electricity on a monthly basis. In contrast, business energy is purchased in bulk, ensuring a supply that lasts for the duration of your contract. This bulk purchasing can often result in a cheaper unit rate for businesses.
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Business Energy Contracts are Longer
While you have the flexibility to choose between fixed and variable rate tariffs for both domestic and business energy, all business energy contracts have an agreed term, which can sometimes extend up to five years.
However, this also means that you typically cannot seek a new deal until your current contract enters its “renewal window,” usually between one and six months before its scheduled end date.
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Business Energy Contracts Have No Cooling-off Period
When switching domestic energy providers, you always have a cooling-off period of about 14 days. This window allows you to cancel the contract with your present provider without incurring any penalties.
But unfortunately, this luxury doesn’t extend to business energy deals. Once you’ve committed to a contract, there is no cooling-off period, putting more emphasis on the importance of making the right choice from the start.
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Separate Contracts for Your Gas and Electricity
While domestic suppliers often offer joint contracts for both gas and electricity, potentially saving you money, the same convenience may not apply to your business energy contract. Typically, businesses have separate contracts for gas and electricity, which means you’ll need to manage them individually.
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Business Energy Deals are Supplied on a Case-by-Case Basis
Unlike domestic energy, which follows a more standardized approach, business energy is a highly tailored process. Suppliers carefully assess the unique needs of each business and create customized quotes based on those requirements. This personalized approach ensures that businesses receive energy plans that align with their specific demands.
Fixed-Term vs Variable-Rate Tariff: Which Energy Contract Is Best for You?
In other to save a good deal on your energy bills, you need to choose the right small business electricity plans for your business. In most cases, you will have the chance to choose between fixed-term or variable tariff plans. Each of these comes with its own unique pros and cons. So, let’s consider them.
Fixed-term Contract
Although the name says ‘fixed’, it doesn’t mean you will pay a fixed amount for your energy usage. It simply means you get charged a set price per unit (kWh) you use. The actual cost will vary based on your usage. This type of electricity plan comes with its own pros and cons. Let’s see them.
Pros
- You don’t have to worry about a rise in wholesale prices
- Very cheap because suppliers lower the rates for customers
- Makes it easier for you to budget for your utility
- High competition among suppliers, which makes you enjoy a wider selection of deals
Cons
- If wholesale prices fall, you may not be able to enjoy a better deal
- Includes automatic rollover, which means you could roll onto a more expensive plan
- In case you find a better tariff elsewhere, you will need to pay exit fees
Variable-rate Contracts
With these types of contracts, your unit rates are based on market activities. That means if there is an increase in market price, you will most likely end up paying more. On the other hand, if there is a drop in wholesale prices, you will also be able to enjoy better deals on your electricity plans.
Pros
- Should there be a fall in wholesale energy prices, your business will benefit hugely from it
- You can leave at any time since you are not tied to any contract
- You can also switch to a different plan without any consequences
- No exit fees for switching to a new provider
Cons
- Unlike what most people think, prices usually rise more often than fall
- Keeping an eye on wholesale energy prices is time-consuming and can take a toll on your business
- It is harder to budget since you are not sure what future energy prices will be
Tips for Choosing the Right Small Business Electricity Plans
Selecting the right electricity plan for your small business is vital to ensure cost efficiency, reliability, and smooth operations. To help you navigate through the myriad of options, consider the following tips:
#1: Assess your Business Needs
Begin by understanding your business’s energy requirements. Take into account factors such as the size of your premises, the type of equipment you use, peak energy usage times, and any specific energy demands unique to your industry. This evaluation will lay the foundation for choosing an electricity plan that suits your business’s specific needs.
#2: Compare Pricing Structures
When comparing small business electricity plans, don’t solely focus on the advertised rates. Look beyond the surface and consider the pricing structure of each plan. Some plans may have a higher unit rate but offer lower standing charges or vice versa. Analyze your business’s consumption patterns and estimate the impact of different pricing structures on your overall energy costs.
#3: Understand Contract Terms
Carefully review the contract terms and conditions of each electricity plan. Pay attention to contract lengths, early termination fees, and renewal procedures. Longer contracts may offer more stability, but they can also limit your flexibility if your business needs change. Assess the trade-offs and choose a contract term that strikes the right balance between stability and flexibility.
#4: Consider Renewable Energy Options
As sustainability gains importance, consider electricity plans that incorporate renewable energy sources. Renewable energy not only helps reduce your carbon footprint but may also provide long-term cost savings. Some providers offer green energy plans or options to purchase renewable energy certificates (RECs). Check the feasibility and benefits of incorporating renewable energy into your small business’s electricity supply.
#5: Evaluate Customer Support
Reliable customer support is crucial in case of any issues or concerns. So, ensure you research the reputation of any electricity provider you intend to choose in terms of their responsiveness, availability, and quality of customer service.
Check customer reviews, ratings, and feedback to gauge their overall customer satisfaction levels. Opt for a provider known for prompt and helpful customer support to ensure a smooth experience. You will be grateful you did down the line.
#6: Look Out for Flexibility
Business needs can change over time, so it’s important to choose an electricity plan that offers flexibility. Look for plans that allow you to adjust your energy usage, upgrade or downgrade your plan as needed, and provide options for additional services or tailored solutions to accommodate your evolving business requirements.
#7: Seek Expert Advice
Navigating the complexities of electricity plans can be overwhelming, especially for small business owners focused on numerous other tasks. Consider seeking advice from energy consultants or brokers who specialize in assisting businesses with finding the most suitable energy plans.
These experts can analyze your business’s energy needs, negotiate contracts on your behalf, and help you make informed decisions.
FAQs
What Happens When My Business Energy Contract Ends?
When your business energy contract ends, you typically have a few options. You can choose to renew your contract with your current provider, switch to a new provider, negotiate a new contract with improved terms, or explore different energy plans available in the market.
Make sure you review your options and make an informed decision before your contract’s expiration to ensure you continue to receive the best energy deal for your business.
How Much Electricity Does a Small Office Use?
The electricity consumption of a small office can vary depending on several factors, including the size of the office space, the number of employees, the type of equipment used, and the nature of the business operations. But on average, a small office can consume anywhere from 5,000 to 20,000 kilowatt-hours (kWh) of electricity per year.
What is the Meaning of kWh?
kWh stands for kilowatt-per-hour. It is a unit of measurement used to quantify electricity consumption or production. A kilowatt-per-hour represents the amount of energy consumed or produced when a power of one kilowatt (1 kW) is used for one hour (1 hour).
It is commonly used to measure the usage of electricity in homes, businesses, and industries. For example, if a device with a power rating of 1 kilowatt (1000 watts) is used continuously for one hour, it would consume 1 kilowatt-per-hour of electricity. The kWh is a standard unit for billing purposes and helps track and calculate energy usage accurately.
What Other Small Business Electricity Plans are Available?
Apart from fixed-term and variable-rate plans, there are some more small business electricity plans in the market. Some of them include:
- Time-of-use plan: This offers different rates based on the time of day and the season. Electricity usage during off-peak hours generally has lower rates, while peak hours may have higher rates.
- Green energy plan: Green energy plans focus on providing electricity generated from renewable energy sources like solar, wind, or hydro power. These plans support environmental sustainability and can be appealing if your business wants to reduce its carbon footprint.
- Demand response plan: This allows businesses to participate in energy conservation efforts during times of high electricity demand. In exchange for reducing electricity usage during specified periods, businesses may receive incentives or lower rates.
- Bundled services plan: Some electricity providers offer bundled services that combine electricity with additional offerings such as energy efficiency consultations, smart metering, or energy management tools. These plans can provide added value and support for optimizing energy usage.
What are the Largest Electricity Providers in the US?
- Duke Energy
- Exelon Corporation
- NextEra Energy, Inc.
- Southern Company
- Dominion Energy
- American Electric Power (AEP)
- Pacific Gas and Electric Company (PG&E)
- Xcel Energy
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