The majority of businesses will be on a fixed rate tariff, which means that the rate paid for energy remains consistent over the contracted period of time.
It is a very popular option for small companies, as it means that energy costs can be budgeted for easily.
The variable energy tariff means that the price per unit of energy is not fixed and could move either up or down, so you will benefit from a drop in prices but should also plan for potential rises as a result of fluctuating wholesale energy or other industry costs. There are usually no exit fees with variable tariffs so you can move tariffs at any time and they are best if you don’t want to be tied into a specific contract and need more flexibility.
According to Luke McCarthy, former Commercial Broker at Make It Cheaper, “those businesses on variable tariffs tend not to be getting the best deals in terms of price. For electricity a variable tariff can go up to 25p per unit, but on a fixed rate tariff it will remain at 11p or 12p a unit.
“There are a number of different circumstances in which a business might find itself paying a variable contract. One of these is when the contract expires, so they might be in a one-year contract and when that finishes they are moved on to a variable rate tariff, or it might be that they have moved into new premises.”
In the next instalment of our energy series, we take a look at the importance of customer service…