Is Business electricity cheaper than domestic energy?

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* Figures based on 8,254 contracts arranged in 2016 when compared to prices or renewal quotes of existing suppliers.

A question we hear often is “is business energy cheaper than domestic energy?” This is not a straightforward question to answer as there are a number of differences between the energy supply at a business premise and the energy supply we have at home. Read on as we explore some of the differences between both.

Business Energy Prices Can Change Often

The main difference between business and domestic energy prices is that business energy prices can change on a daily basis and are linked to the daily wholesale prices unlike domestic energy prices. A business could get a quote one day and then a few days later find that the price has either risen or dropped significantly. This is different for domestic energy prices which tend to be stable for around 6 months at a time, unless there is a significant move in the markets and suppliers announce price changes.

Businesses and Households Pay Different Rates of VAT On Energy

Business energy rates have a VAT at the current rate (20%) whereas domestic energy rates have a VAT charge of 5%. Businesses also pay the additional charge of Climate Change Levy, which at the current rate is charged at £0.47p/kWh for electricity and 0.164p/gas. Taking these charges and factors into consideration, business energy rates can vary substantially to domestic rates although business electricity and gas contracts are usually tied to a longer term than domestic tariffs.

Business and Domestic Electricity Meters are Different

The way that business and domestic energy consumption is monitored is different. For business energy, consumption is linked to the meter profile, which is the first two digits of the meter reference number (00-08). Prices can vary significantly depending on the profile so it is important for businesses to ensure that they have the correct meter installed for their requirements.

Click here to see the different types of domestic energy meters.

Business Suppliers Differ in How They Buy Energy

With business energy some suppliers buy the required amount of energy for that particular contract, meaning that they have secured the energy at the price at the time. Other suppliers buy energy in bulk up front, before customers have signed a contract. Both of these options can affect the price that businesses pay for their energy. Also, some business energy tariffs may have a minimum or maximum consumption per year for the duration of the contract. If these consumption levels aren’t reached they could lead to an additional charge at the end of your energy tariff contract so it is worth checking before signing up to a new contract.

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