Energy prices for many consumers decreased in October following the lowering of the energy price cap by the energy regulator, Ofgem.
Ofgem update the price caps every year in February and August, to ensure the levels of price cap that come into effect in April and October are reflective of market conditions.
Dealing with utilities for non-domestic customers is our bread and butter, so in our latest feature we explore what the price cap means for businesses.
How does the price cap work?
The price cap works by limiting the unit rates and standing charges applied to prepayment, default and standard variable rate tariffs for residential customers. Price cap levels are reviewed twice annually to ensure prices are reflecting wholesale cost estimates for energy, potentially leaving you vulnerable to fluctuations every six months.
What does it mean for your bills?
It’s important to note, the cap will not limit your overall energy bill as this is based on how much energy you use; it will however cap the amount your energy supplier can charge you per kWh for electricity and gas you use in your home. You don’t have to apply to benefit from the cap, you’ll be automatically enrolled if you fit the criteria.
So, if you are not locked into a contract with your supplier and you do not increase the amount of energy you use, it’s very likely that you’ll be one of the 11 million customers Ofgem expected to benefit from the cap.
What about businesses tariffs?
According to the regulator, the energy price cap exists to ensure consumers are paying fairer prices for our electricity and gas. And, whilst this is great it does make you wonder why such caps do not exist for business tariffs.
For business energy contracts, suppliers have no limit to the amount they can charge per unit if you aren’t locked into a contract. So, the excuse of not having time will inevitably turn into not having money if you aren’t focussed on renewing your business’ deals.
However, the fact that there are around 11 million consumers set to benefit from the cap and over 1.2 million UK businesses, many of whom are on variable rates, it’s clear that there is a problem in the energy market. Whether it is inertia, issues with the switching process or just a lack of awareness of the benefits of contracts, energy is costing a lot of customers much more than it should.
Whilst it’s clear that the regulator is taking steps to improve things for consumers, little seems to be happening to ensure businesses are supported.
We know that if you’re running a business or even just starting up, you’re likely preoccupied with anything other than your energy contracts (plus, let’s face it – the thought of scouring through prices isn’t exactly exciting!). But, regardless of whether you are a business or consumer customer, the only way to guarantee you aren’t paying more for your energy than you should be, is by shopping around and comparing electricity and gas contracts – we’ll get to how do should do this later.
General guidance from sources such as Citizens Advice, is to shop around and work is underway to reform the switching process and heavy investment in smart meters has begun. But again, this is only applicable to consumers – not businesses.
Next steps for your business
There are many fixed price deals available to both consumer and business users that will provide more savings than the price cap. A fixed contract will also provide protection from possible wholesale price fluctuations which the cap is not guaranteed to protect against. But, in order to guarantee prices, businesses need to switch.
Taking time to speak to a cost saving consultancy to make sure you’re getting the most out of your business bills won’t take up much of your day whatsoever, they take on the responsibility of scouring the market for prices and arranging contracts directly with suppliers on behalf of customers.
The main goal of consultancies like Great Annual Savings is to ensure businesses achieve savings. Whilst working with a range of businesses across the country, the group have developed great relationships with some of the UK’s leading energy suppliers and are able to negotiate the right contracts for your business.
So, how does the process work? It’s as simple as getting in touch, sending us some information on your current energy situation and we’ll take it from there. We’ll get back in touch once we’ve spoken to our energy partners to discuss the right deal and next steps for your business energy. Once you’ve chosen your contract, we’ll work to get it put it place – job done. No more missing out on cost savings.