Overview and key points
Managing energy costs is a critical aspect of running any business. To get the best deal, you need to be aware of what factors drive the wholesale energy market , have all the correct information to hand and understand which suppliers to approach. This guide from Heres The Plan breaks down the key points to consider when negotiating energy contracts.
Start with the basics: What do you need?
The first step is understanding your energy supply type and consumption. For electricity your MPAN (Meter Point Administration Number) identifies your supply category—domestic, small business, or large business. Different suppliers specialise in different sizes of business so accurate information on your annual usage of electricity or gas is vital. Look at invoices from the last 12 months or consult your current supplier to get precise figures.
Timing matters
The timing of your contract renewal can make a significant difference to the rates you secure. Energy prices in the UK fluctuate with market conditions driven by geo-political factors, so aim to lock in when the market dips. Remember, the larger your energy usage, the bigger impact getting the timing right will have. Adopting an “always renewing” mindset can help you stay ahead, rather than tying decisions to a set schedule.
Fixed vs. flexible contracts: which is right for you?
Choosing the right contract style depends on your business’s risk tolerance and energy consumption:
- Fixed contracts: These provide price stability by locking in rates, which is great for budgeting. However, they may limit savings if market prices drop.
- Pass-through contracts: These separate fixed and variable costs, offering potential upfront savings but exposing you to market price changes.
- Flex contracts: Best for businesses with large energy usage (3GW+), these allow purchasing energy in tranches, helping manage market risk.
Consider green energy options
If sustainability is part of your business ethos, explore green energy options. Look for REGO-backed renewable electricity or green gas sourced via anaerobic digestion. Keep in mind that these options often come at a premium but align with corporate social responsibility goals.
Don’t overlook the details
Small adjustments can lead to meaningful savings. For example, ensure you’re not overpaying for services like Authorised Capacity or standing charges, especially if you have half-hourly metering. Investigate whether your business qualifies for VAT reductions and Climate Change Levy reductions or exemptions. If you have a large electricity supply and require a Meter operator contract (MOP) arrange this yourself rather than having it bundled into your supply contract.
Manage credit and supplier relationships
Your credit score can influence the rates and terms offered by suppliers. If your credit is poor, you may face a limited choice of suppliers. New startups or businesses with no credit history should be prepared to provide a security deposit.
Professional help: Is it worth it?
You can manage energy contracts yourself, but professional support may save you time and money. Consultants typically provide comprehensive advice and ongoing support, while brokers and online platforms focus on securing rates but may offer limited aftercare.
By understanding your needs, keeping an eye on market trends, and timing your decisions carefully, you can negotiate contracts that align with your business goals. Remember, even small savings can add up significantly over time, so stay informed and proactive.
If you would like help navigating the energy market please get in touch with Heres The Plan who will be happy to provide a no obligation review of your current arrangements.
Get in touch:
theteam@herestheplan.co.uk
Tel: 01783 474630
www.herestheplan.co.uk