What’s the difference between business and home energy?

September 12, 2019

The energy market is rapidly changing, with new technology disrupting the way customers engage with their bills. While the home energy market has experienced a revolution in how customers and suppliers interact though, the business energy market has remained relatively unchanged.

Business energy comparison specialists, Love Energy Savings have sought to balance this discrepancy.

“We’re dragging the business energy market into the 21st century”, says CEO and founder, Phil Foster. “For years suppliers have taken advantage of the unregulated nature of the business energy market. We’re the vigilantes, using technology to level the playing field”.

The information below will give you the upper hand when negotiating with your supplier, alternatively use a trusted business energy comparison company to secure a fair price for your business.

The level of regulation

The main difference between the domestic and business energy markets is the level of control Ofgem, the market regulator exerts. Historically, Ofgem has been less reluctant to intervene in the business energy market, focusing their energy instead of protecting vulnerable customers in the domestic market. This means that in the business energy market, suppliers and third-party intermediaries (TPIs) have had carte blanche to operate with impunity and while many providers treat customers fairly some have taken advantage of business customers’ energy ignorance, intentionally making the switching process opaque, misselling contracts and charging and applying excessive commission rates. The Competition and Markets Authority believe this malpractice is costing business energy customers an extra £500 million a year.

Love Energy Savings formed in reaction to the widespread exploitation. Phil Foster again.

“I’ve been fighting for stricter regulation in the business market for 10 years.” Founder and CEO, Phil Foster. “For one, it would wipe out half our competition, but it would also increase engagement in the switching process as more customers would feel confident that the price they are quoted is fair and therefore worth their time exploring”.

Ofgem has recently called for a review into the microbusiness market; however, the broader market is still vulnerable. Until stricter regulation is in place, we recommend using a trusted business energy site comparison.

Cooling off periods

This is the grace period providers offer in which you can cancel your contract after the contract start date, without fear of reprisal. In the domestic energy market, a cooling-off period is standard practice and is usually 14 days from contract start. In the business energy market, business energy suppliers do not offer cooling-off periods, and once you have agreed your contract, even verbally, you will be obliged to see that contract through to the end or risk paying a hefty exit fee. This means business energy customers must make doubly sure they are happy with the terms of their new contract before agreeing to it.

Cost

Businesses typically pay a cheaper per unit rate for their energy. This is because the business energy market, like any other commodity, is an economy of scale and businesses tend to be higher energy users. There are, however, certain taxes imposed on business energy which do not apply to domestic users and may affect your bill.

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VAT

Charged at 20% for business customers and 5% for domestic, VAT is a government charge incorporated into your bill by your supplier. Some businesses are exempt or can apply for a discount on their VAT; this depends on your usage, property and business type – use this guide to see if  you can apply for an exemption. The VAT is also exempt from a tax refund and although it is technically a business – to – business charge, you cannot claim it back at the end of the tax year.

The climate change levy

A governmental tax issued by the HMRC, the Climate Change Levy (CCL) was implemented in 2001 as an incentive to encourage energy efficiency within businesses. It is charged on a per-unit basis and is designed to reduce your overall usage. This year (2019) the CCL is increasing by 45% and 67% for electricity and gas respectively. Companies using electricity generated from renewable sources used to be able to apply for exemption from the charge, however, the government withdrew this exemption in 2015, and now fossil and renewable tariffs are equally subject to the charge.

Dual fuel tariffs

Unlike home energy, dual fuel is not available in the business market. This means, if your business uses electricity and gas, you’ll need to apply for two separate contracts. Not all suppliers, provide gas and electricity and one supplier might be cheaper for one than it is the other. Checkatrade’s main advice is not to make a snap decision when it comes to your business energy or to be defeatist about the switching process. Take a bit of time to research the suppliers and tariffs available, that way you can be safe in the knowledge of your prices, affordability and safeguarded against potential heartbreak down the line.

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