UK Energy Crisis: Should I lock in my business energy rates now, or wait?
Making the right choice for your business in a volatile energy market.
By Nicola Arthur
Throughout 2021, wholesale energy prices have risen sharply following a ‘perfect storm’ of global crises. In the face of soaring costs, we’ve seen several suppliers including CNG Energy cease trading after decades in business, resulting in hundreds of staff facing redundancy and tens of thousands of business customers (including schools, restaurants and hotels) unsettled as OFGEM source alternative providers.
In such a volatile market, it’s no surprise that our customers are asking the question: “Should I lock in my business energy rates now, or wait?
Throughout the recent saga, a flurry of carbon-cutting pledges from governments at the UN Cop26 summit have also hit the headlines, demanding action from us all to counteract disastrous levels of global heating. With this in mind, more and more businesses are starting to consider:
- How can I enhance my green energy credentials, whilst…
- Ensuring I lock in the most competitive rates, and…
- Avoid choosing a supplier that may go bust in the near future?
To help your business make your next move your best move, today I want to share a few answers to real customer questions to encourage you to act… helping you understand how delaying your switch, entering into a variable tariff or signing up to a shorter contract term (in the hopes that rates will fall next winter) could be extremely costly for your business.
Whilst this may be the best option for residential/domestic customers due to the protections offered by OFGEM, I would not recommend businesses transfer onto a variable rate tariff.
The OFGEM price cap only applies to residential customers, and as such, there is no price cap in place for business energy rates when you sign up to a variable tariff.
Competitive deals are still available.
Before switching with Welcomm, a customer recently forwarded us a variable rate quote they had received for their gas meter from one of the ‘Big Six’ suppliers.
As you can see below, from 18 November their daily standing charge was rated at £0.949p, with a unit price of £0.072p.
Our Energy experts were able to help this customer find a deal from another ‘Big Six’ supplier at a greatly reduced standing charge of only £0.25p, saving them over £3,000 per annum on their utility bills.
In the current market, 36 and 24 month tariffs remain the cheaper option for businesses. Because the current wholesale energy price is so high, suppliers are hedging prices for longer term contracts. With market volatility set to continue into 2022 and beyond, this means that, in the longterm, longer tariffs are the best financial decision.
Signing different meters for different contract lengths is certainly also an option we can help with. However, do bear in mind that annual costs for 36 month offers remain cheaper than the 12 and 24 month offers.
Act Now to Avoid Bill Shock
My advice to all businesses looking to save on their utility bills is to ACT NOW. To illustrate just how much delaying utilities could cost your business in the current market, here are another set of example quotes from a customer I recently supported to find a better deal.
Each of the quotes below are for the same electricity meter, quoted with the cheapest offer available on dates roughly a month apart. As you can see, the difference is rather shocking, and represents the rate at which wholesale energy prices have risen.
12/08/2021 | £7,617 |
12/09/2021 | £9,246 |
28/10/2021 | £10,954 |
By signing their renewals immediately in August, this customer could have saved around £3,300 per annum versus October’s prices on this one meter alone.
In a normal market, our Energy Renewals Service would get quotes from 20+ suppliers, including Green Energy suppliers to find the best price, and our Energy experts would advise on the optimal time to switch your supply.
Prices Predicted To Rise In 2022
However, with current market instabilities predicted to continue into 2022, we are advising our customers that they can no longer expect to receive cheaper rates in the warmer seasons – and they should in fact lock in their rates as soon as possible to avoid increased costs.
OFGEM have already announced a price increase for the domestic cap in April 2022, with another expected in November 2022 – meaning that price rises will continue to affect business energy prices too.
Currently the majority of suppliers exiting the market or ceasing trading belong to the domestic sector. However, this does not mean that Business Energy suppliers are immune from the impact of higher wholesale energy costs – a hard truth that has been seen recently with the collapse of business energy supplier CNG Energy.
Our Role as Trusted Advisors
Whilst we cannot guarantee any supplier will remain unaffected, as trusted advisors our Energy personnel abide by the TPI Code of Practice. Inline with the TPI code of practice, we will only recommend suppliers that have tried and tested customer service processes.
If your supplier does enter administration, you will likely be able to leave them immediately, and we can help guide you to a new supplier offering the most competitive rates. To ensure your gas and electricity supply continues uninterrupted, OFGEM have robust processes in place to protect consumers. Learn more about how you’re protected here.
