Your company needs an energy supplier, but you’re not sure where to go. You’ve been reading about different contract options, different energy sources (i.e. renewable vs. fossil fuels), and you’re not sure whether working with a broker makes sense or not. Here’s how to start comparing business electricity suppliers in your area, and what you can expect from them.
Do They Offer Flexible Tariffs?
Some energy companies offer just one price – a fixed priced. If you don’t like it, then you’re out of luck. Other companies offer tiered rates. Some of them are fixed, while others can change from month to month.
When doing a search for your next energy supplier, consider what your company needs. Do you need an energy supplier that can offer you five different tiers? For example British Gas offers several different tariffs. You can get a variable month-to-month rate, you can get a variable rate that’s discounted 4 per cent with a service contract, a contract that promises your rates will not rise for two years, and a fixed rate guaranteed for a year.
If you think you can budget your energy expenses in-house, choose the variable rate. Variable rates offer the benefit of full control over your energy costs. With a longer-term service contract, you get discounted rates. You’re not protected from increases in the price on the market, but you can control the amount of energy you use and directly affect your bill from month to month.
With a fixed rate, you typically pay a higher rate, but that rate is fixed for the length of the contract term.
Do You Need Fixed Pricing?
Fixed pricing is one of the most attractive ways to pay for energy, but do you really need it? Fixed pricing takes advantage of the fact that your energy costs don’t change from month to month. Instead, you pay a flat fee for the usage.
Many businesses like this because they believe it protects them from upswings in the futures market. If energy prices rise, businesses fear they will pay higher rates for their energy. While fixed rates do have a benefit, it’s not always clear that energy rates will increase. Sometimes they decrease.
The risk you take with a fixed rate contract is that rates fall after you commit to a multi-year rate. Many energy companies offer fixed rates, but one thing you should focus on is the quality of a company’s variable rate. Do they offer 12 month contracts at a variable rate? If energy prices are falling, this might be your best option.
Do They Offer Renewable Energy
Some companies, like LoCo2, offer renewable energy as the only option. Because of this, you’re able to align your business with your personal values completely. Not all companies care about having a “green” image. If yours does, then dig into the details of your supplier’s renewable options.
Some companies offer renewables, for example, but their total energy supply is mostly coal or natural gas – with a small percentage coming from wind and solar. Again, if this is important to you, don’t just look at the advertising literature. Dig deeper and ask for an energy supply disclosure.
What Are Their Contract Terms?
Every energy supplier has service contracts. These contracts stipulate the price you pay over a set period of time. In most cases, the minimum contract term is 12 months, though some companies offer shorter contracts. If you’re new in business, it might pay to shop around for 3 month contracts. That way, you can get a feel for how an energy supplier prices its service, get a feel for customer service, and see what the bills look like.
Contract terms can also make or break a deal. If you know you want a variable rate contract, don’t go more than 12 months unless you’re sure the long-term trend in business electricity is going to continue in a downward fashion.
If you choose a fixed rate, seek the longest term contract you can find. Often, these offer the best rates possible given that it’s a fixed rate contract.
Using A Broker
Not every business needs a broker, but most small businesses do. Why? Because brokers bring something to the table that you don’t have: negotiating power. Many brokers can negotiate lower rates from suppliers because suppliers know that they must compete for the business. Many suppliers understand that brokers come equipped with a large client base.
Brokers don’t just bring in one or two clients. They often bring 10, 20, or more. They do business “in bulk.” If the energy company doesn’t flex a little on its pricing, then the broker will just go somewhere else. It’s called “buying power.”
On top of saving you money, some brokers are add valuable services that suppliers don’t offer. For example, if you use a lot of energy, you may be interested in having an audit done. As much as you don’t want to hear it, energy companies do make mistakes.
A broker has the software and manpower to do bill audits, sales tax audits, rate schedule analysis, and quantitative analysis services for your electricity. They can also check sales taxes for you before you even sign up. That way, you don’t get surprised by a bill that’s larger than what was originally advertised to you.
The best part? You don’t have to pay for any of these services. A lot of companies are under the false assumption that brokers charge fees, or that their tariff will be higher to offset the broker’s fees. It’s not true. Brokers charge energy companies for their services, not you. In fact, some energy companies might be charging you more for service now, because they have an “across the board” increase in pricing to offset the general use of brokers in the industry.
In that sense, you’re paying for a broker whether you use him or not. Why not outsource the task of shopping for services, and save yourself a lot of time and frustration?
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