Whilst the electricity and gas which powers both your home and your business is the same, energy suppliers treat business and household energy differently. There are many reasons for this and they are as followed:
The way in which the supplier sets up contracts.
Usually, business energy users are given a ‘rolling’ contract which generally has no definitive end date. This is done in this way so it is easier for consumers to switch suppliers if they find cheaper business energy rates. However, fixed term contracts for businesses do exist but they are often to get out of, if you pay a nominal cancellation fee.
The ‘rolling’ contract form for business energy users has its benefits, however nine times out of ten you are locked into a 1, 2 or 3 year contract and due to this have no option to cancel their contract early.
Business energy rate can differ and change frequently.
Different to domestic energy rates which usually remain stable for six months or longer, business energy rates change regularly because they are based on a daily wholesale price for gas and electric. This means that the quote for business energy could be significantly higher or lower to the initial quote.
Both businesses and households pay different VAT rates.
The current rate of VAT for business energy rates is 20%. On the other hand, domestic energy is charged at 5% VAT and therefore business energy rates are a lot more expensive. This is due to businesses having to pay the CCL – Climate Change Levy. This fluctuates on a year to year basis.
If your business does pay for low energy consumption though, you may be eligible to pay a reduced rate of VAT for your business energy.
Domestic and business energy meters work differently
Business electricity contracts are linked to a unique meter profile, which matches to the first two digits of the meter reference number.
Should you have any further questions or require more information, please do not hesitate to get in touch via our contact us page.