Fixed vs. Flexible – Energy Rates for Your Business
By Beth Williams
Shopping around for the best tariffs and rates on your utility bills for your business can often be complex with the range of different suppliers and brokers offering their own rates and deals. Some businesses don’t have the funds to finance regular audits of their energy usage to find out where they can make some savings when it comes to their utility bills, but although looking around for the right tariff for your business can prove to be time consuming you can end up discovering some excellent deals.
Depending on your annual energy usage it is possible for you to make significant savings in the long term. There are many variables that can have an effect on energy prices such as the price of oil and the economy, but before you jump into looking at different prices you need to grasp and understand the value of fixed and flexible rate tariffs to decide which one will benefit your business the most.
Paying a fixed rate tariff protects your business from any price increases in the energy market as with a fixed rate you only have to pay the same one rate for the entire duration of your contract.
On the other hand however, if the prices drop you will not be able to benefits from any lower rates and will be paying more compared to those who have a flexible rate. At any point during your contract you might decide to leave before your fixed rate period has come to an end in search for a better deal if you unfortunately fixed your rate at a high price, however you may be charged a penalty fee for leaving early.
The length of a fixed rate contract can vary from one to five years, so keeping a close watch on the utility market is essential. Taking note of the trends in the energy market will help you to make a better judgement on whether utility prices may rise over the potential period of your contract, anything can happen in the market over a period of time however and it cannot be accurately predicted to going with a fixed rate always carries somewhat of a risk.
So, in summary what are the advantages of a fixed rate tariff? If you fix at a low rate it is likely that you will save your business money over time if the energy prices spike during your contract period, and if the market does spike then you won’t have to worry about the increases because you’re safe paying at your fixed rate. On the other hand, disadvantages include; possible high upfront costs that some suppliers add to their fixed rate tariffs, if energy prices fall you will end up paying more than you would need to if you opted for a flexible tariff, and don’t forget the cancellation fee if you decide to end your contract early.
With a flexible tariff your energy price could fluctuate in relation to the changes in prices on the market because your rate is not fixed for the length of your contractual period. As there is the potential for varying utility prices month to month due to the unpredictability of the utility market, as a business you will have to then plan for these rises or falls within your budget on a regular basis to ensure that you can afford your energy when the bill arrives. However, the changing rates on the market could mean that you end up paying even less than those on a fixed rate if the prices drop, essentially saving you money.
Although there are disadvantages such as; the prospect of having to pay higher rate if there is a spike in fuel and energy prices on the market, the unpredictability of the energy market could mean you pay different costs from month to month, and as a result you are not 100% sure what you will be paying when you receive your bill which has an effect on the stability of your business expenses. There are advantages to flexible tariffs too, you have a lot more flexibility in changing or leaving your contract compared to a fixed rate contract and you will always benefit when energy prices fall.
The type of contract you decide to go with completely depends on what you think is right for your business and your energy usage, it can be overwhelming with the amount of deals and rates offered by different suppliers and brokers, it is always worth considering getting the help and advice of an energy and utility consultant. They will be able to assess your energy usage and then offer you no obligation advice on all of the different options you have available to you, and if you decide to move forward with the consultants service then they will be able to take away all of the headache that is associated with dealing with different suppliers and keeping an eye on all of the latest rates.
Beth Williams is a freelance marketing manager and is currently working with CUB, an Energy Consultancy Company based in the UK that provide a range of energy services to B2B clients including water audit services and advice on renewables and smart metering.
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March 08, 2017 at 11:00AM
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