What’s The Difference Between Business Energy and Domestic Energy?

Image of lights in a building.

Although the electricity and gas that powers your business premise are exactly the same as the one that powers your household, energy suppliers treat business energy and domestic energy as separate entities. Ultimately, energy is energy, but when it comes to the contracts for businesses or for households, they are seen as different items.

To help you understand why business energy contracts and domestic energy contracts are different, here are a few of the reasons.

 

Business Contracts Work Differently

The main difference between business and domestic energy is how the suppliers set up your contracts.

For domestic users, they are usually given a rolling contract which means that there is no end date. The supplier will continue to provide gas and electricity to the customer on their tariff until the customer decides to change their tariff or change their supplier. There are also fixed-term contracts for domestic energy users, but they are often quite easy to cancel with a nominal cancellation fee.

Whereas, with a business energy contract, they are normally a fixed-term contract. This means that business customers are often locked into a one-year, two-year, or three-year contract without any options to cancel early. Fixed-term contracts also mean that businesses will need to pay the same amount for energy over the duration of the contract. Effectively, they will not be affected by fluctuations in wholesale energy prices.

 

Business Energy Rates Are Flexible

With domestic energy rates, they usually remain quite stable for six months and more. This is because the suppliers buy their energy in bulk in advance for domestic customers. Compared to business contracts, this is quite different.

Depending on the fluctuations of the wholesale price for electricity and gas, the increases or decreases in price will be reflected in the business energy contract. This is because the suppliers will buy energy once a contract has been agreed. Effectively, this means that the price quoted for energy could be more expensive or cheaper depending on the day. If you monitor the wholesale market closely, then you may be able to find a favourable time to get a cheaper business energy contract.

 

Businesses Pay Different VAT Rates

One of the most noticeable differences between business contracts and household contracts is the amount of Value Added Tax that you need to pay. For domestic users, the VAT would be charged at the current rate of 5%, whereas, with a business contract, you would be charged at the current rate of 20%. If your business qualifies for low energy consumption, then you may be eligible to pay a reduced rate of the VAT.

It’s also important to keep in mind that businesses must pay for the ‘Climate Change Levy’ (CCL) on their electricity and gas, which can fluctuate every year.

 

Compare Business Energy Online

If you’re looking for a new business energy deal or simply want to compare energy plans online, then please fill out the business energy comparison form and leave it to our saving experts to find the most favourable deal for your business. In the meantime, if you have any questions or if you are unsure of what you are looking for, then please don’t hesitate to contact us.

Call us on 02476 997 901 or you can email us at quote@comparenergyonline.co.uk.

 

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