Should I Fix My Business Energy Prices In 2024?
Many businesses are already starting to secure their business energy prices for 2024 - 2026 (2-year contract). It’s wise to start looking for a better deal before your current contract ends, to avoid being rolled onto an inflated deemed tariff rate.
It’s a good idea to fix your business electricity and gas prices sooner rather than later, as pricing is still relatively low and many business energy suppliers are currently offering great deals. And, as the weather changes, energy prices tend to fluctuate, resulting in a potential rise in costs as more gas and electricity are consumed.
Fixing your business energy contract prices could be a better way for your business to budget and reveal potential savings throughout the year.
Are Energy Prices Still Rising?
Since Autumn 2022, business energy rates have dropped by more than 60%, revealing opportunities for businesses to switch suppliers to ensure they get the best deal. British Business Energy experts suggest UK businesses could see smaller energy bills in 2024 if they secure a better deal when their current contract ends.
The 60% decrease in business energy rates is dramatically different when compared to household energy rates, which is expected to rise by £94 (5%) - to £1,928 from January 2024, according to the price cap set by Ofgem.
Despite this being bad news for domestic energy users, it’s some welcoming news for business owners, as the Energy Bill Discount Scheme (EBDS) will be ending on 31st March 2024.
Why Are Energy Prices Rising?
The increase in energy prices in January 2024 is mainly due to the rise in wholesale energy costs, based on research by Cornwall Insight analysts. When the COVID-19 pandemic restrictions began to ease, we noticed the initial leap in prices, which was further exacerbated after Russia invaded Ukraine in 2022.
Despite the rise being small, prices are still considerably higher than they were pre-pandemic, it would be considered unwise to assume prices will continue to reach those previous levels. This is why the Ofgem price cap is critical to keep costs regulated and relatively affordable for UK residents and business owners.
Will Energy Prices Go Down In 2024?
On Thursday 23rd November, Ofgem lifted the price cap on domestic energy, and new figures have revealed business energy rates have dropped by 62% since last autumn, compared to the news for domestic energy increasing by 5% in January 2024.
The graph below shows exactly how much business energy rates have fallen since last autumn, based on the average prices of 25,000 kWh/year:
Whilst we cannot predict right now if business energy rates will be coming down next year, as they are heavily influenced by a wide range of factors including supply and demand dynamics, government policies, international news, etc, the graph above shows a stabilisation in costs since last year, and should hopefully show us more opportunities as the year progresses.
In March 2024, the EBDS will be ending and unable to provide support for businesses from then, unless the government decides to implement further help. It is wise to lock in a better rate now, before energy prices increase and secure a good deal before the extra support is taken away.
How Does The Energy Price Cap Affect My Business?
The impact of the energy price cap on your business can vary depending on your energy consumption, the specific tariffs you’re on, and the overall energy market conditions. There are a few potential ways the price cap can affect your business:
- Cost Stability: The price cap can provide a degree of stability by limiting the maximum rates that energy suppliers can charge. This can help you budget your energy costs with more security.
- Potential Savings: For businesses that were previously on high standard variables or deemed tariffs, the price cap may lead to lower energy bills, resulting in potential cost savings.
- Limited Flexibility: The price cap may limit the flexibility of energy supplier to adjust their prices in response to market conditions. This could potentially impact the competitiveness of certain energy tariffs and deals.
- Alternative Tariff Options: The price cap could prompt businesses to consider alternative energy contracts, such as fixed-rate contracts or other non-capped tariffs to potentially access more competitive pricing or bespoke services based on energy consumption.
- Regulatory Compliance: Businesses will need to ensure that they comply with the regulations surrounding the energy price cap, and they should stay informed about any changes to the cap that may affect operations.
The only way to avoid energy price fluctuations is by locking in a deal now, and it's definitiely worth comparing what rate you can currently get.
Why Should I Fix My Energy Prices?
Fixing your energy prices can provide several benefits for your business, particularly through the colder months and before the EDBS ends in March. By fixing your energy prices, you can more accurately budget for your energy costs. This can be particularly helpful for businesses that want to avoid fluctuations in their monthly expenses.
Energy prices can fluctuate due to various factors such as changes in global markets, geopolitical events, and supply and demand dynamics. Fixing your energy prices can protect you from potential future price increases, providing a sense of financial security. Knowing that your energy costs are fixed can provide peace of mind, as you won’t have to worry about any unexpected spikes.
For businesses, fixing energy prices can be beneficial for long-term financial planning and forecasting. It allows for more predictable cost projections, which can be valuable for budgeting and decision-making. Some energy suppliers may offer fixed-rate contracts, and you may opt for this based on your contractual obligations or preferences.
Whilst these benefits can provide a sense of clarity, it is important to consider that fixing your energy prices may also mean that you miss out on potential savings if energy prices decrease, whereby you may consider a variable tariff.
Additionally, the specific benefits of fixing your energy prices can vary based on your business’ circumstances, so it’s important to carefully consider your options, and get in touch with us so we can evaluate your energy consumption and tell you what deals we have on at the moment.
Fixing Your Business Energy Contracts FAQs
What Are Business Energy Grants?
Business energy grants are financial incentives provided by the UK government or energy suppliers to support businesses in adopting energy-efficient practices or renewable energy technologies. These grants aim to encourage businesses to reduce their energy consumption, decrease environmental impact, and promote sustainability. The types of projects we tend to see include energy-efficient upgrades, installation of renewable energy systems, or implementing technology that improves overall energy efficiency. Businesses can use these grants to offset the initial costs associated with adopting a more sustainable and cleaner energy solution.
What Should I Do If My Fixed Business Energy Tariff Is Due To Expire?
When your fixed business energy tariff is expiring, compare rates from various providers, including negotiating with your current supplier for renewal options. Assess your current energy needs, check your contract terms, and consider both fixed and flexible options at first.
We recommend beginning the process well in advance and make sure you get in touch with us for any advice. We can also handle the whole process for you and negotiate the best deals, directly with your chosen supplier.
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