Everything To Know About Business Electricity Rates

Running a business is a challenging task and requires a lot of time and effort. From taking care of customers to competing with other brands, a business has a lot to handle. Apart from these things, businesses are also concerned about high electricity bills.

Businesses require large amounts of electricity to keep production running, resulting in huge electricity bills every month. Many businesses look for cheap business electricity rates to reduce energy bills. It is essential to compare electricity rates from different suppliers to find the best option.

Finding the best business electricity rates is a difficult thing, especially if you don’t know where to start. But no worries, we have got your back. In this article, we will share the secret to finding the best electricity rate for your business.

business electricity rates

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What Is A Business Electricity?

Business electricity is an energy service designed for organizations and companies requiring electricity to operate their equipment, factories, or offices. It’s different from the electricity you use at home.

Business electricity powers various aspects of commercial activities and is delivered through the same cables and wires as residential electricity. When there is a power outage, the same utility company is responsible for restoring power.

You can get a business electricity plan if you run:

  • A large, medium, or small business.
  • A charity organization.
  • A hotel.
  • A home-based business.

Choosing the right business electricity rate is essential to ensure your organization’s energy needs are met efficiently and cost-effectively.

What Are The Different Types Of Business Energy Plans?

When it comes to business energy plans, one plan doesn’t fit all. Choosing the right energy plan for your business is crucial to ensure smooth operation. Electric suppliers offer different energy plans, each with its advantages and disadvantages. Here’s an overview of the main types of energy plans:

  • Variable Rate Plan

The variable rate plan doesn’t have a fixed price for electricity as it changes frequently. The good thing is that you are not locked into a long-term commitment. If you end the contract, they won’t charge a cancellation fee. This plan is suitable for those willing to adapt to fluctuating energy prices.

  • Fixed Rate Plan

In a fixed-rate plan, you pay per kilowatt-hour (kWh) for the entire contract duration, regardless of the price fluctuations. These plans are cost-effective for businesses as the prices can be tailored as per their needs. Electric providers customize electricity rates specifically for your company. Since the contract has a fixed term, ending it before time may result in a cancellation fee.

  • Indexed Rate Plan

An indexed rate plan provides a pricing structure tied to external formulas or variables. For instance, this rate may be linked to the cost of natural gas or another public commodity.

These plans charge per kilowatt-hour (kWh), but they are subjected to heavy fluctuation. Factors like summer heat waves, or winter storms increase commodity prices, impacting electricity costs.

  • Block & Index Electricity Plan

In a block and index electricity plan, companies secure a fixed power block at a predetermined rate. The remaining electricity costs are subjected to fluctuations. This method is primarily used by large industries where they have dedicated energy procurement managers to oversee the process.

Choosing between these plans depends on your business’s needs and requirements. Variable plans offer flexibility, and fixed plans provide price stability. Business should assess their energy consumption before making a decision.

How To Get The Best Business Electricity Rates?

Businesses manage their electricity needs as a part of their energy strategy. Before are some key considerations to get the best business electricity rates.

  • Competitive or Utility Supplier? 

In areas where electricity markets are deregulated, you can either purchase business electricity from the local utility, or you can opt for an alternative supplier.

Choosing utility may cause the rates to fluctuate periodically, and you won’t have much control over it.

A supplier, on the other hand, offers a stable electricity rate, making it easier to budget. In deregulated markets, selecting a supplier is the best choice.

  • Electricity Contract Term

Electricity contracts for businesses come in various term lengths, such as 60 months, 6-12 months, or month-to-month. Choosing the right business electricity depends on the specific needs of your business.

Many businesses choose a 12-month term, aligning with their annual business planning cycle. This choice safeguards against hefty cancellation fees in case the company wants to cancel the contract.

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Some businesses choose a 24-month contract to avail the lower rates. When electricity commodity markets exhibit backwardation, longer-term contracts become more appealing. The current markets are experiencing backwardation, making long-term plans an economical choice.

  • Timing Your Electricity Contract

The best time to buy business electricity is before the expiry date of your current contract. Waiting too long may cause the contract to lapse, and you may end up on a variable rate index rate or an index rate.

Business electricity rates change every season. The rates are higher in the summer and lower in the winter months. Businesses grab lower electricity rates by securing the rate in advance. This way they can compare the rates offered by different electricity suppliers and choose the right one.Top of Form

Why Business And Home Electricity Rates Are Different?

Homes and businesses use electricity in distinct ways which determines the rates. Electricity suppliers use load profiles to price electricity for different customer types. These profiles provide insights into the average electricity consumption patterns for residential, small/medium/large commercial customers throughout the year.

For residential customers, load profiles assume that 60% of electricity usage is for cooling and heating purposes. The residential rates prove that more power is consumed at night time.

Businesses operate from Monday to Friday and their timings are 8 AM to 6 AM. They have a more consistent electricity usage pattern than residential users. The load profile for businesses sets them apart from residential customers.

The electricity rates also differ based on the way rates are quoted. For business electricity rates, only the energy supply cost is quoted. The electricity delivery rates for businesses vary by factors like electricity demand, and meter type.

Home and business electricity rates vary due to various factors. Understanding these distinctions helps consumers make informed decisions when selecting their electricity plans.

Final Words

Cheap business electricity rates benefit companies of all sizes. It reduces operational expenses and promotes a profitable business model. By comparing different suppliers, businesses can find the best deals on electricity rates. Affordable business electricity rates are great for long-term financial stability.