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written by
Jack ONeill

Domestic energy vs business energy - what's the difference?

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Being a small business owner often means learning a fair few new things - the most confusing of them all can often be business energy.

While there’s no difference between the energy that powers your home and the power that turns on your computer at work, the big differences can be found in the pricing and contracts.

Many people think that energy is energy, believing it should be paid for in the same way across the board. But there are some crucial differences you need to be aware of:

Contract

Domestic energy contracts are frequently rolling contracts. So if you move house, you’re able to take the contract with you or take up a new contract in your new home. Whereas business contracts are usually a fixed-term contract – often only one to three years. It’s been known for energy companies to automatically roll their customers onto lengthy contracts, but that practice is slowly starting to change.

The Cooling Off Period

When signing up to a domestic energy contract, you'll be given what is known as a ‘cooling off period’. This is usually around 30 days, and during this time you will be able to cancel your contract without any cancellation fees to worry about. However, with business energy, there is actually no cooling off period. As a result, it’s even more important to ensure that you fully understand the terms of your contract before accepting it.

Price Fluctuations

As they’re so closely linked to wholesale prices, business energy prices are constantly changing. Your energy price may change daily, but the overall energy price will usually be lower than domestic energy because the suppliers buy it at a wholesale price. Domestic energy usually costs more, but that price will only change once or twice a year. The key difference in pricing is down to the way the energy is supplied: domestic customers are linked to the same price as everyone else in their region, so negotiating a better price isn’t really possible.

Charges

There are also additional charges associated with business energy. Business customers pay 20% VAT - 15% more than domestic energy customers. And of course, another charge to consider is the Climate Change Levy, currently charged at £0.47p/kWh for electricity and 0.164p/gas.

The advantages of Business Energy Contracts (at a glance)

  • The price is fixed, so budgeting is easier.
  • It is less susceptible to price fluctuations as your price is locked in for the duration of the contract period.
  • Deals are often better.
  • Prices are usually lower too as your business probably uses more energy than a typical household.

Save on your bills

If you buy your gas and electricity from one of the ‘big six’, you may well be overpaying. Find a better deal at xln.co.uk/energy.

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