The Difference between Domestic and Business Energy Contracts

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Domestic vs Business Energy

The gas and electricity that powers your homes is the same gas and electricity that powers your business. Did you know that energy companies treat the supply of these sources differently if you’re a business? This has always been a common question: Domestic vs Business Energy.

The primary reason for this is that energy consumption varies greatly from sector to sector, which means that energy contracts will differ based on your energy needs. Understandably, you might confuse domestic and non-domestic energy markets with being the same, but it's time to get rid of that notion. They do not operate the same way, and as a business owner, it is crucial for you to understand how to strike the best possible energy deal.  

Is Business Energy Cheaper than Domestic Energy?

Source: Statista

As the population of the United Kingdom grows, so does the demand for energy. Many sectors have different energy consumption. One of the leading contributors to this is the business sector. If you look at the graph above, you can see the recent statistics for average electricity and gas consumption of businesses in the UK. The graph shows that industrial businesses have the largest energy consumption, while medium-sized businesses have the same gas and electricity consumption at 35,000 kilowatt-hours. Large businesses, on the other hand, consume more electricity than gas at 90,000 kilowatt-hours. Looking at these statistics, new business owners might be wondering whether business energy is cheaper than domestic energy.   

It is a simple question, but it would require a rather complicated answer. This is because there are several factors to take into account when comparing domestic vs business energy. Even though the gas and electricity supplied to domestic and business customers travel through the same cables and come from the same sources, energy companies still offer different contracts. This is because domestic and non-domestic energy operates in different ways. To answer the question, “Is business energy cheaper than domestic energy?” the general answer would be, yes.

When it comes to business energy, energy suppliers have rates that are often cheaper than domestic energy rates, because the more energy you use, the cheaper the rate is. While businesses will pay a higher VAT rate than domestic energy customers, most deals will still work out cheaper. To understand business energy better, you can check out our guides here!

What is the Difference Between Domestic and Business Energy?

A.) Contract Length

When it comes to choosing business energy contracts, you can have a minimum contract length of 28 days to 5 years. This differs from domestic energy contracts where you have an invariable contract length of 28 days with some longer-term “fixes”. For business owners who chose longer contract periods, you’ll be offered better prices since energy suppliers can bulk buy energy. The downside is that business energy contracts cannot be exited early.

B.) Contract Terms

Commercial customers have contract terms with fixed prices for the duration of the energy deal chosen. For domestic customers, they have variable prices except when they choose a fixed deal. This means that there is no end date for these contracts, and the energy company will keep supplying energy to the customer on their current tariff until they decide to change. 

Another difference is the cooling-off period. Most business energy deals don’t come with a cooling-off period, while domestic customers are offered this feature to protect them from disadvantageous deals.

C.) Pricing

The biggest difference between domestic vs business energy contracts is pricing. Business energy prices are lower since higher volumes are involved, and they can be customised based on consumption, location, and credit score, among other things. Domestic energy prices are higher because of the “one size fits all” approach.

With business energy deals, there are more price fluctuations as energy suppliers buy their energy sources in wholesale markets, while suppliers for domestic customers buy them in advance. Another difference between the two is the VAT liability and Additional Levies. Commercial customers are subject to 20% VAT, while domestic customers are subject to 5% VAT. Business energy is subject to Climate Change Levy, while domestic energy is not.

D.) Custom Tariffs

Business energy has custom tariffs, while domestic energy has a more generic approach. Energy companies offer varying tariffs for business since each business will have different energy demands. Business energy tariffs vary on a case-by-case basis, following an assessment.

E.) Dual Fuel

There are no dual fuel options in the business energy market. Therefore, it is cheaper to get different contracts for each energy source. For the domestic market, dual fuel is a common feature. 

Can I be on a Business Energy Tariff When Working From Home?

With the pandemic that’s going on in the world, many have chosen the work from home set-up. You might be thinking that since you are at home, you should be using domestic energy. But, a preferable option for you would be business energy. Why is that so?

The most important factor is saving money. Businesses pay less per kWh for their energy consumption as they have lower rates and prices available to them. If you are thinking of the VAT Liability and additional levies, don’t worry because there are exceptions. By using less than an average of 3 kWh of electricity and 145 kWh of gas a day while working from home, you won’t liable for the 20% VAT and the Climate Change Levy. For more information on working from home as a business, you can check out our article here.

How to Switch Business Energy Supplier

We know how difficult it is to change energy suppliers, especially for businesses. EnergyBillKill has deals in place with the biggest and smallest energy suppliers to save you more money when you switch. We focus exclusively on business energy and non-domestic tariffs and help businesses of all sizes get the best deal. We will help you get the most affordable and best energy deals in no time. Switch energy suppliers in less than 60 seconds with our handy price comparison tool. Alternatively, you can download our app, which is available for both Android and iOS

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