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7 Deadly Sins to consider when dealing with energy companies

Sloth: or doing nothing – just sticking with the same energy supplier

To your energy provider you are the perfect customer, you are loyal, you probably pay by Direct Debit, and you automatically accept the new contract they send you in the form of their renewal letter. However, does your energy provider reward you for your loyalty? Probably not, what they have done, however, is potentially increased your energy cost to a higher price than their competitors, just because you have not explored the rest of the energy market. It’s a high price to pay for doing nothing.

Action point: Three months before your energy contract ends check what prices other energy suppliers are  charging.

Greed: or the price of missing a key date in your energy contract

Missing the termination date identified in your energy contract is something the energy companies’ hope will happen. If you do miss this date you will automatically be rolled over into a new 12 month contract at the prices your energy company has decided to charge you. Miss this date by even one day and you have automatically agreed a new contract which is legally binding. The termination date is not the same as the contract end date. The termination date is different with each energy company but is normally between 120 days and 30 days before the contract end date.

Manager calculating business costs

Action point: Do not ignore the renewal letter this has to be sent by your energy supplier, read it and take action.

Gluttony: Or not understanding how much you are paying for your energy.

Does your energy provider use you as a free bank? Or who’s in charge of how much you are paying for your energy use? Not that long ago energy companies used to bill you every three months for the energy you used and this was normally paid to them by cheque. Now most businesses are expected to pay for their energy by monthly Direct Debit. If you do not have a smart meter your energy company will be estimating your energy usage. It is not uncommon for them to overestimate the usage and this will be reflected in the Direct Debit charge. They do this to make sure that your actual usage is covered and it is to their benefit not yours. Remember they are only interested in their profitability and cash flow not yours.

Action point: Read your electricity and gas meter at least every three months and reconcile this reading against your latest energy bill.

Wrath: Or having to deal with the dreaded telesales calls.

On the positive side you will have been prompted that your current energy contract is due to end soon. However on the negative side there are a number of points you should be aware of. The key point to remember here is that as a business you do not have the same protection as an individual, if you agree to a new contract over the phone there is no cooling off period. Another key point to remember is that it is the telesales job to get you to say yes and they have been trained to get you to do this. They also know that you have not had chance to get other prices with which to compare. They want you to make a decision on what they have told you and what you can remember. Your energy bills are a key overhead of your business, energy is an expensive commodity, so make a decision based on fact which you can study and compare against other energy providers, then make an informed decision.

Action point: Do not agree to a new energy contract over the phone ask for the information to either be emailed to you or sent by post, also study the terms & conditions of the contract

Pride: Or the DIY approach to sourcing your own new energy contract.

Done right this is a sure way to get you a good energy deal. You will get a competitive price per kWh. However this can be time consuming. To get an understanding of what a good deal is you will have to speak to at least 6 suppliers (not just the big six) and there are over 20 major commercial energy suppliers in the UK. How much time out of your busy day can you spend on finding a good energy deal and is the price the only consideration? Energy contracts can be complicated and the cheapest price per Kwh may not mean the best value over the lifetime of the contract. Could you be more productive in your business by getting a broker to find you the best deal? Be aware of what type of contract it is, fixed, variable or flexible, the length of the contract, are all the costs included in the fixed price? The actual energy bit accounts for only 60% of the price the other 40% is made up of additional charges.

Best Startup Locations

Action Point: If you know your way around an energy contract, do it yourself, but do it no later than 60 days before your current contract expires, otherwise use a broker who will visit you at your place of business and provide you with at least 3 quotes for you to choose from. Never agree to anything over the phone.

Lust: Or profit is all important.

In respect of the energy companies, profit is all consuming; they have shareholders to keep happy and they are judged on how much dividend is paid out every year. If their profitability falls their share price falls. The energy companies do not want to give you the cheapest price; they are driven by profit and will charge you the highest price they think they can get away with and they will use techniques such as the rollover trap to achieve this. The cost of energy doubles every 7-10 years and if the cost of a kilowatt of electricity is 12p now, by 2024 it will be 24p

Profit is also the key driver to you the business owner. Strategies on limiting how much you pay for your energy can be in your control. You cannot control by how much the price of energy increases but you can control how much you use. Put a strategy together to control the use of energy in your business. Most businesses can save between 20% and 50% on the energy that they use. Contact your energy broker for help. If they can’t help but really care about your business they will be able to put you in touch with an energy consultant that can help.

Action point: Do a review on how you are using your energy, update lights to LED ones, check how efficient your boiler is, can you install solar panels? Put a plan together to reduce your energy usage by at least 20%, in most businesses this can be achieved. Remember protect your profit don’t contribute more than you have to the energy companies profit.

Envy: Or the expert in the pub syndrome

The cost of energy is no different from any other product or service that a business owner buys. You will always meet someone that will tell you that they have got a better deal and the way that you are doing it is wrong. (The expert in the pub) Buying energy for your business is dependent upon a number of factors. For example what type of business you are, the hours that you are open or working, how you use the energy. In the case of electricity this will affect the meter profile number that you have been allocated. This meter profile is the starting point for the price you will pay. A point to consider is, is the meter profile the correct one for you? Have you moved into a property which had been previously used for a different purpose? If this is yes than you may be paying the wrong price for your electricity.

Action point: Understand how your energy bill is constructed and that your meter profile is the right one for you. If you are unsure speak to your energy provider and explain what you do and how you use the energy, they will advise you if the meter profile is the right one, or ask an energy broker for advice.


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