What is a Fixed Rate Business Tariff?
Fixed-rate business tariffs are ideal for businesses that want to protect themselves from future energy price rises. Knowing the businesses average energy use is essential when considering this tariff option. A fixed-rate business tariff is a fixed monthly cost for electricity. This tariff is also known as an ongoing business tariff. If you would like to read more information or learn more about the pricing of business energy, you can do so here .
The business pays a fixed price for electricity for the duration of the contract. A variable tariff has a specific price per kWh for the entire supply period, but the rate changes daily or hourly to consider any variations in supply and demand. A fixed-rate business tariff is a fixed per kilowatt-hour cost. A fixed rate tariff is ideal for new and existing businesses with predictable energy usage levels who wish to guarantee their electricity costs throughout their business contract.
Who is a Fixed Rate Business Tariff Suitable For?
Fixed-rate business tariff is perfect for businesses that require a fixed price for 1, 2 or 3 years. Sometimes longer contract durations are offered. The business will pay the same electricity price for the entire period.
A fixed price allows the business owner to budget for their energy needs. Most businesses will benefit from a variable tariff because it offers flexibility. The prices provided by a variable tariff are linked to the wholesale price of electricity. If the price of electricity rises, so does the cost of electricity paid for by the business.
Fixed rate business tariffs are ideal if you do not want to be exposed to possible increases or decreases in energy usage until your next contract begins.
Since the introduction of the fixed-rate tariff, many new and existing small business owners choose to secure their electricity cost for up to one year through fixed-rate tariffs. The fixed price tariff offers them comfort against price rises.
What are the Benefits of a Fixed Rate Tariff?
A fixed price allows the business owner to budget for their energy needs. Fixed-rate tariffs offer security to businesses who require a long term cost of electricity without any short term increases or decreases in energy usage. It is suitable for businesses that already know their exact energy use plus or minus 10% and want to pay a fixed price for electricity.
Fixed-rate tariffs are ideal if you can predict your energy usage levels for the term of your contract. You will need to know the average kWh used annually by your business for the past three years or be able to predict your new requirements within a 10% range. In some cases, large businesses may have one fixed rate for gas and another fixed rate for electricity. In these cases, some months when your energy usage is low, you will benefit from both tariffs, but in other months where demand is high, you will only benefit from one of the tariffs.
A fixed-rate tariff is ideal for businesses that require a long term cost of electricity without any short term increases or decreases in energy usage.
Fixed-rate tariffs are suitable for new and existing businesses with predictable energy usage levels who wish to guarantee their electricity costs throughout their contract. Provisions for an exit fee and “early exit penalty” can be included. However, some providers charge a smaller exit fee after three months and will refund the entire remaining amount of the fixed rate tariff if you cancel early. In contrast, a variable price tariff offers you more flexibility as the price of electricity is linked to the wholesale price of electricity from retailers, who set their prices.
A fixed-rate business tariff is particularly beneficial for businesses with large seasonal differences in energy demand. It may suit a business that uses a lot of power in summer and a little in winter. The more predictable requirement over the year offsets the cost of the higher price per kWh on some months when you use less electricity.
Fixed-rate tariffs are the solution for businesses with fixed budgeted costs, who want to control their power costs and know exactly how much power they will use over their contract period. If you pay less than the fixed price for electricity, then your savings start to add up.
You can also choose a fixed date for your tariff to end, giving you the security of knowing that your contract price will not increase for a set period. The fixed date means the price will not increase for a set period.
The electricity supplier needs to give you at least 30 days’ notice before increasing your price under a fixed-price plan, so the higher rates are not triggered unexpectedly.
With a fixed-rate tariff, you know from day one how much your monthly bill will be. Fixed rates mean you will not have to worry about price rises at any point in your contract, which means you can plan for the longer term. Fixed-rate tariffs are ideal for existing businesses with predictable energy usage levels. They also provide security to new businesses who require a long-term cost of electricity without any short term increases or decreases in energy usage.
It is suitable for businesses that do not want to be exposed to possible increases or decreases in energy usage until their next contract begins. Fixed-rate business tariffs are generally quite expensive. The fixed price is generally higher than the average cost for a variable rate tariff over a year. A fixed price for electricity can also be higher than a standard business energy deal if you need a short contract duration.
If your energy use fluctuates from month to month, then a fixed tariff can work out more expensive in some months and cheaper in others. However, some energy suppliers give you the option to spread this difference across subsequent bills instead of paying it all at once. If you can’t forecast your energy usage very accurately, then a fixed tariff may be more expensive than a standard business energy deal if you need a short contract duration . The fixed price is generally higher than the average cost for a variable rate tariff over a year.
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