Commercial Electricity Prices

UK energy prices have become dependent on the supply market not only in the UK, but in Europe and even the rest of the world since the deregulation of energy supply in the 90s. Business energy prices are now determined in a traded market.

The UK government still has an important role in meeting the energy demand of business despite the deregulation, and with its watchdog bodies, such as OFGEM and Energywatch, plays a part in regulating energy prices.

Other factors not directly related to raw material costs can have a major impact on energy prices. Business electricity prices are generally higher than the rates for domestic electricity as keeping the business electricity price high is not as politically contentious as keeping the domestic electricity price high. Typically, power companies will blame the high electricity prices on the high prices for gas and oil. Cynics will point out that when the price for oil dropped like a stone the power companies were not in such a hurry to lower their business electricity price to reflect this fall.

How and Why Business Energy Prices Change

With market forces now in play in the energy market, the price of energy supplied to UK markets is more volatile and has fluctuated over the last ten years, although the trend has been upward over the long term.

The amount your business pays for energy will depend on the fuel you use, your bargaining power as a user (larger users having more clout with the suppliers), the length of your contract with your supplier and external factors such as crude oil prices.

Rapidly fluctuating energy prices were experienced throughout 2008 and analysts are warning that these kind of rapid price changes are likely to become the norm in the future, as prices become more sensitive to the cost of production in a global market.

It is a foretaste of what is likely to happen as the supply of finite resources, currently mainly oil and gas, begins to struggle to keep pace with the demand.

Natural gas prices have a significant impact on the electricity prices we pay and natural gas is the single biggest driver of electricity prices, even for renewable electricity. Unfortunately, our dependence on natural gas is increasing and, in the UK, local production has fallen to the point where the UK is now a net importer of gas.

The Pressure of Going Green

There is increasing pressure on businesses to consider the environmental implications of their gas and electricity usage, and to consider such things as carbon footprint when comparing business electricity prices and suppliers. The UK has been relatively slow on the uptake of renewable energy, compared to the rest of Europe, but increasingly investment is being seen in offshore windfarms and solar energy.

By 2020, 15% of UK domestic and business electricity must come from renewable sources to meet the stringent targets set by the last Labour government.

While businesses are embracing the potential long-term money saving and market kudos of being a green company, the fear is that, in the short term, business electricity bills will rise sharply to finance the new, green technology.

Finding the Best Rates

There are now a wide range of national and independent UK energy suppliers to choose from when it comes to finding the lowest guaranteed rates and tariffs for your company

Switching has become easier for smaller companies since Ofgem introduced new rules for small businesses, with fewer than 10 employees, but for larger businesses it may not be so easy to get out of your current contract. It can be done and we explain how in our article ‘How to get cheap business electricity’.

You can get help by consulting an independent energy broker such as Energy Advice Line or Energy Partners. They will compare a vast range of business electricity and gas tariffs, including special green packages, to ensure you get the best business energy deals for your organisation and will help with all the associated regulations and paperwork.