Although homes and businesses typically use the same type of gas and energy, there are several differences between how these energies are applied.
Because businesses use energy differently from residences, energy providers offer different contract types and pricing options to businesses. However, contracts and costs also depend on the type of business and its needs.
So, what’s the difference between business and residential energy? And how can business owners benefit from a commercial energy contract?
Difference Between Business And Residential Energy
Pricing
One of the most obvious differences between business and residential energy is their pricing methods, criteria, and general cost per unit.
Business Energy
For businesses, the cost per unit and contract price varies based on their contract agreements with their suppliers and business needs. It’s also generally less expensive than domestic energy because businesses require higher volumes of energy. You can think of it as a “discount” for purchasing their energy in larger quantities.
Business pricing criteria are based on location, the type of business, the amount of energy they use, credit score, the contract agreements, and the payment method the business uses. But businesses are also subject to more price fluctuations than domestic energy.
Additionally, business energy comes with additional taxes and levies compared to residential energy. Businesses typically pay around 20% VAT, and there are levies in place to encourage them to be more energy-efficient. The Climate Change Levy is contingent upon their energy usage and overall emissions.
If you’re looking for the most competitive business energy prices, you can quickly and easily compare prices from the industry’s leading energy providers for your business electricity with Utility Bidder.
Residential Energy
Unlike business energy, residential energy bills is based on an average pricing method. That means that residential pricing is across the board instead of meeting certain criteria, and one price is applied to everyone in a specific neighbourhood.
Residential energy is also more expensive than business energy. Because homes use less energy than businesses, they don’t qualify for the same discounted business rates. However, the price may fluctuate slightly depending on the neighbourhood or postal code and the payment method used.
Residences aren’t subject to additional tariffs, but they are charged 5% VAT.
Contracts
A contract between a business and an energy provider is much more specified than between a provider and a residence. Two main factors of contracts mark the difference between commercial and domestic energy, namely the length of the contracts and the agreed terms.
Business Energy
Business energy contracts typically range between one month (28 days) and five years. The contract is based on a fixed price that is negotiated and agreed upon by both the business and the energy provider before the contract is drawn up.
Because businesses can negotiate their contracts and get the most beneficial prices, there is no cooling-off period. The business can also not switch providers until the contract has ended. Generally, prices are fixed for the length of the contract.
Residential Energy
Residential energy contracts are short-term contracts that last for 28 days. However, there are options for fixed tariffs. Fixed deals set pre-determined unit prices and include a standing charge that depends on the energy provider.
Unless a resident chooses a fixed deal with their provider, prices may fluctuate throughout the duration of the contract. Domestic energy users can switch providers at any time and have a cooling-off period when they sign up with a new energy supplier. If the user has a fixed deal and wants to switch providers, they may be charged a small fee.
Energy Sources
Although it may not affect every type of business, businesses don’t have the option to purchase dual fuel from a single supplier. Instead, they will need to sign up for multiple contracts with different energy providers.
On the other hand, using dual fuel is a common practice within many UK homes.
Tariffs
Energy tariffs are applied differently to business and residential energy users. Business energy tariffs are based on the business’ energy demands. That means the tariffs will vary from business to business and have specified contingencies.
Residential energy tariffs are typically standardised and applied to all residences.
Conclusion
The main differences between business and residential energy are the costs involved and the types of contracts available to each user type. Businesses may also be subject to different tariffs and don’t have the option of dual fuel through one energy provider.
