Should I Fix My Business Energy Prices?

If there’s one word which best sums up the state of the global energy market over the last few years, it’s ‘volatile’. Business, as we all know, hates this uncertainty. In this environment, it’s critical that all businesses understand your energy prices and the options that may be available to you should you pay too much. Rising energy prices can significantly affect your bottom line, but there are things that you can do to mitigate their most damaging knock-on effects. 

Analysis of Current Energy Prices

Wholesale gas prices rose sharply following Russia’s invasion of Ukraine, a sobering reminder of the extent to which we can all end up as hostages to fortune in a world that is beyond our control. These prices were reflected in suddenly rising energy prices, which led to urgent action on the part of the government to limit the damage to residential households, who were set against the cost-of-living crisis and were finding things difficult enough to start with. 

These changes have not protected businesses as much as residential customers. But since autumn 2022, business energy rates have dropped by more than 60%, revealing opportunities for businesses to switch suppliers to ensure they get far better deals. British Business Energy experts suggest UK businesses could see smaller energy bills in 2024 if they secure a better deal when their current contract ends.

Advantages of Fixing Energy Prices

There are two main advantages to fixing your energy prices when agreeing a contract with a supplier:

Stability in financial planning

Fixing your energy costs allows you peace of mind when budgeting for future energy costs. There’s no need to worry about fluctuations in the global market or events that happen elsewhere in the world over which you have no control whatsoever for the duration of your contract term. 

 Protection against future price spikes

Everyone felt the chilling effect of the sudden upward spikes in energy prices, and while those prices are expected to reduce over the course of 2024, there can be no guarantees that such spikes won’t happen again. For example, the current conflict in the Middle East could easily spread to larger, oil-producing nations.  

Risks of Fixing Energy Prices

Energy companies offer fixed energy prices that guarantee a fixed term for a contract period, but these also come with a degree of risk. Should the global market fall significantly lower than when you agreed on terms with your supplier, you may miss out. Fixed-term contracts can be less flexible than others and come with significant early termination charges. 

When is the Right Time to Fix Energy Prices?

Volatility in the market led to some tariffs changing or being removed altogether. Fixed energy deals are slowly returning to the market, but Ofgem warned in 2023 that “Prices are still unpredictable and signing up to a fixed rate now might mean you miss out if prices fall in the future,” while analysts at Cornwall Insight have predicted that energy prices will increase over the course of 2024. 

What Should Businesses Consider Before Fixing Their Energy Prices Until 2025?

Fixing your energy prices might be important to your business, depending on several factors. What would a comparison with a variable plan look like? How much does your business value being able to budget well in advance? What does your energy use look like? All of these are important factors to continue; a full energy audit is a great place to start. 

How to Choose the Right Energy Tariff for Your Business

Put briefly, choosing the right energy tariff will vary by industry and from company to company. No two businesses are quite the same. You should start by gaining a clear understanding of your energy usage because the right tariff is the one that works best for your specific circumstances. We’ve already produced a handy guide which allows you to compare fixed tariffs against variable ones.

A diversified and substantially deregulated energy market means options are available for business owners keen to do something about their energy costs. Some, such as installing solar panels, may come at a not-insignificant upfront cost, even though there are incentives regarding those as well, while others, such as fixing the rate of your tariff, come with an element of the gamble about them. With prices forecast to fall over the remainder of 2024, can you afford to not look very closely at your business energy? With a little diligence and the knowledge of your company’s needs, you might be the best-qualified person to decide whether your business would benefit from such changes.