In 2023, we’ve witnessed a consistent decline in wholesale gas and electricity prices following the record highs experienced earlier in the year. In April 2022, the Energy Bill Discount Scheme (EBDS) was launched by the UK government, superseding the previous Energy Bill Relief Scheme (EBRS).
This new scheme aims to provide reduced-level support for businesses and other non-domestic customers. This has prompted many businesses to contemplate the value of securing a fixed business energy or domestic energy deal for 2025.
Our recommendation is if a better deal is available, it’s advisable to opt for a fixed energy tariff. Despite the decline in wholesale market prices, they remain significantly higher and are anticipated to rise in 2025.
The persisting challenges in energy security contribute to the volatility of the wholesale energy market, where prices can fluctuate daily. By fixing the amount of money you pay, you can safeguard yourself or your business against potential future price hikes.
What is happening with energy prices?
Throughout 2023, wholesale energy prices have experienced a decline, providing some relief to households and businesses across the UK. However, it’s essential to acknowledge that they remain higher than pre-energy crisis levels. Let’s review the key factors contributing to this increase:
- The invasion of Ukraine by Russia led Germany to suspend the transit of gas via the Nord Stream 2 pipeline. This pipeline, designed to double the annual capacity of Nord Stream 1 from 55 billion cubic meters (BCM) to 110 BCM, was impacted significantly.
- Russia took further measures by reducing the capacity of the Nord Stream 1 pipeline to 20% before completely ceasing the supply. Considering that Russia typically provides about 40% of Europe’s natural gas, this had a substantial impact.
- Recent updates confirm that this is when all reforms will start. All TNUoS charges will increase.
- Europe faced an exceptionally harsh winter, with freezing conditions in northern and central Europe. This led to a surge in gas usage and depletion of natural gas storage supplies.
Should I fix my energy?
We expect a continued increase in energy prices! We recommend that you secure your business energy rates until 2025 to avoid unforeseen price surges.
Household Consumers
Finding a cheaper energy tariff
For households, several energy suppliers are presenting fixed deals that surpass the existing Ofgem energy price cap, aiming to reduce the gap from a standard variable tariff. If you come across such fixed tariffs as an option, we recommend you opt for it.
Protect yourself
Lock in a fixed tariff for peace of mind, ensuring a consistent energy rate amid uncertain times. This one fixed-rate energy tariff or deal will enable you to budget effectively for the upcoming year, providing clarity on your energy costs.
Business Consumers
One-year tariffs
The main drawback of opting for a fixed-rate tariff is the risk of committing to the same energy rate until the contract ends. This a fixed deal may cause you to overlook potential reductions in energy prices when wholesale rates decrease, leading to higher overall costs.
Nevertheless, certain energy providers now offer one-year fixed energy tariffs. This option helps navigate the uncertainties of 2025, shielding your business from potential price hikes without requiring a long-term commitment.
Peace of mind
Given our expectation of ongoing volatility in both wholesale energy costs and prices, opting for a fixed tariff provides a measure of certainty when budgeting for your business’s operational expenses.
What help is available for energy bills?
Several energy schemes are accessible to both businesses and domestic customers to alleviate the impact of increasing energy costs.
It’s essential to note that each scheme comes with its eligibility criteria, and certain opportunities may have limited availability before closure. For companies, the primary options include:
Power Bill Reduction Program
The government will provide a reduction on your gas and electricity bills if you qualify for the Power Bill Reduction Program. Eligible commercial users will get a per-unit reduction on their energy bills for the 12 months from April 2023 to March 2025, up to a certain discount limit. The relative discount will be implemented when wholesale prices exceed a specific threshold.
For the majority of non-domestic energy users in Great Britain and Northern Ireland, the maximum discounts are as follows:
- Electric Rates: Reductions up to £19.61 per megawatt-hour (MWh) when bulk prices exceed £302 per MWh.
- Gas Prices: Discounts of up to £6.97 per MWh when wholesale prices exceed £107 per MWh.
No discount is applied if wholesale prices remain below the specified threshold.
Government Grants for Energy Efficiency in Business
Numerous government-backed initiatives provide grants, loans, and subsidies to assist smaller businesses in enhancing their environmental impact. Additionally, certain local councils offer funding for energy efficiency measures or grants to support sustainable business growth.
Typically, the application process involves presenting a business case detailing the project or measure you intend to implement. A comprehensive list of currently available schemes can be found on the government’s Finance and Support for Your Business page.
Energy Supplier Energy Grants
Support for energy efficiency is not solely restricted to government programs. Your energy supplier might also provide grants specifically for businesses.
To ascertain whether your supplier has any ongoing schemes or offers support to both new and existing customers, the most effective approach is to reach out to them directly. And for domestic customers:
Energy Price Guarantee
The Energy Price Guarantee for residential customers mirrors the existing energy price cap, safeguarding customers by setting a cap on the per-unit charge for energy usage by suppliers.
Presently, it reduces the typical dual-fuel gas and electricity costs for a household in Great Britain to approximately £3,000 per year.
Which kind of energy contract should your business opt for amidst fluctuations in the energy market?
The energy market has sustained its volatility since late 2021, and indications suggest that market conditions may not improve soon. We are ready to assist you to compare business electricity and business gas prices from the top energy firms and suppliers in the UK.
Our goal is to help you comprehend the expected prices of energy for your business and enable you to achieve savings.
We are well-prepared to furnish you with comprehensive information, aiding you in making an informed decision regarding your gas and electricity prices.
Our services include providing a renewal quote, detailing energy price cap tariff costs, and outlining the rates for your energy supplier’s standard variable energy tariff. Get in touch to secure a fixed energy tariff until 2025, shielding your business from potential price hikes!
What to do if your fixed tariff is due to end?
When your current contract expires, your energy provider is likely to transfer you to a variable tariff. Depending on prevailing market prices, this switch could potentially be a more cost-effective option for your business, as the default variable tariff is capped.
It is crucial to conduct a market comparison when your contract is up for renewal to explore the available options for your business. Should prices continue to be high, our advice is to stay with the standard rate until they drop beneath the energy price limit.
Our team of energy experts is ready to assist your business with the best energy deals by thoroughly exploring the market to identify the best energy rates for you. Reach out today to compare business gas prices and business electricity rates with Utility Bidder.
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