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Business beware – energy rates for businesses higher not lower than before

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Scottish Power is the last of the Big Six to join the price war and announce it’s cutting prices. Good news all round? Not necessarily, businesses are still more likely to experience an increase in rates – London Loves Savings investigates

When restaurant owner Ellie Chapman read last week that her utility company was cutting its electricity rates she was delighted. Like many in the hospitality sector, she was hit hard by rises in VAT and National Insurance, and her utility bills were another batch of overheads she could have done without worsening.

So it should have been welcome news when EDF Energy announced last Wednesday that it was cutting its gas rates by five per cent. The move was met with cheers from consumers (even as some consumer groups pointed out EDF Energy had actually increased domestic rates by 15.4 per cent in November).

EDF Energy’s price-slashing spawned a welcomed price war as British Gas, Npower and SSE quickly followed suit, each announcing their intentions to cut their gas and electricity rates. So determined was British Gas not to be outdone, it slashed its rates by five per cent on the spot.

But Ellie was sceptical. Unsure whether she was to benefit from the reduced rates, she contacted a business enery broker to find out more. Unfortunately, Ellie’s fears – that the slashed rates applied to domestic usage only – were confirmed. All the aforementioned reductions applied only to domestic rates, and not to business rates.

In fact, the data below shows that, if anything, utility bills for businesses will go up in 2012.

  Average current price Average renewal price Average switching price
Gas 2.5p/kWh      4.5p /kWh 2.9p/kWh 
Electricity 9.3p/kWh  14.25p /kWh 10.15p/kWh

Source: Make It Cheaper

Back in November, London Loves Savings reported on the pitfalls of utility rollover contracts for businesses. This is the process wherein energy companies hike rates with little warning before automatically renewing a contract. The concern now is that businesses will assume their rates are about to fall when the reverse could be true.

“Businesses expecting to sit back and watch their energy bills come down, because of the price cuts announced by the Big Six, should think again,” explains Jonathan Elliott, MD of Make It Cheaper.

“Business contracts typically renew once a year and when they do it’s quite common to see rates go up by 50 per cent, as contracts are automatically ‘rolled over’ into new 12 month terms. The best prices are only available to those who are proactive about shopping around during their renewal window, and then manage to avoid being rolled over by sending in a termination letter.”

Charles Whitfield-Bott runs a small pharmacy in Whitehaven. He was shocked to learn that utility providers were cutting domestic rates and not commercial ones. “I would expect the providers to cut the rates by the same amount as the domestic rates – surely the wholesale rates are the same?

“We are lower risk, and have higher usages, should be rewarded with a cut.”

Last year Charles nearly became victim of the rollover trap when his provider tried to double his rates from eight pence per unit to 16.2 pence. Luckily he managed to bring his rates down, but others are not so lucky.

Ellie is the process of doing the same. She was originally told by one of her suppliers that, were she to use them as her domestic and business gas and electric provider, she would get preferential rates – but that simply hasn’t happened.

“We’ve had to change our gas supplier – our unit rates went up too high,” explains Ellie. Now her electricity contract is up for renewal and she’s looking to switch. She just wishes that commercial rates could enjoy the new price cuts that domestic users are.

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