The SME approach part two: Why fixed prices can save you a bundle
5 min read
14 August 2017
Fixed prices can save SME owners a bundle compared to other tariffs, and here's why. As with anything, remember to consider more than just the price.
With rising electricity prices hitting the headlines recently, it seems as good a time as any to re-visit the SME approach to energy bills. Here, we explore the different kinds of tariffs, and how small and growing business can benefit from fixed prices.
Earlier in this series, we looked at the SME approach to finding an energy supplier. We considered all the different things you should look for, from customer service, product range, green credentials and expertise – and of course, pricing.
We also explored how an SME business owner should learn to negotiate as a business rather than a consumer. We considered that, although a small business might not be in a strong negotiation position, research is necessary to get the best deal.
Recently, Centrica made the headlines when it was announced that British Gas is increasing the cost of electricity by 12.5 per cent. Gas prices were left unchanged – but those on a duel fuel bill will be affected, and can expect a 7.3 per cent rise to take effect on 15 September.
With that in mind, now seems a perfect time to examine the different tariffs available to SME owners, how they should approach energy suppliers, and how to avoid getting caught out on pricing.
Finding a good deal
There is a great deal of different energy tariffs available, and many people looking for a good deal are now hard-wired to seek out a bargain on a price comparison site.
However, price comparison sites are not always the best place to visit to find a deal. A recent Competition and Markets Authority (CMA) report found that the energy market in particular lacks transparency, with some tariffs not published as many are negotiated between the supplier and its customers.
Try to use them more as a jumping off point, but don’t take them as the be-all and end-all – some energy providers won’t even be listed, and you could end up missing out.
As with anything, try to consider more than just the price point – signing up to the cheapest supplier only to find the service is patchy and you can’t get through to anyone on the customer service hotline isn’t anyone’s idea of a good deal.
Different kinds of tariffs
Duel fuel tariffs are popular because they combine both electricity and gas – thus reducing the paperwork headache required with sourcing two separate contracts. You can sometimes get good deals on duel fuel tariffs because companies acknowledge you are spending more, and they want to keep you happy.
However, as with the British Gas announcement recently, you can get caught out. If the company raises its price for either or both of the products, you’ll end up footing the bill.
For business owners whose priority is budgeting with certainty, there are several options.
Firstly, there are prepayment options. This means installing a new meter, and paying for energy on a unit by unit basis – no nasty surprises later down the line. The advantages of this may be outweighed by the pricing however, as this can be an expensive way to procure energy.
Secondly, there are capped and fixed energy tariffs – and they pretty much do what it says on the tin.
A capped tariff means that the price per unit of energy you use will never rise beyond a certain point, and if you are lucky you may also benefit from price cuts. A fixed tariff means the price per unit of energy will not change for the duration of the agreement.
Capped and fixed pricing can be a happy medium for small business owners – it allows budgeting with certainty, which can help protect businesses against fluctuating market conditions.
Especially in such politically and economically unstable times, this can be a real boon. Be small business savvy – research your options, and make the switch that is right for you.