What is a tariff and why is it important?

A business energy tariff is essentially the pricing structure for your supplier. As well as the rates suppliers will use to calculate your bills, it may include features, contract durations, and additional discounts or charges. Your tariff therefore determines what you pay, and when you can switch suppliers.

What tariff are you on?

Your current tariff should appear on your bill. Ofgem wants all suppliers to provide a Tariff Information Label on bills - a breakdown of key facts about the tariff including its name, type, unit rate, daily charges and end date. It's important you know all these details if you're considering switching supplier.

Common types of business energy tariff

  • Fixed - With a fixed business energy tariff you will be agreeing to pay a guaranteed unit rate and daily charge for the duration of the contract. Pros: you're protected from those constantly rising costs. Cons: you'll be tied in for the duration, often with a fee for cancelling early.
  • Variable - The cost per unit is subject to fluctuations. Pros: cost per unit may be cheaper than Fixed when you start the tariff. Cons: rates could go up at any time.
  • Time of use - Price per unit can vary depending on the time of day - a smart meter is needed for this tariff. Pros: if your business operates mostly at off-peak times, you could save. Cons: peak rates can be expensive.
  • Green - Tariffs that are certified by Ofgem as having some benefit to the environment, such as using renewable energy sources. Pros: minimises your impact on the environment. Cons: usually a bit more expensive.
  • Default or Deemed - The tariff you will automatically be placed on when you first move into a new premises, or if your contract comes to an end. Pros: you're free to shop around and switch as soon as you find a suitable tariff as there is no end date or notice period. Cons: usually more expensive than a contract.

Additional discounts and charges

Remember that additional savings can be made with a Dual Fuel tariff (i.e. combining your business gas and electricity with one supplier), if you choose to pay by Direct Debit, and occasionally if you opt out of paper bills and manage your account online instead.

Meanwhile, read any tariff information carefully to find the contract length and the exit fees you will need to pay if you cancel before this date.

Finding the right energy tariff for you

The good news is Ofgem is working hard to make tariffs easier for customers to understand – with changes introduced in early 2014 that will really help anyone trying to save money. The tariff information label for example makes it clear what you're paying and why; suppliers also need to provide a tariff comparison rate (TCR) which gives an indication of how tariffs compare.

Of course, switching providers can be a time consuming and often confusing process. For expert help finding the cheapest prices available to you, as well as contract terms and conditions that meet your needs, contact our business energy comparison team on 0330 333 4106. Make sure you have details to hand of the tariff you are currently on, so we can accurately estimate what you'll save.