An energy tariff sounds like something out of science fiction, but it’s a common item you’ll find on monthly power bills. And if you don’t know what it is, you might be spending more on your business's power than you should be.
Let’s dive into what energy tariffs are and what types to look out for, and then we’ll walk you through how you can choose the right one for your business.
What are energy tariffs?
An energy tariff is the pricing structure set by energy suppliers that determines how much your business pays for electricity and gas. It typically includes components such as the cost per unit of energy consumed and standing charges, which are fixed daily or monthly fees. There are different types of energy tariffs, including fixed tariffs, variable tariffs, and time-of-use tariffs. Understanding these components is essential for managing your energy costs effectively.
Types of energy tariffs
Each of the different types of energy tariffs have advantages and disadvantages, depending on your business's energy consumption patterns and needs.
- Fixed tariffs: Fixed tariffs lock in the price of energy for a set period, such as one or two years, providing stability and predictability in your energy costs. The main advantage is that you avoid fluctuations in energy prices, which can help with budgeting and cost management. However, if market prices fall, you may end up paying more than the current rate. Fixed tariffs are ideal for businesses that prefer stable expenses and have consistent energy usage patterns.
- Variable tariffs: Variable tariffs fluctuate with market energy prices, meaning your rates can change periodically based on market conditions. This can potentially lead to lower costs if energy prices drop, but it also exposes you to higher costs during price spikes. Variable tariffs are suitable for businesses that have flexible energy usage patterns and can benefit from market price changes—or those willing to take a risk for potential savings.
- Time-of-use tariffs: Time-of-use tariffs charge different rates depending on the time of day, with lower prices during off-peak hours and higher rates during peak times. This can lead to cost savings if your business can shift energy-intensive activities to off-peak periods. However, managing energy use to align with these periods can be challenging, and peak rates can still lead to high costs. Time-of-use tariffs are best for businesses with variable energy needs and the ability to adjust their usage based on time-of-day pricing.
Choosing the right energy tariff for your business
How do you know if the energy tariff you have is right for you? Here are a few steps you can take to make sure your getting your money’s worth from the power you pay for every month:
- Assess your business needs
To determine the most suitable tariff for your business, it’s essential to evaluate various factors, such as the size of your business and peak usage times. A thorough understanding of your energy consumption patterns will help you decide whether a fixed, variable, or time-of-use tariff aligns best with your needs and budget. For instance, businesses with consistent energy usage might benefit from a fixed tariff, while those with fluctuating consumption may find variable or time-of-use tariffs more economical. Conducting a detailed analysis of your business operations and energy requirements is crucial for making an informed decision that optimizes your energy expenditure.
- Compare tariffs
Comparing tariffs and suppliers is a vital step in securing the best energy deal for your business. Start by reviewing the rates, terms, and additional charges of various tariffs. Look into the reputation and customer service of different suppliers to ensure reliability. Create a comprehensive comparison chart to evaluate the cost-effectiveness of each option. This process involves not just looking at the base rates but also considering any hidden fees or contractual terms that might impact your overall expenses. By meticulously comparing these aspects, you can identify the most favorable tariff that aligns with your financial and operational goals.
- Negotiate with suppliers
Armed with your tariff comparisons, you are in a strong position to negotiate better rates or terms with energy suppliers. Approach multiple suppliers to explore their offerings and use the information from your comparisons as leverage. Highlight your specific business needs and the benefits you are seeking to achieve through a new tariff. Effective negotiation can result in significant savings and better terms that suit your business operations. Don't hesitate to push for discounts or special rates, especially if you have been a long-term customer or if you are willing to commit to a longer contract period.
- Conduct regular reviews
Regularly reviewing your energy tariff is essential to ensure it continues to meet your business needs. The energy market is dynamic, with new offers and changes occurring frequently. Set a schedule to periodically reassess your tariff, perhaps every six months or annually, to stay informed about potential savings opportunities. By keeping abreast of market trends and new deals, you can make timely decisions about whether to stick with your current tariff or switch to a more advantageous one. This proactive approach helps you avoid unnecessary costs and ensures your energy expenses remain optimized.
- Analyze usage and adjust accordingly
Utilizing energy-monitoring tools to track your energy consumption is critical for identifying any discrepancies or inefficiencies. These tools provide valuable data that can help you make informed decisions about your energy use. Analyze this data regularly to understand your consumption patterns and identify areas for adjustment. If your business operations or energy needs change, use this information to reassess and possibly switch tariffs or suppliers to better suit your current situation. This continuous monitoring and adjustment process is key to maintaining cost-effective and efficient energy management for your business.
Take control of your energy bill
Understanding energy tariffs is just one component to taking control of your energy bill. In fact, the monthly power bill you get in the mail doesn’t even tell you the whole story. That’s why many businesses use smart meters to tell them how they’re spending their power. Smart meters like Electripure’s CleanPQ give business owners insights into every area of their facility and can identify weak points that you can actually act on.
Ready to get real information about your business’s power consumption? Contact us today and Electripure’s experts can come out to help you get a clear vision of the power you pay for.