The definition of a micro business, regarding your energy, is pretty simple; it’s classed as a micro business if:
- it consumes no more than 293,000 kWh of gas per year, or
- it consumes no more than 100,000 kWh of electricity per year, or
- it has fewer than 10 employees (or their full-time equivalent) and has an annual turnover not exceeding €2 million.
It seems pretty straight forward so far doesn’t it? Yet, regardless of the fact that the energy industry and Ofgem have put rules of engagement in place to help protect micro businesses (and the way they buy energy), some suppliers and Third Party Intermediaries (TPIs) are still bending these rules to meet their own gains. So have your own rules of engagement ready when you tackle the energy industry;
Know your energy contract renewal dates.
Guidelines were put in place by Ofgem to stop the energy suppliers from putting micro businesses on higher “out of contract rates”. But, this has had a knock on effect. Some contracts will automatically continue or roll over (the energy suppliers can only do this for a maximum duration of one year though) but you may not want this. You may want to see what alternatives are on offer at any one time and have the freedom to move suppliers if you wish. Also, there are rules in place to allow micro businesses to give termination notice at any time during their contract. This is to stop suppliers requiring termination during a narrow time period (usually 30 days, but rarely more than 90 days). Knowing your contract renewal dates will put you in a much better position when it comes to energy renewals.
Many micro businesses agree contracts with energy suppliers over the phone; please don’t be one of them!
Always ask to physically sign a contract. And when it gets sent through to you (generally by email), always make sure the Terms and Conditions form part of the contract that you’re about to sign. If they don’t, then reject it. The pricing should be visible on the contract as well as the length of the term. There is generally no cooling-off period after you agree an energy contract so why risk not seeing the contract in writing? Also, some contracts can have a term of several years, (with an early termination fee if you wish to change energy supplier before then) so make sure it’s right at the outset; read through the entire document. And if you do “sign-up” over the phone, your verbal agreement is binding.
“Ha! Finding the best energy deal; how hard can it be!?”
Unfortunately, it can be trickier if you’re a micro business. For a start, there is no obligation for the energy suppliers to supply you. A supplier can determine which customers they choose to supply, whether that be based on the size of the supply or your credit rating. If you’re going to start calling around for quotes then do you have the time and resources to commit to it? If you’re calling the suppliers direct then it’ll be no surprise to you that their offering is going to be the one that is the best thing since incandescent light bulbs. So be prepared to make that same call 10 times over. Call different suppliers, to ensure you do get the right product for you and your business circumstances. If you choose to work with a TPI (Third Party Intermediary) to procure your energy then know that some won’t find the best deal for you. They’re not obliged to find the best deal for you (although they should-this is a whole other story on its own though). You could find a better deal if you are prepared to look at different contract lengths or payment methods for instance (again, the TPI should present this but many don’t). Also, not all TPIs compare apples with apples; if they’re presenting “fixed” contracts then shouldn’t each comparison be “fixed”? Oh, and there’s more to consider on that point, some TPIs may say that a contract is “fixed” but in reality, it’s not fully fixed and in fact it’s the contract length that’s fixed. Therefore, you should check whether your price is likely to vary within the term of the contract-this may be presented as “pass-through” charges. But please bear in mind, whether you’re with a supplier direct, or choose to work with a good TPI, not all energy contracts have to be set-up on this basis (and nor should they).
If you choose to use a Third Party Intermediary (TPI), then know the basics.
A TPI is an organisation (including switching sites, energy brokers, energy consultants or any company that offers support with energy procurement) that give advice to help you buy and manage your energy supply. Also, not all TPIs are equal! You should never feel under pressure to use their services, whether they have contacted you or you have contacted them. Also, your energy supply will always be with an energy supplier; the TPI doesn’t supply your energy and so the billing should always be from the supplier too. Have some basic questions ready such as which suppliers will you be approaching for pricing? (the more the merrier but be warned, some TPIs don’t research the whole market and some represent just one or a small group of suppliers), How many pricing offers will you present? (it shouldn’t be more than 3-5 because it’s their role to weed out the ones that aren’t appropriate for you), What will you do during the switch and also the life of the contract? (they should still be working for you even after you’ve signed).
Finally, during the contract period energy suppliers cannot stop treating a customer as a “micro business” even if it grows beyond the micro business definition. So use the advantages of being classed as a micro business and grow beyond your wildest dreams!