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Business Energy Procurement - Is It Necessary?

Many UK businesses overlook one of their most significant controllable expenses: energy costs. This raises an important question: is business energy procurement truly necessary, or is it simply another administrative burden?

Understanding Business Energy Procurement

Business energy procurement is the strategic process of securing gas and electricity contracts at the most competitive rates and favourable terms for your organisation. Unlike domestic energy switching, which is relatively straightforward, business energy procurement requires a deep understanding of market fluctuations, regulatory frameworks, and supplier relationships.

Companies like Cibus Energy have built strong relationships with a range of UK suppliers, enabling them to compare prices across different contract lengths and secure the best value energy rates for their customers. This level of market access and expertise is difficult for individual businesses to replicate independently.

The Hidden Cost of Doing Nothing

Perhaps the most compelling argument for professional energy procurement lies in understanding what happens when businesses fail to actively manage their energy contracts. Many organisations unknowingly fall into the trap of out-of-contract rates, leading to substantial overpayments.

How Businesses Overpay on Out-of-Contract Rates

When a business energy contract expires without a new agreement in place, suppliers automatically place the customer onto what are known as “deemed contracts” or “out-of-contract rates”. These deemed energy contracts are notorious for being significantly more costly than negotiated tariffs, with rates for micro businesses reaching up to 80% higher than those in negotiated deals.

The financial impact is staggering. Without an energy contract, businesses could end up paying double or quadruple the average market rate for energy. To put this into perspective, whilst a standing charge typically costs around 25p per day under a negotiated contract, deemed contract customers can pay up to £1 per day. Similarly, unit rates can jump from approximately 13p/kWh to as much as 40p/kWh.

Common Scenarios Leading to Overpayment

Businesses typically find themselves on these expensive deemed rates in three situations:

  1. Moving premises: When relocating to new business premises, many organisations begin using energy before arranging a contract with their chosen supplier, automatically triggering deemed rates.
  2. Contract expiry: If a contract expires and the business continues to consume energy without agreeing to new terms, they’ll be moved to a deemed energy contract.
  3. Contract cancellation: When either party terminates an existing agreement and energy consumption continues without a replacement contract.

Worryingly, government figures show that 26% of businesses with zero employees have never considered switching suppliers, compared to 10% of businesses with 10 to 49 employees. This apathy means countless businesses are overpaying for energy without realising it.

The Rollover Contract Trap

If businesses allow their contract to rollover rather than negotiating new terms, they’re likely to be placed onto an expensive standard tariff with rates that can be 50% higher than negotiated contracts. Unlike deemed contracts, rollover agreements may also include exit fees, making it costlier to escape.

The Value of Professional Energy Consultancy

Given the complexity of business energy markets and the severe financial penalties of inaction, professional energy procurement becomes not just beneficial, but essential for most organisations. Energy consultants bring market expertise, supplier relationships, and dedicated management that most businesses cannot resource internally.

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Additional Services Provided by Energy Consultants

Beyond securing competitive energy contracts, professional energy consultants like Cibus Energy offer a comprehensive suite of services designed to optimise your entire energy management strategy:

Core Procurement Services:

  • Market analysis and price comparison across multiple suppliers
  • Contract negotiation and management
  • Renewal reminders to prevent deemed rate situations
  • Access to exclusive rates through established supplier relationships
  • Independent, impartial advice with no supplier bias

Supplier and Bill Management:

  • Full supplier and bill management packages to ensure businesses only pay for the energy they use
  • Bill validation and error correction
  • Dispute resolution with energy suppliers
  • Usage monitoring and reporting
  • Account management across multiple sites

Site Works and Metering Services:

Strategic Energy Management:

Financial Services:

  • Historical bill audits to identify overcharges and recover costs
  • Available capacity reduction programmes
  • Budget forecasting and cost modelling
  • Risk management strategies for volatile markets

Is Business Energy Procurement Necessary?

The evidence overwhelmingly suggests that professional energy procurement is not merely advisable—it’s financially essential for most UK businesses. Around 10% of micro businesses are currently on deemed contracts, likely overpaying by tens of thousands of pounds annually without realising it.

Consider that business energy contracts typically run for two to five years and, unlike domestic contracts, offer no cooling-off period. Once signed, you’re committed to the terms. This makes the initial procurement decision critically important, as mistakes can be costly and long-lasting.

Furthermore, the business energy market is considerably more complex than the domestic sector. Prices fluctuate based on wholesale market conditions, supplier capacity, consumption volumes, industry sector, and numerous other factors. Energy consultants leverage their extensive industry knowledge and supplier networks to navigate this complex energy market on behalf of businesses, identifying optimal purchasing windows and maximising savings.

Taking Control of Your Energy Costs

For businesses serious about controlling costs and maintaining competitiveness, energy procurement should be viewed as a strategic investment rather than an administrative expense. The cost of professional procurement services is typically more than offset by the savings achieved through better contract terms and the avoidance of deemed rates.

The good news for businesses currently on deemed rates is that you can switch at any time with no exit fees. However, prevention is always better than a cure. By engaging an energy consultant before your contract expires, you can ensure continuity of competitive rates and avoid the deemed rate trap entirely.

In an environment where energy costs represent a significant portion of operating expenses for most businesses, professional energy procurement isn’t just necessary—it’s a competitive advantage that no prudent business can afford to ignore.

For more information about how Cibus Energy can help your business secure competitive energy rates and comprehensive energy management solutions, fill out our contact form or call 07817 962252.

 
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