When it comes to energy rates, businesses often have different rates from residential and domestic entities. This is mostly because the contracts for business energy are quite different from those for domestic energy.
If you’re a new business owner looking to make a decision on whether to choose commercial or domestic energy for your business operations, this article will help clarify things for you. This way, you can actually get a great deal on your energy rates.
Commercial electricity and gas often appear cheaper than the rates that are offered to domestic customers. You would think that domestic would be cheaper, but that’s not necessarily the case.
Why Does This Happen?
Well, the rates are different for various reasons.
Quantity of Electricity Used
Most commercial and business places often need to use up more electricity than residences. Therefore, because they use large volumes of electricity, they typically get lower rates per unit of power.
Basically, economies of scale play a significant role here, as it does everywhere else. This can attract steep discounts, but the companies are usually charged higher VATs –20 percent instead of 5 percent domestic electricity VAT charges.
Ability to Negotiate Electricity Rates
When you’re buying energy in bulk, you may be able to negotiate your rates because of the volume of electricity and gas that you need. Most business places are often able to knock down the prices of energy units because they’re buying and using more energy.
Domestic users, on the other hand, do not have the same leverage. So they often have to rely on whatever the power companies charge them. Of course, they can always switch energy providers, but the rates will most likely, not be as low as the commercial customers.
Prices Change Frequently
All power companies often have peak and off-peak periods. This means that the pricing is different for both periods of the day.
However, during the same day, commercial companies benefit from fluctuating energy prices, while domestic customers are stuck with whatever rates they’re given. This price fluctuation means that when the prices dip, the business place can use a lot more energy without necessarily paying more.
Energy Rates Are Based on Business Needs
Commercial electricity and gas charges may also seem considerably lower than residential facilities because the power company does consider the business size. Very large businesses tend to use a ton more power.
Therefore, because of their sheer size, the power companies often want to please them and keep them as customers. Therefore, they offer bigger businesses lower energy unit rates per kWh, while selling them larger electricity units. This allows them to generate a lot more revenue, even if the profit margins are lower.
These are the reasons why it looks like commercial customers get lower energy prices. But there are often some other charges that business energy customers have to pay that domestic customers don’t.
At the end of the day, the rates kind of evens out, leading to little or no difference in energy rates per kWh. If you’re looking for more information or want a qualified electrician for your commercial or domestic electrical installation, we can help.
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