Business energy vs domestic energy: Why your club needs to know the difference

Energy is energy, right? Well, not quite.

It’s easy to assume energy deals work the same way at your club as they do at home.

However, understanding the crucial differences between business and domestic energy is essential. Understanding these differences can help clubs assess their own energy arrangements and the options available to them.

Businesses are not protected by the UK energy price cap

No two businesses are the same, meaning one standardised energy price cap would be tricky to roll out fairly across a variety of sectors.

Ultimately, businesses are expected to have more time, resources and incentive to shop around when it comes to signing new energy deals. Knowing your needs is important.

Businesses usually sign fixed-term contracts

In 2023, an Ofgem study found over three quarters of businesses were on a fixed-rate deal for gas and more than two thirds were on a fixed rate for electricity.

Businesses tend to value the predictability and protection against price volatility to allow for budgeting and long-term planning, while domestic users are already offered some protection via the energy price cap.

Energy prices are tailored to each business

Unlike domestic energy, there are no one-size-fits-all business energy tariffs.

Business energy use can vary significantly. A rugby club, for example, may use energy in completely different ways to local takeaways and industrial manufacturing plants, which is why suppliers assess each business individually.

Businesses can negotiate energy contracts

Following on from the previous point, households are usually offered a standard price by suppliers. What you see is what you get. You sign up, and away you go.

Businesses have greater scope to compare suppliers and find tariffs that suit their needs. The larger the business, the greater the opportunity to negotiate. Suppliers want your business.

Businesses may pay more VAT

Domestic energy users are usually subject to a reduced 5% VAT rate, while businesses generally pay the standard 20% rate.

However, several categories of business may benefit from the reduced rate:

• Low energy users (approximately less than 4,397kWh of gas or 1,000kWh of electricity)
• Mixed-use premises, if at least 60% of the site is used for domestic purposes
• Charities and (not-for-profit organisations)
• Certain residential uses, including hospices, care homes and self-catering holiday lets

Make sure you’re paying VAT at the correct rate.

Business energy contracts have renewal deadlines

Business energy contracts can include specific renewal deadlines and notice periods. These may require action anywhere between 30 and 120 days before a contract ends, depending on the terms of the agreement.

You must negotiate a new contract with your current or a new supplier within this renewal window, or you could be automatically enrolled on a new deal, often with higher rates.

What businesses can consider before renewing an energy contract

When reviewing an energy arrangement, businesses and clubs may wish to consider:

1. How much energy you use: This gives you a baseline for comparing quotes.
2. Usage patterns: You could benefit from time-of-use tariffs with different day/night rates.
3. What you are paying for: Look beyond the headline kWh unit rate and check you’re paying the correct non-commodity costs, including VAT, other taxes and levies.
4. Different contract structures: Fixed and flexible arrangements have different features and considerations, and their suitability will depend on the individual circumstances of the organisation.
5. Contract end dates: Understanding when an existing agreement ends, and any associated notice periods, can help businesses avoid unexpected changes to their contractual arrangements.

About Troo

Troo can support clubs on energy-related products and services. Their work already covers a range of businesses and organisations, including those operating within the sports sector. Troo’s services are designed to provide businesses with information and support around their energy arrangements.

We are pleased to share information – such as this – as well as the work Troo does within the business energy market.

As part of our relationship with Troo, they are offering clubs a free energy health check for practical advice on business electricity, gas and water procurement, renewable consultancy and their ongoing management services.

For further information about Troo, contact Sean Gleeson: sean.gleeson@troocost.com

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