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How Much Can You Save by Switching to a New Business Gas Provider?

Editor's Note: If you are interested in becoming an expert on Supply Chain Management (SCM), take a look at Flevy's Supply Chain Management (SCM) Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.

Featured Best Practice on Supply Chain Analysis

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This deck was developed to support supply chain visioning and strategic diagnostics. It provides checklists of key questions to ask in formulating a supply chain strategy, core frameworks, tools and techniques that facilitate the strategic thinking process. See also "Supply Chain Performance [read more]

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In the UK, energy suppliers compete to provide the best services at the most reasonable rates. This is an excellent advantage for consumers because unlike other countries where a single company monopolises energy, consumers here can switch providers when they feel that they are paying more than they should.

What does it mean to switch suppliers?

Transferring energy suppliers is not a complicated process. These days, business consumers can switch suppliers through any of the three following methods:

  • Contact suppliers directly and facilitate the switch
  • Use a comparison website like Utility Bidder to shop for quotes and complete a transfer form online
  • Hire a broker who will contact suppliers and negotiate the best terms and rates possible

Any of these steps are guaranteed to get you a lower price, regardless of which you prefer. Nevertheless, for convenience and efficiency, business owners typically choose to either use a comparison website or hire a broker.

Understanding the terms ‘out of contract’ and ‘deemed rate’

An out of contract rate occurs when a business owner fails to cancel a deal that is about to expire, and the supplier places the customer on a new price which is usually higher than the previous rate. On the other hand, a deemed rate occurs when there is a change in tenancy or ownership of a particular property.

Both of these rates are quite expensive, and if you are paying one of these rates, it is best to change tariffs as soon as possible to save money.

How much do businesses save by switching energy suppliers?

Savings are guaranteed if you switch, but the amount depends on several factors. Some of the considerations include the last time you changed, as well as your total energy consumption. The size of the business is also a factor that affects the annual savings of each company after transferring to a new energy supplier. A micro-business can save about 25% annually, a small business 27%, a medium business 37%, a large business 38%, and an industrial company 33%.

Different types of contracts

It is also vital to look into the kind of agreement you are choosing for your company as it will also have an impact on your spending. The typical term is fixed for approximately one to three years. If you prefer a fixed term, the rate will remain as is throughout the contract period. There is also an option to choose a flexible term.

The difference is that the rates applied to a flexible term depend on the current market prices. What this means is that when market prices are down, you will also pay lower rates. Unfortunately, if there is a sudden surge in wholesale energy prices, you will also take the hit.

A fixed rate protects you from the volatility of the UK energy market, which is why it is the natural choice for most business owners. For a residential consumer that is not tied to a contract, it makes sense to gamble on a flexible rate. But for a business owner, there is certainty and convenience in choosing a fixed term because you can easily project your company’s expenses based on the current rates you are paying.

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The purpose of the 4 Stage Model is to provide a high-level qualitative assessment of an organizations practices and processes. The model aligns with the Supply Chain Council's SCOR model and is broken down into Plan, Source, Make and Deliver. Within each of these major processes are a series of [read more]

Want to Achieve Excellence in Supply Chain Management (SCM)?

Gain the knowledge and develop the expertise to become an expert in Supply Chain Management (SCM). Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. Click here for full details.

Supply Chain Management (SCM) is the design, planning, execution, control, and monitoring of Supply Chain activities. It also captures the management of the flow of goods and services.

In February of 2020, COVID-19 disrupted—and in many cases halted—global Supply Chains, revealing just how fragile they have become. By April, many countries experienced declines of over 40% in domestic and international trade.

COVID-19 has likewise changed how Supply Chain Executives approach and think about SCM. In the pre-COVID-19 era of globalization, the objective was to be Lean and Cost-effective. In the post-COVID-19 world, companies must now focus on making their Supply Chains Resilient, Agile, and Smart. Additional trends include Digitization, Sustainability, and Manufacturing Reshoring.

Learn about our Supply Chain Management (SCM) Best Practice Frameworks here.

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About Shane Avron

Shane Avron is a freelance writer, specializing in business, general management, enterprise software, and digital technologies. In addition to Flevy, Shane's articles have appeared in Huffington Post, Forbes Magazine, among other business journals.

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