Ofgem’s Energy Price Cap is a government policy designed to protect UK households on standard variable tariffs from excessive energy costs. The cap limits the maximum price domestic suppliers can charge per unit of gas and electricity.
But if you run a business, you may be wondering how the Energy Price Cap will affect your delivered price for your next deal.
Is the Energy Price Cap linked to business pricing?
In short, business energy prices are not covered by the Energy Price Cap. The cap applies exclusively to domestic customers, not to commercial contracts. Business energy operates in a fully competitive market, where prices are based on wholesale costs, contract type, business size, and usage patterns.
How it can be reflected in non-domestic tariffs
Firstly, both domestic and business tariffs are impacted by movements in the wholesale energy market. When wholesale prices rise, suppliers may struggle to cover costs under the capped domestic rates, so they may look to recover profits through their commercial offerings. This can lead to imbalances and differences in domestic and non-domestic pricing.
Equally, a rising wholesale market means higher domestic and non-domestic prices. We know suppliers love a rapid price increase. Both markets are affected by the same conditions, but don’t administer pricing the same way.
Because the business energy market has more variable moving parts, companies can negotiate better rates, switch suppliers, or explore various product types to manage costs. There are always efficiencies to explore for businesses, even within a single supplier’s product offering.
So, seeing projected domestic cap drops does not mean there are hefty discounts on the way for your business. What it does mean is a projected dip in wholesale market price. But remember, this only accounts for around 40 per cent of a business energy contract.
How we can help
At Procure Smart, we help UK businesses navigate the energy market with expert advice. While the Energy Price Cap doesn’t apply to your business, understanding how it affects the wider market can help you make informed decisions.
Need help comparing business energy deals? Speak to one of our experts today for a free, no-obligation quote.
Or, check out the market today with our unique comparison and switching tool, Switch Savvi.
