5 Common Business Energy Renewal Mistakes And How To Avoid Them.
Energy contract renewals provide an opportunity to optimise what is often one of the most significant expenditures within your business. Approached correctly, a renewal can help secure a contract that is aligned with your operational requirements, improve cost visibility and potentially deliver meaningful savings over the term of the agreement.
With the UK energy market experiencing significant volatility in recent years, many businesses are now renewing contracts in very different market conditions to when their previous agreements were secured, which in some cases could be up to six years ago. This can mean a considerable impact on your future energy expenditure.
A well-managed renewal process has become increasingly important for businesses looking to maintain commercial stability and make more informed procurement decisions. In contrast a poorly managed renewal process can lead to unnecessary cost, unsuitable contract structures and avoidable operational frustration later in the agreement.
Below are five common mistakes businesses make during the renewal process, how they could impact your business and the key considerations that can help you avoid them.
1. Leaving Renewals Too Late
One of the most common mistakes businesses face during renewal periods is leaving assessment and action too late. This is easily done when your focus is naturally on the day-to-day running of your business, however waiting until the final stages of your current agreement can reduce your opportunity to properly assess the market and secure the most competitive rate available throughout your renewal period.
Many suppliers open renewal windows several months prior to the contract end date, allowing you opportunity to lock in your future tariff during this period. Leaving reviews until the final stages can reduce your ability to properly assess market conditions, compare procurement approaches and review available contract options.
Starting the process earlier gives your business more time to evaluate supplier options, understand market positioning, respond effectively and take advantage of market shifts.
2. Choosing A Tariff That Doesn’t Match Your Consumption
Energy contracts are not always one size fits all and different tariff structures can suit different types of business depending on consumption profile, operational hours and overall usage levels.
A contract that appears cheapest on paper may not always produce the lowest overall annual cost.
Selecting the right contract often starts with understanding how and when your business consumes energy and how this impacts your overall annual expenditure.
It’s easy to become fixated on headline pricing figures, however these should always be reviewed alongside your consumption profile to give a more accurate understanding of how this impacts your annual cost.
3. Not Comparing Available Options
Another common mistake businesses make during renewal periods is accepting the first proposal from their existing supplier without seeing how it compares to the wider market.
While remaining with your current supplier can be the right decision, your business should still ensure it has visibility of the alternatives available before committing to a new agreement.
Market conditions, supplier appetites, pricing strategies and contract structures can vary significantly at any given time. Without conducting a proper market review, your business risks missing opportunities to secure more competitive pricing, improved contract terms or supplier options that are better aligned for your business’s needs.
Even if your existing supplier remains your preferred choice, benchmarking available options provides you with confidence that your agreement represents fair market value at the point of renewal.
4. Overlooking Supplier Service Standards
Supplier support is often underestimated until a problem arises. Billing disputes, account amendments or a change of occupier can quickly become time-consuming when communication and service levels are poor.
A competitive new tariff can quickly lose its value if ongoing account management becomes difficult or operational issues are not handled efficiently. For many businesses, reliability and responsiveness can be just as important as pricing.
Try to carry out appropriate due diligence before agreeing to switch supplier. Reviewing customer feedback, service performance and supplier reputation can help you make a more informed decision before entering into a new agreement.
5. Neglecting Renewable Energy Options
Renewable energy options are often overlooked due to the historic pricing gap between renewable and non-renewable products.
However, as renewable procurement has become increasingly accessible in recent years, pricing has become far more competitive than many businesses initially expect.
While pricing will always remain an important consideration, renewable procurement can also support wider brand positioning and sustainability objectives without necessarily resulting in significant additional cost.
Requesting a renewable comparison alongside your standard renewal pricing can help your business properly assess the options available before making a final decision.
Final Thoughts
Energy renewals don’t need to be stressful, and we believe they should be viewed as an opportunity to maximise value and improve your position going into your next agreement.
By avoiding some of the common mistakes outlined above, your business can approach the renewal process with greater confidence to secure a contract that is aligned with both your business needs and overall energy expenditure.
Giving yourself enough time to review the market, compare available options and understand how both the tariff and supplier align with your business needs can make a significant difference when it comes to securing the right agreement.
If this still sounds like a lot of hassle, working with a business energy procurement specialist can be a time-efficient way to ensure you maximise the value from your next agreement.
At Shoto Energy, we offer a free energy audit with no future commitment so you can better understand your current position ahead of your next renewal. If you need any further guidance or would like to compare options from our panel of trusted suppliers, we’re always happy to help.
