Many homes and businesses ask this question daily. The answer to this question is different for everyone and it really depends on your home or business. In this article, I am going to explain to you how to work it out. Now, if you have no interest in knowing this information then get in touch with me and I promise I won't bore you with loads of information and take the hassle off you to work it out.
Below is three different cases and examples for you to read and understand - I'll start off easy for you to get your head around it!
1. Anna runs a medium-sized clothes boutique in her local town. The business is using on average 20000 units of electricity per year. The current unit rate she is paying is 41c p/kWh which equates to €8200 per year on her energy rate (excl. Vat and any other charges). Her current company is offering her a new rate for next year of 35c p/kWh which will bring her costs down to €7000. That's a saving of nearly 15%. All she must do is sign a piece of paper and now she starts paying less. Easy. Anna makes a call to a broker and tells her she can go on a lower rate, but her daily standing charge will increase by 15c per day (€54.75 extra). If she switches, she can get a rate of 33.7c p/kWh.
We know her existing company's Energy cost will equate to €7000.
Let’s do the math on if she switches - 20000 units X 0.337 = €6740, so her savings would be another €260 if she switches. If you take in to factor the extra €54.75, she will pay on her daily standing charge - that's a net savings of €205.25. So, in this situation, Anna should switch suppliers this year.
Are you still with me? It gets a little trickier so if you are lost already then you know what to do. I will leave this here hello@askandrew.ie
Now, let’s move on.
2. Jamie runs a household with his 2 kids and his wife. His contract is coming to an end, and he is being offered 6% discount to stay with his current company. He is clearly not happy as he saw on Facebook that the company was giving 15% discount to new customers and decided to write underneath it ''What about loyal customers'' (yes, we have all seen these comments or if you’re reading this - you've probably wrote a similar comment in the past). Cheeky! We all have! So, Jamie has wrote that comment on an energy companies page, he is now starting to see many ads on electricity deals (I wonder why)
The ad states that they will give 18% discount and Jamie is on that phone to the energy company and signs straight up. No questions asked. The person on the other end thought it was his lucky day. Was he right to just take it? Let’s work it out here.
His current company was giving him 6% off their energy rates. The rate was 38c p/kWh so with the discount the rate was 35.72 c p/kWh. Let just say if he uses the average of 4200 units per year then his ''energy only'' cost would equate to €1500.24 (this is under the assumption that the rate stays the same for the 12 months - I will cover this in another article).
The new company was giving him 18% off their energy rates. The rate was 48c p/kWh so with the discount the rate was 39.36 c p/kWh. Let just say if he uses the average of 4200 units per year then his ''energy only'' cost would equate to €1653.12.
Moral of the story - Jamie bought on impulse like the last time you ordered the most expensive steak in a restaurant but then they overcooked it and turned out to be an expensive mistake. Look at rates and look at your usage. Numbers never lie (unless you’re using one of them step counters that you bought for €2.00)
Okay, now seriously - this next one can mess with your mind. Read it slowly and you will get through it.
3. ABC Limited is ran by Donald - his company is a larger user of 400,000 units per year. He has deciding between a Fixed Unit price for his business of a Variable Unit price that tracks the price of the Wholesale Cost of Electricity. Let me first explain what they mean:
Fixed Unit Price - to make it simple for you a fixed pricing plan gives you assurance that you know what rate you will be paying for the length of contract. Can it increase during the contract? Yes, it can if the Pass-through charges need to be increased. Pass-through costs are fees paid to other companies who operate and maintain the electricity network. Recent years, Pass-through charges increase by a couple of cent per kWh only. If Electricity prices drop significantly over the next few months after signing to one of these contracts, then the business has to pay the exit fees which start at €1000 and can reach 5 figures in some cases!
Variable Tracker Rate - this is a rate that companies can offer to businesses. This means that when the prices drop at certain parts throughout the year. The business can get those savings in their bills and vice-versa.
Donald took advice from his friend that a fixed rate is the best way to go. (His friend is correct - it can be more beneficial for many businesses). Donald is being offered a fixed rate of 44c p/kWh (including pass through charges) which will bring his energy costs to €176,000 for the year.
Now we need to look at a tracker rate - for this Donald can only look at how it worked out over the previous year as unless he has psychic powers then he just won't know! See Below how it worked out last year.
Month | Price p/kWh (incl. Pass Through costs) |
January | 49 |
February | 45 |
March | 44 |
April | 41 |
May | 34 |
June | 30 |
July | 32 |
August | 31 |
September | 34 |
October | 35 |
November | 39 |
December | 44 |
AVERAGE COST | 38.16 |
Okay, so this is how the tracker performed last year. Remember we mentioned Donald's business uses 400,000 units a year, that's an average of 33,333 units per month. So below are the costs of the lowest month, highest month and the full year.
Lowest month - August
Fixed Pricing = 33,333 X 0.44 = €14,666.52
Tracker Variable Pricing = 33,333 X 0.31 = €10,333.23
Highest month - January
Fixed Pricing = 33,333 X 0.44 = €14,666.52
Tracker Variable Pricing = 33,333 X 0.49 = €16,333.17
Full Year Cost
Fixed Pricing = 400,000 X 0.44 = €176,000
Tracker Variable Pricing = 400,000 X 0.3816 = €152,640
So, as you can see, Donald has a choice. He can go on a Fixed Cost and know what he is paying for the year and budget it, or he can go on a tracker and risks paying more or saving compared to being on a fixed rate.
I know you were probably waiting for me to tell you which one to go for, but my electricity bill is not €176,000 so the choice is completely up to Donald. What I can do is give you advice on the market prices and let you know how these tracker rates have been performing over the previous 12 months.
If you are reading this and looking to see what options, you have for you electricity then get in touch and I would love to help you!
Contact: 061 - 518314
Email: hello@askandrew.ie
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