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What our Nerds say about business energy
Just as you need to heat and power your home, your business requires gas and electricity to keep the lights on and the radiators running.
Many of the same providers that service domestic customers also act as business energy suppliers. However, there are some major differences between domestic and commercial energy contracts.
Unlike with your home energy, you will typically have to get separate quotes for gas and electricity contracts for your business. This means you will also be billed separately for each commodity.
Your business energy contract will often also be longer than a household energy contract, with some lasting up to five years. And instead of going straight to the energy supplier, you may consider going through a business energy broker to potentially secure better rates than you could achieve on your own.
To discover more about how business energy works, how you can change your supplier, and what your different tariff options are, read our guide below.
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What is the Energy Bills Discount Scheme?
The Energy Bills Discount Scheme (EBDS) replaced the Energy Bill Relief Scheme (EBRS), and runs from 1 April 2023 to 31 March 2024.
Eligible businesses will have their per-unit cost automatically discounted if their wholesale price crosses the set price threshold, up to a maximum discount.
In Great Britain and Northern Ireland, the scheme works as follows:
- Electricity: a maximum discount of £19.61 per megawatt hour (MWh), with a price threshold of £302 per MWh.
- Gas: a maximum discount of £6.97 per MWh, with a price threshold of £107 per MWh.
For businesses that are ‘particularly vulnerable’ to higher energy prices, there is a greater level of support available. These businesses – including a range of manufacturers and miners, as well as libraries and museums, among others – are classed as Energy and Trade Intensive Industries (ETII), and will need to apply for this higher level of support.
For ETIIs:
- Electricity: a maximum discount of £89 per MWh, with a price threshold of £185 per MWh
- Gas: a maximum discount of £40 per MWh, with a price threshold of £99 per MWh
The full list of Energy and Trade Intensive Industries can be found here.
Why you should switch your business energy supplier
As with household energy, switching your business energy supplier could save you money in the long run. This is especially true if you have just moved into new business premises, where you will typically be placed on an expensive deemed rate that you haven’t chosen.
Even under the Energy Bill Relief Scheme, if you are on a fixed-rate tariff the differences in standing charges and other costs from supplier to supplier still means you may be able to save money by switching. Similarly, due to the maximum discount for variable, deemed and out-of-contract tariffs, you could claim a greater reduction if you were to switch suppliers.
It can also help make your business greener if you choose to switch to a 100% renewable energy tariff.
How much can businesses save by switching energy suppliers?
The amount your business can save by switching energy suppliers will vary greatly depending on a number of factors specific to your organisation. This will include, but is not necessarily limited to:
how much energy your business uses, itself informed by your size, industry and energy efficiency the unit cost per kWh of your existing contract the price of the standing charges and other fees on your existing contract.
What to consider when you compare business energy
When deciding which business energy supplier is the best fit for your needs, you should consider the following:
- the unit rate and standing charge you are quoted
- what kind of tariff suits your business
- whether the energy comes from renewable sources
- the length of the proposed contract
- the notice period of the contract
- whether the contract has a cooling-off period
- the cost of any additional charges, such as maintenance charges
- if you are using an energy broker, how much they will charge
Who should get business energy?
What kind of business energy plan is best for you will in part be determined by the size of your business. The larger your business, usually the lower your unit rate and standing charge.
You should also be aware that there are two types of business, which have slightly different rules when it comes to business energy: micro businesses, and charities and non-profit organisations.
Micro businesses
In the eyes of energy suppliers, you are a micro business if you meet just one of the below criteria:
- Your annual electricity usage is less than 100,000 kWh
- Your annual gas usage is less than 293,000 kWh
- You have fewer than 10 employees, and your yearly turnover is less than €2 million (around £1.71m)
This means that most small businesses in the UK would be classed as micro businesses.
If you do qualify as a micro business, Office of Gas and Electricity Markets (Ofgem) rules mean that in Great Britain you can expect:
- plain, easy-to-understand language in your contract
- greater transparency around the details of your contract, including brokerage costs and expiry dates
- a shortened notice period of 30 days
- a 14-day cooling-off period if you change your mind
- a renewal cap of 12 months if you let your contract roll over
- not to be back-billed for unpaid business energy used more than 12 months ago
One protection in place for micro businesses in Northern Ireland, as dictated by the Utility Regulator (UR), is a 13-month limit on energy backbills for gas and electricity.
If you run your business out of your home, you may not need a business energy contract. Instead, you may want to continue using your household energy.
Charities and non-profit organisations
If you run a charity or non-profit organisation, you may be eligible for the reduced VAT rate. This would take the amount of VAT you pay on your energy from the standard 20% down to 5%.
You would also be exempt from paying the Climate Change Levy (CCL), which can reduce your bills by a further 5%.
Types of business energy tariffs
There are multiple kinds of business tariff contracts available. These include the following:
Fixed rate
This is where you pay a fixed unit rate in kilowatts per hour (kWh), for a fixed period of time, i.e. the length of your contract. Your bill will be based on your energy usage.
With a fixed-rate tariff, you can benefit from stability. Although your usage may rise and fall, you will at least always know how much you are being charged per unit. However, it also means that you may miss out on any falls in the wholesale price of gas and electricity.
Variable rate
Unlike a fixed rate, your unit rate on a variable tariff will rise and fall based on market activity, namely wholesale energy prices. This means your unit rate will vary throughout your contract. This could end up costing you more or less money in bills than a fixed-rate contract, depending on how rates vary.
Deemed rate
A deemed rate is normally among the most expensive business energy tariffs out there. It will be in place because you have just moved into a new business premises and are yet to negotiate your own contract with a business energy supplier.
However, you are free to switch suppliers when under a deemed contract, as there is no expiry date involved.
Out-of-contract rate
If you reach the end of your contract with your business energy supplier, and fail to either switch to a new supplier or sign a new contract with your existing supplier, you will be charged at an out-of-contract rate.
This is typically more expensive than a deemed rate, as you have ‘chosen’ not to source a new contract.
Flexible rate
A flexible business energy rate would allow your business to purchase blocks of energy throughout your fixed-term contract. The flexibility also extends to how far in advance you want to buy energy.
Flexible tariffs can allow you to be flexible with your energy usage, but may also require more time and knowledge to implement.
Pass through tariff
With a ‘pass through’ tariff, you would agree to some rates and charges at the start of your contract, with the remaining fluctuating costs appearing as a separate charge on your bill. Unit rates can be cheaper with pass through contracts, as your business is assuming more risk by not locking in all of the rates ahead of time. This means what you may lose in price stability, you could make up in savings.
Extended tariff
Some suppliers may offer an extended tariff. This would allow you to extend the length of your existing contract with the same supplier.
Extended tariffs may allow you to continue to benefit from an existing good deal. However, they may also mean you miss out on a cheaper deal you may have found if you compared other business energy providers.
Is it better to choose a fixed or variable tariff?
Whether you choose a fixed or variable tariff is down to what you want to prioritise when it comes to business energy.
If you want to know exactly how much you will be charged for your energy usage, and budget accordingly, then you may want to consider a fixed tariff.
However, if you want to take advantage of movements in the price of wholesale gas and electricity, and are willing to assume the risk of your bills rising as well as falling, you may want to look into a variable tariff.
Are dual fuel business energy tariffs available?
Unlike with domestic energy, you usually cannot get a dual fuel business energy tariff.
A dual fuel tariff is when you get both your electricity and gas from the same supplier, under the same contract.
You can still get your business gas and electricity from the same supplier, but under individual contracts.
However this does mean that you are free to pick the cheapest business gas tariff and the cheapest business electricity deal, even if they come from different suppliers.
How do business energy contracts work?
There are a number of aspects to a business energy contract that may be unfamiliar if you have only ever dealt with domestic energy.
What does single fuel mean?
Business energy contracts are typically single fuel. This means you will need to get separate contracts for your business gas and business electricity, even if they both end up coming from the same supplier.
How long are business energy contracts?
Business energy contracts can be between 12 months and five years long. According to Ofgem, most business energy contracts last from one to three years.
This means that business energy contracts are usually longer than a domestic energy contract.
Do I need to physically sign a business energy contract?
You don’t need to sign a business energy contract for it to be binding – an agreement over the phone can also bind you to a specific deal.
Is there a cooling-off period for business energy contracts?
Most business energy suppliers will not offer a cooling-off period for your contract.
However, some suppliers may do this so if this is important to you, find out before signing the contract.
If you are a micro business, suppliers are required to offer a cooling-off period of 14 days.
How are business energy rates calculated?
Your business energy bill will normally contain the following charges:
- Unit rate – the amount you pay per kilowatt hour (kWh) of electricity or gas. This will usually be split into a day rate and a night rate. The unit rate will be multiplied by your per kWh usage, and this figure will likely make up the biggest part of your bill.
- Standing charge – the daily rate you pay for gas and electricity to be supplied to your business, regardless of how much you use.
- Climate Change Levy (CCL) – the government levy paid for every unit of energy your business uses.
- VAT – charged at 20% for most businesses, or 5% for those eligible for the reduced rate.
- IGT charges – fees paid if your gas is supplied by an independent gas transporter.
What is the Climate Change Levy (CCL)?
The Climate Change Levy (CCL) is an environmental tax you pay on every unit of business electricity and gas your organisation consumes.
First introduced in April 2001, the CCL initially included an exemption for renewable electricity. However, that exemption was removed in the Summer Budget 2015.
If you pay the standard 20% rate of VAT, you will likely be charged the CCL. If you pay the reduced VAT rate of 5%, it is likely that you won’t.
In order to be exempt from paying the CCL, you need to use an average of less than:
- 33 kWh per day, or 1,000kWh per month, for electricity
- 145 kWh per day, or 4,397kWh per month, for gas
What can affect a business energy quote?
There are a range of factors that can influence the business energy quote you receive, including:
- the cost of wholesale gas and electricity
- the cost of the supplier’s standing charges and other fees
- the type of tariff you are searching for
- your current usage
- whether you are using a business energy broker
How much will a business energy broker charge?
How much a business energy broker charges will depend on both the broker in question, and how they make their money.
A business energy broker will either:
- charge a commission, calculated at a unit rate per kilowatt hour that is added to the kWh unit cost set by your business gas or electricity supplier
- take a share of savings payment, based on the percentage amount you have saved by using their services
- submit an upfront invoice detailing their fixed monthly fee
If your energy broker fails to provide you with a full written disclosure detailing how much they have earned from your contract, you may be entitled to make a business energy claim.
Difference between domestic and business energy
When compared to domestic energy contracts, business energy contracts:
- are typically longer
- usually do not have cooling-off periods, unless you are a micro business
- are single fuel, rather than dual fuel
- can accommodate multiple businesses premises or locations
- may be cheaper on a per unit cost basis
- are not capped by Ofgem
Is business energy cheaper than domestic energy?
Although it can be hard to directly compare the two, suppliers get better rates for business energy than domestic energy as they are buying in bulk to last for the whole contract. These savings are usually passed on to the commercial consumer. As domestic energy is usually bought monthly, there is less money saved by the supplier and, in turn, the resident.
When weighing up domestic and business energy, you need to make sure you calculate your expected usage, and whether business energy remains cheaper than domestic energy once VAT and the CCL are factored in. For example, if you are working from home, business energy may not always be cheaper.
Are business energy prices capped?
Businesses in Great Britain are not protected by Ofgem’s energy price cap. This means that normally there is no maximum limit a business can be charged for their annual energy consumption. In Northern Ireland, there is currently no such energy price cap for domestic or business customers, however the Utility Regulator does regulate the prices of the electricity supplier PowerNI, and gas suppliers SSE Airtricity and Firumus.
However, the introduction of the Energy Bill Relief Scheme limited the wholesale price suppliers could charge businesses for electricity and gas from 1 October 2022 to 31 March 2023.
Can businesses use renewable energy and how?
Many providers offer green energy tariffs where at least some, if not all, of the energy you use comes from renewable sources. You should be able to check their fuel mix – i.e. the percentage make-up of how their energy is generated – on the supplier’s website.
You may also want to consider installing your own renewable energy sources, such as commercial solar panels.
» MORE: Renewable business energy
Should I switch business energy suppliers?
Whether or not you should switch business energy suppliers will be determined by how happy you are with your current provider and how much you could save by changing your tariff.
What to consider before I switch
When considering whether to switch business energy suppliers, you should bear in mind:
- how much money could could save on a new deal
- how long any new contract would last
- how happy you are with your current supplier’s customer service
- the reviews of the other suppliers you are considering
- whether you can get a better deal with your existing supplier
What happens when you switch business energy suppliers?
When you switch business energy providers, the way your gas and electricity is supplied doesn’t change. It is still coming through the same pipes and cables. All that changes is the company you are buying the energy from.
Will my business be disrupted when I switch?
There should be no interruption to your energy supply when you switch providers. Therefore, there should be no direct disruption to your business and its usual activities.
When should I switch?
You can normally only switch suppliers when your business energy contract ends. You will then need to check the terms of your contract to see if you need to give notice to your current supplier.
You can also switch energy suppliers if you are on a deemed or default contract. These are contracts you have not chosen – for example, because you have moved into a new business premises.
You should closely monitor the business energy market as rates regularly change, based on the daily wholesale price of gas and electricity. This means timing your switch is important if you want to maximise the amount of money you might save.
When switching business energy suppliers, you can either go to the supplier directly, or through an energy broker. A broker may be able to secure you a better price, for a fee.
How long does it take to switch business energy suppliers?
Once you have decided to make the switch, it normally takes between three and six weeks for the change to take place.
Can I switch business energy suppliers if I owe money?
If you have been in debt to your business energy supplier for less than 28 days, you will still be able to switch providers. Anything you owe will be added to your final bill.
If you have owed your supplier money for longer than 28 days, you will need to pay the amount in full before you can switch providers.
However, if it is your supplier’s fault that you are in debt – for example, it billed you incorrectly – the supplier cannot stop you switching business energy providers.
Will my gas and electricity be interrupted if I switch?
No, when you switch business energy suppliers, your supply of gas and electricity will not be disrupted or even turned off temporarily. So you don’t need to worry about your business being unable to function as a result of changing providers.
How do I find out when my business energy contract ends?
If your business energy contract end date isn’t on your monthly bill, then you may need to contact your supplier directly to find out. If your organisation is classified as a micro business, Ofgem dictates that your end date must be present on all bills for fixed-term contracts.
If you are on a fixed-term contract, your supplier should inform you that your contract is ending around three months prior to the end date.
How do I start a business energy contract?
If you are looking to set up your business energy for the first time in new business premises, you will likely need to complete the following steps:
- Find your gas and electricity meters and take a reading. This will help make sure your future bills are more accurate, and that you have all the necessary details to start comparing suppliers. If you are unsure about where your meters are, ask your landlord or contact the previous tenant or owner.
- Find your current supplier. If you cannot find an energy bill or contact the previous occupants, you can use the Meter Point Administration Service to find your gas supplier, the Energy Network Association search tool to find your electricity provider.
- Choose your tariff. If you have moved into new business premises, you will be put on a deemed rate by the existing supplier. Deemed rates are typically more expensive than other types of tariffs. However, since you haven’t chosen this rate, you are free to try to negotiate your own contract with the existing provider, or switch to a new supplier at any time.
Can I leave my business energy contract?
Normally you cannot leave your business energy contract early.
If you want to switch providers, you will usually have to wait until the end of your contract and then give the notice period as specified in your contract.
What if I’m moving premises?
If you are moving business premises, you will need to give your current business energy supplier as much notice as possible. You can either continue with your existing supplier at your new premises or find a new supplier.
Either way, you will need to complete a Change of Tenancy form in order for you to be billed correctly for your usage at your old premises.
If you are sticking with your existing supplier, you will still need to sign a fresh contract for your new premises, based on the details of the property.
If you do not sign a contract before you move in, you will be put on a deemed rate by the existing supplier of your new premises. It is advisable to sign a contract as quickly as possible, whether with the existing supplier at your new premises or a different provider, as deemed rates are among the most expensive around.
If the supply has been disconnected at your new premises, you may have to pay a reconnection fee.
What is the Ofgem switching programme?
The Ofgem switching programme was implemented on 18 July 2022. It is designed to make the business energy switching process faster and more reliable. Under the programme, businesses can expect:
- a new centralised switching service (CSS) to improve efficiency when transferring information such as supply address, supply type, customer start dates and meter point information
- a reduction in how long it takes to switch energy suppliers,
- from an industry standard of 21 days to just two days for business customers
- a shorter obligation window (the period in which suppliers can object to a business energy switch), down from seven working days for gas and five for electricity, to just two working days for both
- an immediate annulment process when switches are initiated by mistake
How to switch business energy suppliers
There are five steps you should follow when switching business energy suppliers.
- Find the name of your existing business energy suppliers. Find out when your existing business energy contract ends, and any notice period you may need to give.
- Compile the details of your existing contract, including your yearly usage.
- Compare business energy suppliers in order to find the right deal for your organisation.
- Finalise your new business energy contract and wait for the switch to go ahead.
» MORE: Switching business energy suppliers
What details do I need to switch suppliers?
To switch, you may need to provide:
- your business postcode
- the name of your current supplier
- the terms of your current contract
- your energy costs per unit and standing charges
- your annual energy usage
Average business energy bills in the UK
Given that the term ‘business’ includes multi-national corporations and sole traders alike, it can be hard to provide an accurate average for business energy bills in the UK.
However, if you take the most recent average business gas and electricity prices from the Department for Business, Energy and Industrial Strategy (BEIS), you can begin to get an idea.
According to the BEIS, in the second quarter of 2022 the average cost of gas for a small business, including the CCL, was 4.74p per kWh, while the average cost of electricity was 21.04p per kWh.
At those prices, if that small business had an annual usage of 22,500kWh for gas, and the same again for electricity, it would pay £5,800.50 a year for its unit costs and CCL alone, before its standing charge and other fees were added on top.
What is a good business energy rate?
Since business energy quotes are based on daily wholesale gas and electricity prices, there are a number of external factors that can influence the tariffs on offer. These include supply and demand issues, storage problems, currency fluctuations and the weather.
These issues can also contribute to the ‘hidden costs’ that are often a part of business energy bills.
When searching for a good business energy rate, it may be useful to consider the averages below.
Average business gas prices per kWh (including CCL)
| Business size | Price per kWh |
|---|---|
| Micro business | 8.59p |
| Small business | 5.24p |
| Medium business | 5.44p |
| Large business | 5.46p |
| Very large business | 5.09p |
| Extra large business | 6.03p |
Average business electricity prices per kWh (including CCL)
| Business size | Price per kWh |
|---|---|
| Micro business | 27.87p |
| Small business | 25.43p |
| Medium business | 24.07p |
| Large business | 22.35p |
| Very large business | 22.95p |
| Extra large business | 22.69p |
Sources: Price per kWh based on BEIS Q4 2022 figures.
Why is business energy so expensive?
Supply issues caused by the war in Ukraine, the impact of pent-up demand as Covid-19 restrictions eased, and various cold snaps depleting natural gas stores have all contributed to the price of wholesale energy sharply increasing. The price of gas at points even hit an all-time high during 2022, although it has subsequently fallen from those levels.
Since business energy suppliers buy energy from the wholesale market, any rise in costs is subsequently passed on to businesses themselves.
» MORE: UK energy crisis explained
Average UK business energy usage
While business energy usage can vary wildly based on industry and business size, the following can be used as a rough guide:
Average business gas usage in the UK
| Business size | Average usage |
|---|---|
| Micro business | 5,000-15,000 |
| Small business | 15,000-30,000 |
| Medium business | 30,0000-65,000 |
Sources: Bionic and UKPower
Average business electricity usage in the UK
| Business size | Average usage |
|---|---|
| Micro business | 5,000-15,000 |
| Small business | 15,000-30,000 |
| Medium business | 30,0000-50,000 |
Sources: Smarter Business and UKPower
Tips for saving money on your business energy bills
There are a number of ways you can try to cut your business energy consumption, and therefore reduce the cost of your gas and electricity bills.
Some steps to consider include:
- carrying out an energy audit to assess your business’s energy efficiency
- insulating your business premises
- turning off appliances when they are not in use
- taking control of your building’s heating
- replacing your lights with energy-efficient options, such as LEDs
FAQs for Business Energy
Although the cheapest business energy quote may be appealing, it is always worth considering other factors as well.
These include the customer service of the supplier in question, the length of the contract, the notice period of the contract, and whether or not the tariff uses renewable energy.
You should also check whether the quote includes VAT, CCL and other charges.
The Energy Bill Relief Scheme ran from 1 October 2022 to 31 March 2023.
It was a government scheme designed to discount the wholesale price of business electricity and gas, in order to make bills more affordable. In order to achieve this, the government capped the price suppliers could charge non-domestic customers at £211 per megawatt hour (MWh) for business electricity and £75 per MWh for business gas.
The Energy Bill Relief Scheme was replaced by the Energy Bills Discount Scheme on 1 April 2023.
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