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What our Nerds say about business electricity

CONNOR

BUSINESS NERD

It’s safe to say that, regardless of what your business does, it probably wouldn’t run without electricity.

From lights and computers to the kettle in the kitchen, electricity powers most aspects of your business. And this includes energy-intensive equipment or tools, which may be related to your specific sector.

However, business electricity is treated differently by energy suppliers than domestic electricity, which can be confusing if you are not in the know.

How it works

1
Get a quote in minutes
Enter your postcode and a bit about your business and energy needs - gas, electricity or both.
2
Search for deals
With our partner Love Energy Savings, search 150 energy tarriffs in seconds.
3
Sit back and switch
Once you've found the deal that's right for you, apply online or through an advisor - the switch will be handled for you.

This comparison service is provided by LoveEnergySavings.com Ltd on behalf of NerdWallet Ltd.

The data you input and submit is provided directly, and processed by Love Energy Savings. Calls made to this number will be handled by the team at Love Energy Savings. Details of terms and conditions, privacy and cookie policy can be found at LoveEnergySavings.com.

*£1,067 is the average saving Love Energy Savings customers have saved since inception. This data was collected 01.07.2021, The average SME electricity bill is £2,400 p.a. (consumption below 50,000kWh).

How could I get cheaper business electricity rates?

One way to see if you can secure a cheaper business electricity rate is by thoroughly comparing suppliers when you are nearing the end of your contract.

To help make this a bit easier for you, you can compare business electricity prices in less than 60 seconds using our handy tool.

First, you need to enter the postcode of your business. Then you will be asked to supply your business name, the name of your current supplier, and your current electricity usage.

Click ‘See Results’, and you will be shown the quotes on offer to your business on a supplier-by-supplier basis. This includes how much money you could save by switching suppliers.

Although cheaper rates will be a high priority for every organisation, every business will want slightly different things from their electricity provider. When looking to switch business electricity supplier, you should also keep in mind:

  • the unit rate and standing charge you are quoted
  • whether you want a fixed or variable rate
  • whether the energy comes from renewable sources
  • the length of the proposed contract
  • the notice period of the contract
  • the cost of any additional charges, such as maintenance charges
  • if you are using an energy broker, the broker’s fees

How do I switch my business electricity supplier?

As with domestic electricity, changing your business electricity supplier could help save you money.

However, you won’t be able to switch your supplier until the end of your contract. This is unless you want to pay off the rest of your expected usage, which will rarely make financial sense.

Once you have reached the end of your contract, you may also need to give your supplier notice. It is important to check your notice period ahead of time.

When comparing electricity quotes, a major factor to consider is the daily wholesale price of electricity. This is what business electricity tariffs are based on, and it frequently changes.

If you are considering switching suppliers, regularly checking your electricity quotes and timing the change correctly will help you maximise the amount of money you can save.

When applying to switch electricity suppliers, 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

It can take around three weeks for your switch to be completed, but may take longer if there are any complications. You won’t suffer any disruption to your energy supply during this period.

Why should I switch my business electricity to a new supplier?

Just like with your domestic energy, switching your business electricity supplier can potentially save your organisation money. And it is essentially a must if you have just moved into new business premises, as you will be put on an expensive deemed rate that you have had no say in selecting.

Beyond the cost of the contract, switching business electricity suppliers can also help make your business greener, depending on the tariff you choose.

How much can I save by switching my business electricity?

How much money you could save by switching business electricity supply will, in part, be determined by:

  • the cost of your original tariff, versus the deals currently available
  • the size, and energy usage, of your business
  • the length of contract you choose to sign
  • what type of tariff you choose
  • what type of energy you buy, i.e. whether it is renewable or not

Can I switch to green business electricity?

Many business electricity suppliers offer renewable or green tariffs. To check exactly how their energy is being generated, you can look at the supplier’s fuel mix. This is the percentage make-up of how their energy is generated and, due to the Electricity (Fuel Mix Disclosure) Regulations 2005, should be found somewhere on the supplier’s website.

How does business electricity pricing work?

The primary factor determining the price of business electricity is how much it costs to buy energy on the wholesale market. Wholesale prices change frequently, and are informed by everything from global demand, to the weather, to geopolitical issues such as international conflicts.

Then there are a number of different charges that will appear on your business electricity bill, contributing to its overall cost. These may include, but are not limited to:

  • Unit rate – the amount you pay per kilowatt hour (kWh) of electricity. Typically, the more energy you are expected to use, the cheaper your unit rate will be. Your business location, and the length of your contract, can also have an impact on the cost of your rate.
  • Standing charge – the daily rate you pay for energy to be supplied to your business, regardless of how much you use.
  • Climate Change Levy (CCL) – the government levy charged on the 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.

Types of business electricity tariffs

There are two main tariff options when it comes to business electricity: fixed rate and variable rate.

Fixed rates

This is where your contract will state a fixed unit rate in kilowatts per hour for the length of your contract.

Variable rate

Instead of a fixed unit rate, a variable tariff will see your rate rise and fall with market activity. This means your business would assume the risk of your unit rate rising, but also could benefit if it fell.

Other tariffs

If you move into new business premises, you will be on what is called a ‘deemed’ contract. You will easily be able to switch suppliers as this contract doesn’t have an end date.

Similarly, if you don’t arrange a new tariff before the end of your contract, you will move on to a ‘rolling’ or ‘out-of-contract’ tariff. If this happens, you will also be able to freely change suppliers, since your contract will no longer have an expiry date. However, you may still have to give notice.

You can also get specific tariffs that ensure some, if not all, of the electricity supplied comes from renewable sources.

How do I start an electricity contract for my business?

To begin your application for business electricity, you will normally need to provide your business postcode, and energy usage for a certain period of time – over three or six months, or a year, for example.

Comparing the greatest number of suppliers possible will allow you to pick the best tariff for your business needs. And if you are using an energy broker – a third party that may be able to negotiate a better price for a fee – be sure to ask them which suppliers they represent.

When making your application, you may be asked your company type, as well as when you want your contract to start and end, and your payment details.

You may also be eligible for business energy-efficiency grants and schemes. To check, search at Gov.uk.

Average UK business electricity costs

Many factors can have an impact on daily wholesale electricity prices, and therefore your business electricity quote – from the weather or supply and demand issues to fluctuations in currency.

These same factors will also inform the maintenance and network charges that come as part of your electricity bill.

How much one kWh costs will depend on the size of your business when it comes to annual electricity usage. The table below can act as guidance for when comparing quotes.

Average business electricity prices per kWh (including CCL)

Business size Annual usage (kWh) Price per kWh
Micro business 5,000 - 15,000 18.84p
Small business 15,000 - 30,000 18.89p
Medium business 30,000 - 65,000 17.22p

Sources: Price per kWh based on BEIS Q4 2021 figures. Annual usage based on Bionic, Business Energy and UK Power.

» MORE: What is the UK energy crisis?

Money-saving tips for cheaper business electricity

Switching business electricity suppliers at the end of your contract is one way to potentially save money, as long as the new supplier is offering lower unit rates and standing charges.

Another way to save money on electricity is to make your business more energy efficient. To help you do this, you could conduct a business energy audit.

Other tips for reducing the cost of your business electricity include turning off appliances when they are not in use, getting your employees on board to implement the changes you have identified, and checking your lighting to make sure it is energy-efficient.

» MORE: 11 tips to save money on business energy

Can you get business electricity at home?

You can get business electricity at home. And since business energy is usually charged at a cheaper rate per unit than domestic energy, it can be appealing.

However, you will also pay VAT at 20% (or 5% for some businesses) and the Climate Change Levy on top of your usage, so it may not always be the best decision financially. It is important to factor in these costs when considering switching from domestic to business electricity. In addition to this, business electricity could mean you are tied into a much longer contract, with no option for switching without paying for the cost of the full term.

You will usually also need to prove that your electricity usage meets the threshold for your chosen business energy supplier. This is normally around 50%.

This can sound like a lot. But just your basic day-to-day work needs, such as lighting, computer usage and heating, may well push you above this threshold.

You can track your usage by monitoring your electricity meter over a week, reading the meter at the end of each working day and comparing it with evening and weekend usage. It will be easier to do this if you have a smart meter as this provides real-time data, which is updated every half an hour, as well as historic data for the previous day, month or year.

Who should get business electricity?

The bigger your business, the more likely it is that you should get business electricity. That is because the larger your business is, the cheaper your unit rate of electricity will be.

However, you should still consider applying for commercial electricity if you are a small business. Business electricity quotes are typically cheaper than domestic electricity per unit, as suppliers are buying the energy in bulk rather than on a monthly basis.

There are two forms of business that have special rules surrounding their business electricity: micro businesses, and charities and non-profit organisations.

Micro businesses

When it comes to commercial electricity, you are classed as a micro business if you meet just one of the following criteria:

  • Your annual electricity usage is less than 100,000kWh.
  • You have fewer than 10 employees, and your yearly turnover is less than €2 million (around £1.71m).

Due to this second criteria, most small businesses in the UK would actually fall under the micro business category.

It is important to work out whether you are classified as a micro business, as there are specific Ofgem rules in place to protect you when it comes to business energy contracts. These include:

  • 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 rollover.

Charities and non-profit organisations

Charities and non-profit organisations are one form of business that may be eligible for the reduced VAT rate of 5%.

As a charity or non-profit, you also won’t be required to pay the Climate Change Levy (CCL).

Business Electricity FAQs

How hard is it to switch business electricity rates?

As long as you are at the end of your contract, it shouldn’t be difficult to switch business electricity rates. You just need to make sure you have all the relevant information to hand and follow each step of the process as instructed by your new and old providers.

To see what rates are out there, you can use our comparison tool to get a quote in less than 60 seconds.

What information do I need to switch business electricity?

To switch business electricity supplier, you will likely 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

Do I need to tell my current business electricity supplier that I’m switching?

You will need to inform your current business electricity supplier that you are intending to switch provider within the notice period stipulated by your existing contract.

Will my business electricity be disrupted during the switching process?

Your business electricity supply will not be disrupted during the switching process. So don’t let this worry stop you from seeking out the best business electricity deal for your organisation.

Can I switch business electricity if I have more than one electricity meter at my premises?

You can still switch business electricity suppliers if you have more than one meter at your premises.

Can I switch business electricity suppliers if I am tied to an existing contract?

You will only be able to switch business electricity suppliers at the end of your existing contract. You will also likely need to let your existing provider know you intend to switch during the specified notice period.

What happens if I am on a deemed contract?

If you are on a deemed contract, i.e. a business electricity contract you have not chosen, you are free to switch suppliers at any time. And it is recommended that you do so, as deemed rates are among the most expensive energy tariffs around.

When does my business electricity contract end?

If you are a micro business, then Ofgem dictates that your contract end date must be found on your business electricity bills. The same may still be true even if you aren’t a micro business.

If you can’t find your contract end date on your business electricity bill, then you may need to dig out your original contract or contact the supplier directly.

How can I find out who supplies my business electricity?

You should be able to find the name of your business electricity supplier on your bill.

If you have just moved into a new business premises, you can try asking the landlord or previous tenant to find out who your supplier is.

If you still cannot find out who supplies your business electricity, you can use a service called the Energy Network Association search tool to find your provider.

Is it easy for micro businesses to switch electricity suppliers?

It is no more difficult for a micro business to switch electricity suppliers than a larger organisation.

In fact, as a micro business, you benefit from certain protections as laid out by Ofgem, including, plain, easy-to-understand language in your contract, a 14-day cooling-off period if you change your mind and greater transparency around the details of your contract, including brokerage costs and expiry dates.

What is the VAT rate on business electricity?

The standard rate of VAT on business electricity is 20%. However, certain businesses are eligible for a reduced VAT rate of 5%. These include:

  • charities and non-profit organisations
  • mixed use business premises, where 60% of the energy usage is for domestic purposes
  • businesses that use no more than 33 kWh a day (or 1000 kWh a month) of business electricity.

Are business electricity prices capped?

No, business electricity prices are not capped in the same way that domestic electricity prices are limited by Ofgem.

Can I get a business feed-in tariff if I use solar panels?

While the feed-in tariff (the original scheme designed to pay you for the electricity you produce) is no longer available, if your business uses commercial solar panels, you can still sell the excess electricity you generate back in Great Britain to the National Grid through the Smart Export Guarantee (SEG) scheme.

Unfortunately, the Smart Export Guarantee scheme does not operate in Northern Ireland.

What is a smart meter?

Smart meters for businesses and domestic households automatically submit your energy readings for you. This not only saves you the time taken to manually submit a reading, but can also help ensure that your bills are more accurate, potentially saving your money in the long run.

Can I get a half-hourly meter?

It will only be possible to switch to a half-hourly meter if your business has a maximum demand of 70 kilowatts or more in any half-hour period.

If your business has a demand for 100 kilowatts or more in any half-hour period, then it is a legal requirement to use a half-hourly meter.

What is classed as commercial electricity use?

Technically, any electricity used towards your business would be commercial electricity use.

This is clear if your business has specific premises separate to your household. Any electricity used on those premises would fall under this category.

However, if you run your business from home, it may not be as obvious.

Most suppliers will require you to prove that around 50% or more of your electricity used is for business purposes at home before allowing you to switch to a business electricity contract. Different suppliers may have higher or lower thresholds.

Can I cancel my business electricity contract?

In most cases, you will not be able to cancel your business electricity contract early.

If you are a micro business, you should however be offered a 14-day cooling-off period at the start of your contract. This means you can cancel the agreement within that time frame.

Is business electricity cheaper than residential?

Although the electricity may come from the same source, and maybe the same supplier, there are a number of differences between domestic and commercial electricity.

The most important differences are:

  • Business electricity tends to be cheaper per unit than domestic electricity.
  • Business electricity contracts are normally longer than for domestic households.
  • You cannot have a dual energy contract for business electricity and gas.
  • VAT is charged at 20% for most businesses, and at 5% for domestic households.
  • Broadly speaking, it is not possible to exit a business energy contract early.
  • Business electricity is subject to the Climate Change Levy (CCL).

» COMPARE: Business energy suppliers

Can I switch from domestic to commercial electricity?

Yes, you can switch from domestic to commercial electricity.

If you work from home, you should first check if business electricity will be cheaper than domestic electricity once you add on VAT and the Climate Change Levy.

And if you are a small business, check to see if you are actually classed as a micro business, as you will be eligible for certain consumer-friendly benefits.

Can I get business electricity and gas supplied together?

No, dual energy tariffs are not available for businesses. Instead, you will need separate electricity and gas contracts.

Visit our business gas comparison page to find the right tariff for your business.

What do I do about electricity supply when moving premises?

When you are moving business premises, you will need to:

  • Notify your current energy supplier before you move.
  • Take a meter reading on the day you move out of your current premises, and send it to your current supplier.
  • Find out and contact the energy supplier at your new premises and supply them with the latest meter readings.

When you move premises you will automatically be put on a deemed contract. This means you are free to switch contracts to a potentially better tariff, as there is no fixed end date to the contract.

It is advisable to do so, as deemed contracts are among the most expensive tariffs around.

About the author

Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more

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