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Information written by Connor Campbell Last updated on 26 October 2021.

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.

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 should take between three and six weeks for your switch to be completed. You won’t suffer any disruption to your energy supply during this period.

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.

How much is business electricity?

Many factors can impact 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

Business size Annual usage (kWh) Price per kWh Standing charge (daily)
Micro business 5,000 - 15,000 16.6p - 18p 25p - 32.5p
Small business 15,000 - 30,000 16.2p - 17.7p 25p - 34.5p
Medium business 30,000 - 65,000 16p - 17p 25p - 33.8p

Sources: Bionic and Business Energy

Can you get business electricity at home?

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

However, you will also pay VAT at 20% 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 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).

What are the business electricity tariff options?

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. Your bill will then reflect your energy usage.

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 a 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 to choose the best business electricity supplier for me?

Every business will want slightly different things from their electricity provider. These are things to keep in mind when looking for a business electricity supplier:

  • 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

To help you make up your mind, take a look at our business electricity comparison page.

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.

You can filter these results by supplier or by how long the price is fixed for.

Commercial Electricity FAQs

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.

What is the difference between domestic and commercial electricity?

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.
  • It is harder, and in some cases not possible, to exit a business energy contract early.
  • Business electricity is subject to the Climate Change Levy (CCL).

» COMPARE: Business energy suppliers

How do you read a commercial electric bill?

There are a number of different charges that will appear on your business electricity bill. These may include, but are not limited to:

  • Unit rate – the amount you pay per kilowatt hour (kWh) of electricity. This will usually be split into a day rate and a night 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 paid for every unit of non-renewable 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.

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.

» COMPARE: Business gas suppliers

How can I save money on business electricity?

Switching business electricity suppliers at the end of your contract is one way to potentially save money, as long as your 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.

» MORE: How to create a business energy audit

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.

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.

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