Whether it’s the differences between contracts, how to switch suppliers, or how your bills are calculated – there’s a lot to know about business energy, and learning everything can be difficult on top of running your business.
Luckily, we’ve assembled this extensive guide to business energy, breaking up the important issues into sections and answering the most common business energy questions that you may have been struggling to get to grips with.
The biggest difference between business and household energy is how suppliers set up contracts. Business energy contracts tend to be for a fixed duration typically between 1-5 years, without the option to cancel early. Businesses can opt into fixed-rate contracts such SEFE Energy’s Shield product – which will protect them against changes in the energy market.
Energy providers are bound by a series of industry codes and the supply Licence Conditions, which regulate how they do business and interact with customers. These rules are enforced by several independent regulatory bodies, including Ofgem, and are designed to protect customers and make sure they’re treated fairly. Read our industry codes of practice.
The main difference in business energy between micro, small/medium and large companies is the types of gas and electricity contracts available, and how they’re priced.
For example, SMEs generally opt for fixed-rate energy contracts, as these offer the best combination of convenience and affordability. A fixed-rate contract means small businesses are protected from changes in the wholesale energy price, so they can easily budget for energy costs.
For companies that meet the ‘micro business’ criteria, there are some further distinguishing factors when it comes to business energy. Micro businesses are able to view business energy prices online using only their postcode and consumption information, and can terminate their contracts closer to the end date (at 30 days out, as opposed to the standard 90 days).
Large businesses, on the other hand, may treat energy as a strategic function – in which case, they may choose a flexible purchasing contract that gives them the freedom to buy and sell gas and electricity to optimise procurement.
Several factors affect the wholesale price of business gas and electricity, including the weather, how it’s stored, regulatory pressures, crude oil prices, flow and availability, and wind generation. However, few customers will notice these changes, as a fixed-rate contract protects small business customers from daily wholesale price fluctuations.
The cost of gas and electricity is dependent on the size of your business. On average, UK businesses spend £1,135 per year (source) on gas and electricity – based on a variable tariff. However, this could be significantly higher or lower, depending on the size and industry of business.
The right supplier can be dependent on your finances, the type of business you run, what the energy will be used for, and how committed to the environment your business is.
Generally, SMEs look for fixed-rate contracts that offer a price guarantee for the length of the contract. Before agreeing to any energy deal, always read the small print in the provider’s terms and conditions, particularly their policy on passing through third-party charges and out of contract rates.
You should also look for a supplier that offers a simple switching service, minimising the amount of work needed at your end.
A few quick fixes around the office can play a part. Turning off computers at night, encouraging staff to work from home once a week, using DIY insulation and turning down the thermostat can all help with saving money on your energy bills.
The cost of setting up a new business gas or electricity connection is entirely dependent on the location of your premises, how long the job in question will take and the amount of energy you’ll need.
Fully fixed-rate contracts mean that the rates detailed on the contract represent the price you’ll pay for the full contract term, making it easy for SMEs to budget for energy use. It is important you seek clarification that any fully fixed-rate contract you accept also includes all third-party charges and any other charges – and isn’t just fixing the cost of energy alone.
Pass through products (or partially fixed) typically fix the cost of the energy for the duration of your contract, but allow the supplier to pass through third-party charges such as transportation and distribution charges at the cost they are being charged by the distribution companies. It can be beneficial to have these types of products especially if you think you are going to reduce energy consumption or don’t require 100% budget certainty.
Flexible purchasing contracts allow large businesses users to buy their energy at different times during the contract period instead of agreeing the contract rate upfront like you would on a fixed contract.
Pass-through rates are affected by the prices that third parties charge suppliers in order to move the energy around the country, and eventually to your meter point. Suppliers also need to include costs for unidentified gas (UIG) and feed-in-tariff (FiT) charges. Typically, suppliers will pass through prices they don’t control which may also include any new or current government levies.
For a micro business contract, terms and conditions must be written in ‘plain and intelligible language’ since the business’ owners might not necessarily be familiar with the industry.
Additionally, the supplier must state when the contract begins and ends as part of a ‘Statement of Renewal Terms’. A notice period for termination must also be included, set at 30 days before the end of the contract.
Yes. If your supplier does not have the necessary information about your business, you may be asked to provide them with the number of full-time employees, the business’ turnover and its energy consumption.
You can find out whether your contract is coming to an end by checking your most recent energy bill, where the end date should be stated in the section that also includes your tariff name and account number. Alternatively, you can check the signed copy of your contract or call your energy provider to double check.
You will normally receive notification that your current tariff is ending 42-49 days before your contract’s official end date (or 60 days before for micro businesses).
Many business energy contracts will not be renewed automatically following their expiration – instead, your business will be placed on to out of contract rates until a new contract is put in place, your business moves premises, or your business switches supplier.
Out of contract rates refer to the default charge a business is levied with when their contract ends and no new alternative is put in place, i.e. renewing the supply agreement with the existing supplier or entering into a supply agreement with a new supplier. These can be expensive, so you should always remember to arrange a new contract before the out of contract rates come into effect.
Deemed rates are charged when there was never a contract in place, as with when a new tenant moves into an existing site. Learn more about out of contract and deemed rates.
No, most suppliers will require termination to be issued to them in writing at a period which will be specified within your contract. As long as you have adhered to the termination window then your new supplier will arrange the switch on your behalf. However, in some circumstances, your old supplier may object to the switch, if you either owe them money or your new supplier tries to register you for the wrong date.
As long as you don’t owe your existing supplier money, or you are not tied into an energy contract with them, then a successful transfer can be concluded in less than 3 weeks.
No. There’ll be no interruption to your supply, as the new energy supply comes from the same grid that powered your old supply. The only difference will come in the form of your billing and contracts.
Most SMEs will have fixed energy contracts for their gas and electricity supply, which normally last one year or longer. The contract wording will set out a period in which you can terminate your supply. Customers on an out of contract or deemed rate can initiate a switch at any time as long as they inform their supplier of their intention to switch within a 30-day period and all outstanding payments have been made.
Prior to agreeing a contract with a supplier, they will confirm what information they require in order to generate the quote and contract. Typically, this will include your business name and full registered address, site addresses and meter numbers, which can be found on an invoice. In addition, they will require the type of product you require and the date this should commence.
If the current supplier has objected to the switch, then this usually means there’s a debt on the account or you’ve moved properties without contacting the existing supplier. Once you’ve resolved the issue, they’ll remove the objection, and your new supplier will continue with the switch.
As stated above, everything will remain the same.
An AMR (automated meter reading) device automatically collects consumption, diagnostic and status data from energy metering devices and transfers said data to a central database for billing and analysis. This eliminates the need for manual meter readings and billing based on past or predicted consumption. Find out more about AMR systems.
AMR devices use SIM card technology (similar to that in mobile phones), so any site that has a suitable signal is eligible for AMR installation. You should speak with your supplier to find out how quickly they can install AMR devices and if any additional charges would apply.
Half-hourly metering is a special type of metering system which uses AMR technology for more accurate electricity reading, updating energy suppliers with updated readings every half an hour.
Non-half-hourly metering may or may not include AMR technology. They send suppliers consumption data for more accurate billing and fewer visits to your site.
It is always good practice to check your meter readings on your energy bills and simply contact your supplier if these are being estimated on a regular basis.
With any technology, issues can arise - so it’s always good practice to check your readings on your invoice as per the above.
It’s possible that they want to exchange your current meters for a smart meter or a pulse enabled meter, or that they’re too old and likely to become a safety hazard. Providers should notify you of a meter switch in plenty of time, and your service shouldn’t be affected.
You can contact your supplier to see whether they’ll install one. In fact, all business energy suppliers must offer smart meters or AMR devices to customers before 2020.
Some suppliers offer similar products – known as ‘advanced meters’ – since they’re not ready to install smart meters that comply with government standards. These advanced meters offer many of the same benefits as the smart meters.
No, you do not need to have an internet connection for accurate readings. Depending on your location, your AMR meter will communicate by using either existing mobile or radio signals that are currently in your area. Signal boosters can also be used in low signal areas.
In simple terms, your energy supplier charges you the rates you have agreed as per the contract for the volume of kilowatt hours (kWh) you have used. Usually, you will be billed monthly or quarterly but may have further options if you choose to use portals or go paperless. Most energy suppliers will charge in pence per kWh and a standing charge in pence per day or pounds per annum, but it is also good to check what is included on the point of agreeing the contract.
Most businesses will pay VAT at a rate of 20%, though some are eligible for a discount. Since your energy supplier automatically adds the VAT to your bill, you’ll need to apply for this potential discount separately. An example of a business that pays the reduced VAT amount is a registered charity.
A meter point administration number (MPAN) is a unique 13-digit reference that identifies your business’ electricity supply point; similarly, a meter point reference number (MPRN) relates to your gas supply.
In order to arrange the metering for your property, your chosen supplier will require your business’ MPAN and MPRN. These numbers can be found on your current energy bill.
The MPAN/MPRN should not be confused with the meter serial number, which is found on the meter itself.
CCL is charged on taxable commodities supplied for lighting, heating and power purposes to businesses in the industrial, commercial, agricultural and public service sectors. Your business is being charged the CCL as a means of encouraging businesses to be more energy efficient.
You can pay a reduced rate on CCL charges by entering into a climate change agreement with the Environment Agency. Businesses in these agreements will receive a reduction of 90% in the CCL rate paid of electricity bills and a 65% reduction on all other fuels. Learn more about the Climate Change Levy.
If your bills are usually based on estimated readings, the easiest way to ensure you’re paying the correct amount is to send your supplier regular meter readings.
In order to avoid estimated readings, it’s recommended that you take a meter reading on the last day of each month and submit it to your energy supplier within 5 days, so they can calculate an accurate bill. This ensures that you only pay for the energy you’ve used.
If you have a smart meter or AMR device on your meter you should still pay attention to your monthly bills to ensure your energy supplier is using the automated readings provided by these technologies.
There’s a chance there might be a problem with your meter, which means the energy supplier has had to base your bill on an estimate. Your energy supplier should contact you in this event in order to investigate the fault, however, you are free to contact them.
Yes, you can be refunded if you’re in credit. In order for this to happen, you’ll need to check that your balance is up to date by giving your energy supplier a meter reading.
Changes to energy regulation are often announced in the government’s financial budget, and usually come into force on April 1, in line with the new tax year – but can be implemented at any point during the year.
Per Ofgem’s Standards of Conduct, energy suppliers have to treat firms fairly when it comes to contacting, billing and switching business customers, with fines coming into play if these are ignored. Learn more about industry codes of practice.
It’s possible that new regulations could affect your energy contract. This depends on other factors, such as whether you’re subject to other charges like the CCL. For example, last April the rate of CCL rates increased, affecting businesses who were subject to these charges as a result.
We recommend subscribing to our Regulation Voice newsletter to keep abreast of the latest regulatory changes, and insight on how they could affect the price you pay for business energy.
The Energy Savings Opportunity Scheme is a mandatory energy assessment and energy saving identification scheme for large organisations throughout the UK. Its intent is to increase business profitability and competitiveness, while benefitting the environment by identifying cost-effective energy savings opportunities.
You’ll be affected by ESOS if your business has 250 or more UK employees, or has fewer than 250 employees but has an annual turnover exceeding £50 million and a balance sheeting exceeding £42 million.
Certain energy suppliers are required to participate in the feed-in-tariff (FiT) scheme to pay fixed tariffs to micro and small businesses that generate their own electricity. These suppliers are required to declare their FiT status annually.
Your chosen provider should publish details of their FiT status on their website.
Business energy providers are not obligated to update their customers on regulatory changes, however, you can find details of upcoming regulatory changes and how they might affect you by subscribing to the Regulation Voice newsletter.
Looking for more information on the different contract types for businesses? Head over to our new business energy page to find out more and get a no-obligation quote while you’re there. Alternatively, visit the homepage to find out more about our business energy solutions, or call us on 0161 837 3390.