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How to compare micro business energy rates

Margins can be tight when running a business. This means that overpaying on anything - from staff wages to stock, and equipment to energy bills - could be enough to plunge you into the red. This can be felt even more keenly if you run a microbusiness with a modest turnover. Switching energy is a good place to start when looking to cut costs. The good news is their are rules in place to make energy switching easier for microbusiness owners. Here's all you need to know.

3 min read

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What is a micro business?

If you’re not sure whether or not you’re running a microbusiness, there are two definitions you’ll need to consider. One relates to the size of your business, while the other considers your energy usage and whether you’ll be eligible for micro business energy contracts for your gas and electricity.

  • For financial purposes, a micro business is defined by the European Commission (EC) as one that has fewer than ten employees and a turnover or balance sheet total of less than €2 million.
  • But to qualify for a microbusiness energy contract, you must either meet the above criteria, or make sure your business uses no more than 293,000 kWh of gas a year, or no more than 100,000 kWh of electricity a year.

As for the cost of your energy bills, Ofgem estimates that if your business uses 293,000 kWh of gas or 100,000 kWh of electricity and non-domestic premises. It should pay between £10,000 and £12,000 a year for each fuel, excluding VAT and the Climate Change Levy.

Are you eligible for a business energy contract in your home?

If you run your business from home, you might be happy that your current domestic energy deal is meeting the needs of both your household and business energy use. But it might still be worth comparing business energy deals to see if you can get better rates than your domestic ones.

To qualify for a commercial energy tariff, you’ll need to prove you are running a business from home and using a significant portion – around 50% – of the gas and electricity you use each day to run your business.

This might sound like a lot, but just using enough lighting, heating and electricity to keep your business running every day will most likely be enough for you to hit the threshold.

When calculating how much energy you use for business purposes, remember to deduct any appliances that would be on regardless of your business being there, such as fridges, freezers, ovens and washing machines.

If you need expert assistance to find a great deal on business energy, speak to one of our experts today on 0800 188 4930. Or leave your details here, and we’ll call you back.

How do micro business energy contracts differ from other SMEs?

Ofgem, the energy regulator, changed the rules on micro business energy to make contracts more comparable to domestic energy deals. Here are some of the main differences between microbusiness energy contracts and other business energy deals. 

No notice period

Most SMEs can’t consider switching to a new energy deal until their current one enters its switching window. This is a period of about six months before the end of a contract when businesses can compare deals and arrange a new one, either with their current supplier or a different one.

This isn't the case if you run a microbusiness. Suppliers can no longer insist on a notice period of at least 30 days to end a microbusiness energy contract. This means microbusiness owners can give termination notice at any time during their contract. 

The only exception is if you're on an evergreen or rollover tariff. This is when your supplier automatically signs you up for another 12 months if you don't arrange a new deal before your current one ends. 

Transparent contracts

If you've signed up for fixed-term energy deals, your gas and electricity suppliers must be completely transparent about contract end dates and notice periods on bills and statements. This is designed to offer more transparency so you know exactly when you need to switch to avoid being rolled onto a less competitively-priced evergreen deal.

If you are on a standard business energy deal, your supplier has to contact you when your switching window opens, at which point it will usually offer you a renewal deal. It’s unlikely the renewal rates offered by your current supplier will be among the most competitive on the market, which is why it makes sense to compare rates before you commit to renewing.

Better information on your rights

Citizens Advice are offering microbusiness owners information on how the energy market works. This will help with decision-making when choosing a new energy contract. There's also more information available on your rights as a microbusiness owner, and energy brokers need to sign up for an approved dispute resolution scheme.

Limits on backdated billing

If your supplier has been billing you incorrectly, you could be hit with unexpectedly high energy bills. If you’ve been billed too little each month, you could be hit with a big bill to make up the shortfall, while being billed too much means you’re unnecessarily throwing money away each month. 

To help protect from unexpectedly large, and potentially crippling energy bills, Ofgem has recommended that suppliers can only backdate your bills for the last 12 months. Even so, to help mitigate the risk of over or underpaying for your gas and electricity, you should still provide your energy supplier with frequent readings, to make sure your business is billed accurately.

How do business energy deals differ from domesitc?

Many energy suppliers will offer both domestic and commercial energy deals. But business energy and domestic energy deals are very different in their terms and how they're set up. Below are some of the main differences.

Different charges

The unit rate and standing charge make up most of your business energy bill. This is true of both domestic and business energy deals. But some commercial energy users also have other costs, such as the Climate Change Levy (CCL) and Contracts for Difference. And VAT is charged at a different rate in most instances. Unless eligible for the reduced rate of 5% (the same as domestic) business owners pay VAT at 20%.  You can find out more in our guide to VAT on business energy.  

Long-term fixed rates

Businesses can lock in their energy rates for up to five years, with three-year deals being among the most common. Domestic fixed rate deals usually only last for a year, although households can sometimes lock in rates for up to two years.

Although business energy contracts can't be terminated early, they generally offer a longer switching window of up to six months when you can compare deals and sign a new contract. Domestic energy deals, on the other hand, can be terminated early. This is often subject to a penalty fee which is charged per fuel, even if you're on a dual fuel deal. But households can end a deal with no penalty fee if the contract has entered its last 49 days.  

Dual fuel differences

While households can often get a discount by taking both gas and electricity from the same supplier (known as a dual fuel deal), business owners must take out separate contracts for gas and electricity. This applies even if the same supplier provides both fuels to the same business premises.  

No business energy price cap

The Energy Price Guarantee caps domestic energy rates for two years. The Energy Bill Relief Scheme offers financial support for business energy bills, but it's not a price cap. Instead, businesses are given a discount on their energy bills, which means it's important to switch to a fixed deal. You can find out more at our guide to the Energy Bill Relief Scheme.   

What to do if you can't pay your business energy bills

If you're struggling to pay your business energy bills, you need to get in touch with them as soon as possible to let them know your situation. You'll then need to arrange a repayment plan to pay what you owe and keep the energy supply running to your premises.

If you can't agree on a repayment plan, your account might be given to a debt recovery agency. If this happens your credit rating could be affected. If no resolution has been found within 30 days of a missed payment, your supplier could even start the disconnection process. This usually comes with a fee that is added to your debt, and you'll have to pay again to have the power reconnected.

How to switch micro business energy supplier

In order to get the cheapest electricity for microbusiness usage, or the best deal on gas for your microbusiness, it’s worth enlisting the help of the energy experts here at USwitch for Business, who can help you switch in just a few simple steps:

You can do this in just a few simple steps:

  • Give the energy experts at Uswitch for Business a call on 0800 188 4930, or leave your details here and we’ll give you a callback.
  • After a quick chat, we’ll compare energy deals to find the ones that best suit the needs and budget of your business.
  • You choose the deal you prefer, and then we take care of the rest. We’ll let your old supplier know you’re making the switch and you can start enjoying cheaper electricity when your new deal starts.

Switching energy suppliers is one of the most effective ways to help cut your overheads without compromising on the quality of your goods or service, and we can help take the time and hassle out of finding the best deals on business gas and electricity.

Get in touch now to see how much you could save.

What are the latest micro business energy rates?

All business energy deals are designed to meet the exact needs of your business. The rates you're offered by business energy suppliers will depend upon a number of things, including the amount of gas and electricity you use each year, as well as how and when you use it. Suppliers will also look at the location of your business and its size.

To give you an idea of the rates you could be offered, here are the latest energy rates for microbusinesses and small businesses.

FuelAnnual usage (kWh)Average price (per kWh)Standing charge (daily)
Electricity5,000 - 15,00044.9p95.0p
Gas5,000 - 15,00018.6p66.6p

Note: Rates offered may vary according to your meter type and business location. Figures don't include the Energy Bill Relied Scheme discount. Current market volatility may also mean that the prices you’re quoted are different from the averages shown. The figures shown are the average unit rates and standing charges quoted by Bionic per business size from January 3 to January 6, 2023. Rates do not include any Energy Bill Relief Scheme discount.

What is a micro business?
How do micro business energy contracts differ from other SMEs?
How do business energy deals differ from domesitc?
What to do if you can't pay your business energy bills
How to switch micro business energy supplier
What are the latest micro business energy rates?

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