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Small business energy advice
Our energy experts summarise the latest advice to help small business owners to optimise their business energy. Jump to what you’re looking for:
Small business energy prices
Small businesses have suffered from expensive energy costs over the past two years. The war in Ukraine kicked off an unprecedented rise in energy costs that peaked in Autumn 2022.
Since then, prices have eased but remain approximately twice as high as the historical average.
💡Small business energy rates are more complicated and less protected tha domestic energy. Check out our article on domestic vs business energy.
Average small business energy rates
The table below shows the latest average one-year fixed business electricity rates for small businesses. These business electricity rates have been put together by our experts using the latest wholesale electricity prices on the national grid.
It’s important to note that small business electricity prices can vary from region to region.
| Size | Annual Consumption kWh | 1 Year fixed elec rate p/kWh |
|---|---|---|
| Small | 10,000 to 50,000 | 22.3 |
| Medium | 50,000 to 100,000 | 20.3 |
| Big | 100,000 + | 20.1 |
Source: The above data has been compiled using the following:
- Wholesale electricity rates on the National Grid published by the ICE exchange.
- Three-month rolling average non-commodity rates offered in the commercial electricity market using AquaSwitch quoting data.
Small business energy tariffs
Small business owners typically have two main options for business energy tariffs: a fixed-rate energy contract, which offers certainty over the cost of each kWh of electricity, and a variable tariff, whose rates fluctuate based on the latest market conditions.
Continue reading to explore the pros and cons of each of these types of business electricity tariffs.
Fixed-rate small business energy tariff
Here are the two biggest reasons to consider a fixed-rate small business electricity plan:
- Simplicity – Fixed rate business electricity is the simplest to understand and manage. Throughout your contract, you’ll pay a fixed unit rate per kWh of electricity consumed plus a daily business energy standing charge. The simplicity means that it is easy to forecast your business electricity costs based on your actual usage for the year.
- Certainty – The price of electricity can fluctuate widely with geopolitical events. A fixed-rate small business electricity tariff protects your business from rising energy costs.
Variable-rate small business energy tariff
Here are the two primary reasons to consider a variable-rate business electricity plan:
- Flexibility: Unlike with a fixed business energy contract, you have the option to switch business electricity suppliers at any time, thereby avoiding expensive early termination fees.
- Benefit from Falling Prices: Businesses on variable rates can benefit from decreasing electricity prices, potentially lowering overall costs.
It’s important to note that fixed-rate electricity tariffs for small businesses are usually more cost-effective, as suppliers aim to attract new customers by offering competitive rates. To find out the latest fixed prices, enter your postcode below.
For more detailed information, check out our full article on business energy tariffs.
Support for small business energy bills
Until March 2024, the Energy Bill Discount Scheme offered protection to small companies. However, no replacement scheme has been introduced to protect small businesses since then.
Without a cap on small business energy prices, out-of-contract prices are now enormously expensive.
To manage your energy costs effectively, it’s crucial to regularly switch to fixed energy tariffs, which helps secure the most competitive rates on the market.
Read on for more information about what to do if you’re struggling to pay your energy bills, about business energy grants available to small businesses, and about Ofgem’s small business protections.
Small businesses struggling to pay their energy bills
In these challenging economic times, many smaller businesses are struggling to stay on top of paying their energy bills. Ofgem and Citizens Advice offer the following guidance:
- Contacting your energy supplier: It’s crucial to communicate with your supplier if you’re facing difficulties in paying bills. They may offer manageable payment plans, payment breaks or reductions, extended payment periods, or even access to hardship funds.
- Seeking business debt advice: Organisations like the Business Debtline can offer guidance on managing business debt and budgeting.
- Reduce energy consumption: Businesses can take proactive steps to lower their energy consumption, thereby receiving cheaper bills. For quick and effective strategies to reduce your energy expenses, check out our section on easy ways to reduce business energy consumption. These tips can help bring your energy bills down to more manageable levels.
Latest resources for business energy support:
- Ofgem – Getting help if your business cannot afford its energy bills
- Citizens Advice – Get help with your small business energy bills
Small business energy grants
The UK government, devolved administrations, and local councils offer various business energy grants to make small businesses more environmentally friendly. These grants typically support investments in:
- Installing a heat pump system as a boiler replacement
- Energy efficiency upgrades like improved insulation.
- EV charging station for employees and your business fleet
- Commercial solar panels to generate electricity yourself.
Discover how to apply for the latest small business energy grants in our comprehensive guide to business energy grants.
Regulations supporting small businesses
Ofgem, the energy regulator, provides additional rules governing how business energy suppliers treat their small business customers, offering them extra protection compared to larger companies. Here’s a summary:
- Back-billing restriction – If your business has been paying estimated bills due to a lack of physical meter readings, your supplier cannot charge you for additional energy used if this occurred over 12 months ago.
- Disclosing the terms of your energy contract – Suppliers must clearly display the current contractual terms (tariff type, end dates, etc.) on your bills and upfront when you first agree to a contract. This transparency helps to avoid the pitfall of expensive out-of-contract rates.
- Termination notices – Your business energy or business gas supplier cannot require you to provide a formal termination notice should you choose to switch suppliers when your business energy contract comes to an end.
- Restriction on rollover contracts – The use of automatic rollover energy contract terms when you don’t take action at the end of your current business energy tariff is limited to a maximum of 12 months.
Broker Alternative Dispute Resolution – All business energy brokers working with small businesses are signed up to a dispute scheme that allows businesses to make formal complaints here.
Broker commissions – The fees earned by brokers that helped to arrange your contract must be disclosed on any business energy contract you sign.
💡 These rules apply to microbusinesses, defined as those with fewer than 10 employees or less than 100,000 kWh of electricity or 293,000 kWh of gas each year.
Source: Ofgem – Microbusiness guidance
Best energy deals for small businesses
The optimal way for small businesses to pay for their electricity and gas is to regularly search the market for fixed energy tariffs and make a simple business energy switch to the cheapest supplier. Compare business energy today in a few simple steps:
Enter your business postcode
Enter the postcode of your small business property below, along with your current contract status, and we’ll search the market for the latest prices.
Compare fixed energy deals
Our business energy experts will present you with small business electricity and gas quotes offered by our trusted suppliers.
Make a simple switch
Our experts will manage a seamless transfer of your electricity and gas supplies to your new supplier, giving you cheaper rates.
Energy efficiency tips for small businesses
The most effective way for small businesses to reduce their energy costs is simply to use less electricity. Our business energy experts have summarised the six easiest ways for a small business to minimise unnecessary energy consumption:
Install timers
Timers can automatically turn off lighting and heating in a small office, provided they are programmed correctly. There’s no need to heat an office during cold winter nights when everyone has gone home.
Eco-mode of white goods
Modern dishwashers and other devices follow the EU’s ecodesign requirements, which promote eco-functions. A dishwasher in eco-mode will work a lot slower but will use a lot less energy – perfect for running overnight at an office.
How water temperatures
Heating water is by far the biggest way in which small businesses use energy, either through central heating or through the hot water coming out of the taps. Consider using a lower temperature to reduce the required energy.
Consider your need for printers
Printers use a lot of electricity, paper and ink, all of which are significant and unnecessary costs to most small businesses. Consider using the latest software and going paperless across your business to quickly eliminate this waste.
Business energy monitor
A business energy monitor is a simple device that takes a live reading of your business’s electricity and gas consumption. These are great for quickly identifying problems before your business is hit with a huge energy bill.
Internal energy audit
An energy audit is a great way to assess how your business uses electricity to identify areas where you can improve efficiency. It’s simpler than it sounds – use our energy audit checklist to analyse your business today.
Renewable energy options for small businesses
There are over 5.5 million small businesses in the country, which have an important role in the UK’s transition to net-zero.
Here are the three easiest ways for a small business to go green:
Green business electricity tariff
Green heating systems
Most commercial properties in the UK still use an old-fashioned gas boiler for their heating. Eliminate your expensive business gas rates and enhance your business’s green credentials by upgrading to a heat pump or a biomass boiler heating system.
Small-scale renewable electricity generators
Installing commercial solar panels or a small wind turbine typically requires no planning permission and generates cost-free renewable electricity for your business. The smart export guarantee scheme can be used to sell any excess electricity back to the grid.
Smart energy meters for small businesses
Along with all UK households, Ofgem has set binding targets for energy suppliers to roll out smart energy meters to small businesses.
A smart meter will provide automatic meter readings to your business energy supplier and can also share its data with a business energy monitor. UK businesses have the option of requesting a free smart meter upgrade from their supplier, which is worth considering for these three reasons:
- No manual meter readings – Manual meter readings are entirely eliminated, as a smart meter will automatically record and send these to your supplier.
- No estimated energy bills – With accurate readings, your supplier will know exactly how much energy your business has used and can charge you accurately.
- Off-peak tariffs – With automatic meter readings, you can access off-peak tariffs where your business can take advantage of cheaper electricity at night.
To request your smart meter and get more information, check out our guide on smart energy meters for businesses.
Small business energy – FAQs
Small business owners have a lot of questions when it comes to managing their electricity and gas contracts. Our business energy experts have answered the most common below:
How much VAT do small businesses pay on electricity rates?
Most businesses pay VAT at the standard rate of 20% for commercial electricity bills. However, if your small business uses less than:
- 33kWh a day of electricity; or
- 145kWh a day of gas
Then you’ll be charged VAT at 5% – the same that is paid by UK households.
💡 The average UK home uses 8 kWh of electricity and 34 kWh of electricity each day.
For more information, check out our guide to VAT on business energy.
How can I estimate my small business’s electricity usage?
The energy usage of small businesses depends on what your company does, and specifically:
- Day-to-day business activities.
- Building type.
- The efficiency of electrical devices.
- The heating system used.
Check out our full article on business energy consumption for more information.