Short answer
A business electricity contract sets the price you pay for each kWh of electricity, a daily standing charge, and how long those terms last. There is no price cap for business energy, so the detail of the contract decides what you actually pay.
Key takeaways
- Business electricity has no price cap, so the contract terms set what you pay.
- Compare total cost (unit rate plus standing charge), not unit rate alone.
- Check what is fixed and what is passed through before you sign.
What a business electricity contract covers
Every contract has the same core building blocks, even if suppliers lay them out differently:
- Unit rate(s): pence per kWh. A simple meter has one rate. Others have day and night, or weekday and weekend, rates.
- Standing charge: a fixed daily amount per supply point.
- Term: the start and end dates. One to five years is common for smaller businesses.
- What is fixed: whether every cost is fixed, or some are passed through at cost.
- Ending and renewal terms: notice periods, what happens at the end, and exit fees.
- Broker fees: for contracts agreed on or after 1 October 2024, any broker fee must be shown in the principal terms.
How business contracts differ from household energy
| Household | Business | |
|---|---|---|
| Price cap | Ofgem price cap applies to standard variable tariffs | No price cap |
| Cooling-off | 14 days | Generally none, so read the terms first |
| VAT | 5% | Usually 20%, or 5% for low-use supplies |
| Climate Change Levy | Not charged | Charged unless exempt |
| Contract length | Often 12–24 months | Often 1–5 years |
Fixed, variable and pass-through
Fully fixed
The unit rate and standing charge are fixed for the term. This gives the most budget certainty and suits most small businesses.
Fixed with pass-through
The energy price is fixed, but some non-commodity costs, such as certain network or policy charges, are passed through at whatever they turn out to be. The headline price can look lower, but your bill can move during the contract.
Variable or out-of-contract
Prices can change, usually with notice. This is often what you pay if a fixed contract ends and nothing new is agreed, and it is usually more expensive. See out-of-contract rates.
Why quotes expire quickly
Business electricity prices follow the wholesale market. Because of that, supplier quotes are often valid only for a short time, sometimes just the same day. It is normal for a broker to ask you to decide quickly once you have compared options. A good broker will still give you the time to read the principal terms first.
Credit checks and deposits
Suppliers usually credit-check businesses before offering a contract. New businesses or those with a limited credit history may be asked for a security deposit, or offered a shorter term.
Meter type affects the contract
- Standard or smart meters: priced on your annual consumption and rate structure.
- Half-hourly meters: priced on your consumption profile, with capacity (kVA) charges and sometimes reactive power charges. See half-hourly data.
A checklist before you sign
- Does the start date match your current end date?
- Is everything fixed, or are some costs passed through?
- What happens if your consumption rises or falls a lot?
- How much broker commission is included, and is it in the unit rate or the standing charge?
- What happens at the end of the term, and is any notice required?
- Are there exit fees if you move or close?
Common mistakes
- Comparing unit rates only. A lower unit rate with a much higher standing charge can cost more overall. See standing charges.
- Signing a start date that leaves a gap. Even a few days between contracts can mean out-of-contract rates.
- Not checking what is passed through. Two "fixed" prices are not comparable if one passes network costs through and the other doesn't.
- Assuming you can cancel. Business contracts generally have no cooling-off period.
Key terms
| Term | Meaning |
|---|---|
| Principal terms | The key terms a supplier must give you before you agree, including price, length and any broker fees |
| Non-commodity costs | Charges other than the energy itself, such as network and policy costs |
| Pass-through | A cost charged at whatever it turns out to be, rather than fixed |
| Microbusiness | A small business with extra protections under Ofgem rules, defined by consumption or by staff and turnover |
| Change of tenancy | The process when a business moves into or out of premises |
Are you a microbusiness?
Ofgem's definition includes a business that uses less than 100,000 kWh of electricity a year, or less than 293,000 kWh of gas, or that has fewer than 10 employees (or full-time equivalents) and an annual turnover or balance sheet of no more than €2 million. Microbusinesses get extra protections, including rules on contract information and notice.
Sources
- Ofgem: Energy advice for businesses (ofgem.gov.uk)
Questions
How long should a business electricity contract be?
There is no single right answer. Longer contracts give price certainty but less flexibility. Many small businesses choose one to three years.
Can my supplier increase a fixed price?
Not for the fixed elements during the term. If your contract passes some costs through, those can change. Check the principal terms.
Do I need to sign a new contract if I move premises?
Usually yes. Contracts are tied to a supply point, so moving normally means ending one contract and starting another.
We introduce enquiries to an energy broker partner and may receive a fee. We're not a supplier and don't give whole-of-market advice. How we're paid
Your next energy contract deserves a closer look.
About two minutes. No obligation.