Business energy contracts explained

How business energy contracts differ from home energy

Business energy is bought differently from household energy. Rather than one published tariff that everyone pays, suppliers usually price each business individually, based on how much energy you use, the meters and sites involved, the length of contract you want and their own credit checks. Business contracts are also outside Ofgem's household price cap (see is there a price cap on business energy?), so the contract you agree is what sets your price.

Ofgem's guidance on getting a business energy contract says the type of contract you can get usually depends on the size of your business and how much energy you use, and that different sizes of business get different protections. Microbusinesses have the most, which we cover in microbusiness energy rules.

Two more differences catch people out:

• There is no cooling-off period. Once you agree a business energy contract you are bound by it. Ofgem says this is why it matters to use a trustworthy broker. Read is there a business energy cooling off period? before you accept any quote.
• Doing nothing has a price. If you move into premises without arranging a contract, or let a fixed term end without agreeing a new one, you will be supplied on default terms that Ofgem says are usually more expensive. Those are deemed rates and out-of-contract rates.

If you run your business from home, Ofgem says you are probably on a domestic contract; check with your supplier.

Types of business energy contract

Not every supplier offers every type. For the buying-strategy choice between the first and last rows, see fixed vs flexible business energy.

What to check before you agree a contract

Ofgem lists the things you should know before agreeing a business energy contract. We use the same list when we help you read quotes from Fidelity Energy's panel:

1. What type of contract it is. Fixed, variable or flexible, and whether any charges can change during the term.
2. How long the term is, and the start date. A new contract should follow on from your current one without a gap that leaves you on out-of-contract or deemed rates.
3. Any fees, including those in special clauses: exit fees, termination clauses and charges for changes to your supply.
4. What protections you have. These depend on your business size; microbusinesses get extra protections set out in the supply licence.
5. Whether broker fees or commissions are included in the price. Suppliers must show broker costs in the contract's principal terms, and give you the information on request. See energy broker fees.
6. What happens at the end. Whether it renews automatically onto a new fixed term, or moves you to out-of-contract or deemed rates, and when the switching window opens.

Check the details too: the site address, the supply numbers and the annual consumption the supplier has used. A quote built on the wrong consumption figure can look very different once real bills arrive.

The charges on a business energy contract

Most business gas and electricity contracts have the same building blocks:

• a unit rate, charged for each kWh you use, which may be one rate or several (for example day and night) depending on the meter
• a standing charge, charged for each day you are supplied, whatever you use
• the Climate Change Levy for most business users, shown on the bill
• VAT, at the standard rate for business use or the reduced rate for qualifying use

How the unit rate and standing charge are balanced varies by supplier, so compare quotes on your own annual consumption rather than on one headline number. Our guide to the cheapest business energy contract walks through that sum.

VAT and the levy are where many quotes differ in presentation. Our page on VAT and Climate Change Levy explains the reduced rate, the 60% rule, the temporary zero rate on qualifying electricity in Great Britain and who does not pay the levy. For a fuller explanation of standing charges and unit rates themselves, see our sister site Business Gas and Electric.

Meters, supply numbers and your contract

Every contract is tied to specific supplies. Your electricity supply number (MPAN) is printed on your electricity bill and your gas meter point reference (MPRN) on your gas bill. A supplier needs them, with your annual consumption, to price a contract accurately; Ofgem's switching guidance says the new supplier will need your annual consumption and meter details before you sign.

The type of meter matters too. Larger electricity supplies may be settled half-hourly, which changes how a supplier prices the contract; see half-hourly business electricity for the contract side. What each meter type is, and how to read one, is explained on Business Gas and Electric.

How we help you compare business energy contracts

Forever Communications works as an agent of Fidelity Energy, an independent business energy broker and consultancy (it is not a supplier). We collect your bills and requirements, Fidelity Energy asks the suppliers on its panel to price them (it says it compares 24+ suppliers; that is a broad panel, not every supplier in the market), and we help you understand the options, the contract terms and the commission before you decide. Fidelity Energy then arranges the contract with the supplier you choose.

We can help you:

• compare fixed and flexible options on the same consumption and start date
• time a renewal so a new contract starts when the old one ends (see business energy contract renewal)
• move off deemed or out-of-contract rates
• check the end-of-term terms, exit fees and broker costs in the principal terms

Fidelity Energy is normally paid commission by the supplier you choose, included in your unit rates and/or standing charge, and Forever Communications receives a share of that from Fidelity Energy. Fidelity Energy's terms also let you opt at the start to pay it a fee by invoice instead. The detail is on our energy broker fees page.

Fidelity Energy is on the Energy Ombudsman's broker register, the kind of redress scheme Ofgem says a broker paid by a supplier must belong to; our energy broker ombudsman page explains how to check that and how complaints work.

Contact us with a recent bill and your contract end date, and we can arrange quotes from Fidelity Energy's panel.