Commercial energy debt
This fact sheet covers England & Wales. We also have a version for Scotland if you need it.
Commercial gas and electricity arrears are priority debts because the suppliers have the power to disconnect your supply if you do not pay. They do not need to apply to court to do this. However, they do need to go to court if they intend to break into your commercial property.
This fact sheet tells you how to deal with gas and electricity debt at commercial premises, such as shops, warehouses and factories. Most of the debt advice in this fact sheet only applies to micro-businesses. See the next section to work out if it applies to you.
Use this fact sheet to:
- help you sort out common problems with commercial energy accounts;
- deal with energy arrears; and
- help you to negotiate with your suppliers.
The sample letters mentioned in this fact sheet can be filled in on our website. This fact sheet also includes some useful contacts and links for you to get further debt help.
Rising energy prices and support for businesses
The government has announced two schemes to assist businesses with rising commercial energy bills. Under the Energy Bill Relief Scheme and the Energy Bills Discount Scheme, you may see a discount applied to bills during the period 1 October 2023 to 31 March 2024.
For more information, see Government support in the section Supply and renewal.
What is a micro-business?
Ofgem is the regulator for gas and electricity suppliers. Ofgem says that a micro-business is a business that:
- has less than the equivalent of ten full-time employees and an annual turnover (total business takings) of no more than €2 million (two million euros); or
- uses no more than 100,000 kWh of electricity each year; or
- uses no more than 293,000 kWh of gas each year.
A business only has to meet one of these criteria to be a micro-business. If you are unsure how to check whether your business meets any of these criteria, contact us for advice.
Supply and renewal
Gas and electricity suppliers usually buy their energy in advance and then sell it to business users under a contract. You will normally be tied into a contract that says how long the energy will be supplied for and how much it will cost. Many suppliers will agree contracts on the phone. Once a fixed-price contract is agreed, the supplier must take all reasonable steps to send you a copy of all terms and conditions of the contract within 10 days.
When the contract ends, you will still be supplied with energy, but it will normally cost more. This process is called automatic renewal. Suppliers must contact you in writing, or by email, about 60 days before your contract is due to end. They must explain what you need to do to prevent automatic renewal, and the terms that will apply if you do not renegotiate a new contract. Suppliers must include the current prices, new prices and annual consumption on renewal letters for fixed-term contracts to make comparisons between suppliers easier.
Check your bills regularly. You could negotiate a new contract with your supplier when your current contract comes to an end. You can contact the supplier by phone, but you should always get a written copy of the contract.
Before you agree to a new contract, you should be made aware of the key information about the contract. This includes information on:
- the charges for the supply of energy;
- how long the contract is for;
- your rights to end the contract; and
- from 1 October 2022, if a third party was involved, the fees or commission that will be paid to that third party. A third party can include a broker, a price comparison website or a sales agent.
Higher energy costs
If you do not re-negotiate with your supplier when your contract ends, you could automatically be tied into another contract. This could be for a maximum of one year at higher prices. If you don’t want your contract to be automatically renewed for another fixed-term, you can send notice to your supplier from the first day of the contract.
If you take over a business from someone else, contact the utility supplier to negotiate a new contract. Otherwise, you may find that you have a ‘deemed contract’. This will usually mean that your gas and electricity will be expensive. Ofgem, the energy regulator, advises that deemed contracts are on average 80% more expensive than negotiated contracts.
If you are a business customer using energy on a deemed contract, the supplier cannot:
- prevent you from switching to another supplier, for any reason or at any time, (ie they cannot object to you transferring for reasons of debt or contract); or
- require you to give notice before terminating the contract or charge you a termination fee.
You may want to shop around to find the best energy deal for you and your business. You can use the website www.uswitchforbusiness.com to help you do this. If you want more than one estimate, you could use any of the switching sites which have Ofgem's Confidence Code. Get more information about the Confidence Code on Ofgem's website, www.ofgem.gov.uk.
The government has announced two schemes that may help reduce your business's energy bills for the period 1 October 2022 to 31 March 2024.
Most businesses with a non-domestic contract for their gas and electricity supply are eligible for support. Your business will not be eligible if:
- you agreed a fixed-tariff contract signed before 1 December 2021; or
- your business uses gas or electricity for the purpose of generating power that it sells back into the grid.
How the schemes work
The schemes involve a discount being automatically applied to the commercial energy bills of eligible businesses.
If your business is eligible, you should have started to see a discount applied to bills from November 2022.
Energy Bill Relief Scheme
This scheme provides a discount to the energy bills of eligible businesses for the period 1 October 2022 to 31 March 2023.
The discount is calculated by comparing the wholesale price your supplier pays for the energy you use against a ‘Supported Wholesale Price’ set by the government. The Supported Wholesale Price is set at 21.1p per kWh for electricity and 7.5p per kWh for gas.
The amount of discount that will be applied to your bill will depend on the type of contract your business has.
Your business is only eligible for a discount if the contract was signed on or after 1 December 2021.
If the wholesale price your supplier pays for the energy you use is greater than the Supported Wholesale Price, your bill will be discounted by the difference between these prices.
For example, if your supplier pays 30p per kWh for electricity, your electricity bill will be discounted by 8.9p per kWh (this is calculated by taking the Supported Wholesale Price of 21.1p per kWh away from the 30p per kWh your supplier pays).
Variable, deemed or default tariff
If you do not have a fixed-tariff contract, the ‘Maximum Discount’ you can have is 34.5p per kWh for electricity and 9.1p per kWh for gas. A discount will only be applied if the wholesale price your supplier pays for the energy you use is greater than the Supported Wholesale Price.
For example, if your supplier pays 20p per kWh for gas, you will be eligible for a discount as this is 12.5p per kWh higher than the Supported Wholesale Price set by the government. However, as the difference is higher than the Maximum Discount for gas, your discount will be the maximum 9.1p per kWh for gas.
For more information on the Energy Bill Relief Scheme, including examples of how discounts are applied, see GOV.UK.
Energy Bills Discount Scheme
This scheme will provide eligible business with a reduced level of support during the period 1 April 2023 to 31 March 2024.
If your business is eligible for support, an automatic discount will be applied to your bills if the wholesale price paid by your supplier exceeds:
- 30.2p per kWh for electricity; and
- 10.7p per kWh for gas.
The maximum discount that will be applied will be 1.961p per kWh for electricity and 0.697p per kWh for gas.
For example, if your supplier pays 34p per kWh for electricity, you will be eligible for a discount as this is higher than the threshold of 30.2p per kWh. As the difference between the two figures is higher than the maximum discount available, your discount will be the maximum 1.961p per kWh for electricity.
Discounts will be automatically applied by your supplier.
Businesses in sectors with high energy usage
A higher level of support may be available if your business is in a sector with a higher level of energy use. To see if your business may be eligible, check GOV.UK to see if it operates in a sector listed in the Energy and Trade Intensive Industries.
If your business is eligible for a higher level of support, it will have a lower threshold before a discount is applied and the maximum discount will be greater. The discount will apply to 70% of energy used by your business.
- For electricity, discounts will be a maximum of 8.9p per kWh when the wholesale price your supplier pays exceeds 18.5p per kWh.
- For gas, discounts will be for a maximum of 4p per kWh when the price your supplier pays exceeds 9.9p per kWh.
You will have to apply for this higher level of support. Further information on the application process has not yet been published. We will update this fact sheet when more information is available.
For more information on the Energy Bills Discount Scheme, see GOV.UK.
If you pay energy costs to a landlord
If your landlord has a commercial energy contract with a supplier, it is your landlord that will receive the benefit from the Energy Bill Relief Scheme. However, if your landlord passes energy costs on to you, they must consider passing on a ‘just and reasonable’ amount of the scheme benefit to you. Your landlord must notify you of their decision on how much they will pass on, even if they decide it is not appropriate to pass on any of the benefit.
Contact us for advice if you feel your landlord is not passing on the right amount of benefit from the scheme. You can also find more information on landlords’ obligations on GOV.UK.
Currently, the obligations for landlords to pass on scheme benefits applies to the Energy Bill Relief Scheme. However, the government has confirmed an intention for similar measures to be put into place for benefits received under the Energy Bills Discount Scheme.
Commercial suppliers should try to read your meter at least once every year. It is a good idea to read your meters regularly yourself and give the readings to your supplier. This means that you will only be billed for the energy you use, rather than getting estimated bills. It is especially important to read the meters when you start trading, and also if you cease trading.
Smart meters and estimated bills
Smart meters automatically send meter readings to your energy supplier. Due to changes in the systems used to send the meter readings, some older smart meters may temporarily stop sending meter readings. If your smart meter is affected, you should send regular meter readings to your supplier during the period that your meter is not sending the readings.
Use the smart meter check tool on the Citizens Advice website to check if your meter is automatically sending readings to your supplier.
From 1 November 2018, a change to the Standard Licence Conditions for gas and electricity suppliers means that energy suppliers to micro-businesses should not back bill for energy used more than 12 months previously. The exception to this is where consumers actively prevent suppliers from taking or receiving accurate meter readings; for example, by tampering with a meter or obstructing access to the meter.
If you cannot resolve a complaint with your energy supplier about back billing and you are a sole micro-business, you can contact Citizens Advice consumer helpline for help. See the Useful contacts section for details.
If you have received your supplier’s final response to your complaint and you are not happy, or the complaint has not been resolved within 8 weeks, you can escalate the matter to the Ombudsman Services: Energy. See the Useful contacts section for details.
If you find that you cannot pay your bill, or you have arrears, contact your supplier as soon as you can. Ask if they have a special department that deals with arrears and arrangements to repay. Explain your circumstances fully and the reasons why you cannot pay. If you find the person you speak to unhelpful, ask to speak to a manager. If you need to write to your supplier, see our Ask your commercial energy supplier to accept affordable payments sample letter.
Most suppliers will try to give you time to pay what you owe. However, you will need to show that you can pay for your ongoing fuel plus something towards the arrears. The supplier will normally look at your payment history when deciding what repayments they will accept.
If your circumstances change and you need to adjust payments on your arrangement, you may need to write to your supplier. See our Re-negotiate with your commercial energy supplier if your current repayment arrangement is unaffordable sample letter.
If you need time to get debt advice and find a debt solution, you may want to consider applying for breathing space.
Breathing space will stop most types of enforcement and also stop most creditors applying interest and charges for 60 days.
To find out more, see our Breathing space fact sheet.
If your business becomes insolvent, your supply of gas and electricity may be protected once your official receiver or insolvency practitioner has agreed that you can ask for the supply to be continued.
If your business enters administration or a voluntary arrangement is approved for either yourself as an individual or your business, your supplier may not be able to use an insolvency-related term in the contract to end your supply. Contact us for advice.
If the energy arrears are owed by a limited company, you may be able to apply for a moratorium for the company. This is a formal breathing space that gives you time to put a plan into place to deal with the company’s debts. See our Limited companies fact sheet for further information on a moratorium.
Your contract will often state that the supplier only has to give seven days’ notice before they disconnect you. However, before it gets to this stage, you will usually receive several letters or phone calls from them.
Your supplier does not have to offer you a pre-payment meter before disconnecting your fuel.
The Citizens Advice Extra Help Unit may be able to help you if you are threatened with disconnection. You cannot contact them directly. You need to speak to the Citizens Advice consumer helpline first and ask to be transferred to the Extra Help Unit. See Useful contacts at the end of this fact sheet.
The supplier will need to get a warrant from the magistrates' court, giving them permission to break in to your premises (if necessary) to disconnect the supply. If permission is given, it will last for up to 28 days from the date it was granted. You should always receive a letter notifying you of the date, time and location of the hearing. It is always a good idea to attend the hearing and explain what you are trying to do to resolve the issue. The court has the power to delay disconnection while further investigation takes place.
Living at the premises
It is very important to check what type of supply contract you have. If you have a residential supply contract, your supplier needs to follow Standard Licence Condition 12 and offer you a pre-payment meter before disconnecting you. If you agree to have this type of meter installed, they cannot disconnect your supply. For information about residential energy supplies, see our Gas and electricity arrears fact sheet.
However, if you have a commercial supply contract, you have less protection. Your supplier does not have to follow the rules that apply to residential supplies before disconnecting you. If you are in arrears, tell the supplier that you live at the premises. Ask them to treat you as a vulnerable customer. They may be prepared to do this in certain circumstances.
If you are trading from home, it could be that you have a residential supply. If this is the case, your rights will be different.
Contact us for advice if:
- you do not live at your business premises;
- your fuel supplier is the same at both your home and business address; and
- your supplier threatens to disconnect you at one address for arrears at the other.
An example of a situation where you may be classed as vulnerable is if you run a shop and live in the flat above. If there is not a separate fuel supply for your personal use, you may have a commercial supply for the whole premises. If you fall behind with your commercial fuel bill, you risk your home supply being cut off. In this case, you could contact your supplier and ask them to treat you as vulnerable.
Making a complaint
If you are unhappy about the way your supplier has dealt with you, the first step is to complain to them in writing. Ask for a copy of their complaints procedure.
You can ask the Citizens Advice consumer helpline for help and support with this process. They will refer all clients they identify as being vulnerable, threatened with disconnection or been disconnected to their Extra Help Unit . They have the power to investigate any complaint about actual or threatened disconnection, and complaints from vulnerable clients.
If you are unhappy with the response from your supplier, or the problem has not been sorted out after eight weeks from when you made your complaint, you can take your complaint to Ombudsman Services: Energy. This is an independent organisation which will investigate your complaint and make recommendations about what should be done to put things right. See the section Useful contacts for contact details.
Complaining about a broker or another third party
If your complaint is about a third party that was involved when you set up a contract with your commercial energy supplier, you should complain to that third party first. Relevant third parties can include brokers, sales agents or price comparison websites. If the response from the third party does not resolve your problem or if eight weeks have passed without an agreement being made, you may be able to take your complaint to Ombudsman Services: Energy if:
- the complaint is about an event that occurred on or after 1 December 2022; or
- the complaint is about an event that occurred before 1 December 2022, but you only became aware of it on or after 1 December 2022.
Reducing commercial energy costs
Energy bills are among the biggest expenses that many businesses have. In this section, we outline some steps that you may be able to take to keep your energy costs as low as possible.
Understanding your energy usage
Make sure you know the terms of your current contract. This will help you to understand whether it may be possible to save money by switching to another tariff or another supplier. Look for the following terms.
- How much you are charged per unit and what the standing charge is. This information will be useful for comparing with other tariffs.
- The end date of your contract. You may be switched to a more expensive rate if you do not negotiate a new contract before your current one ends.
- When you can switch. Set yourself a diary reminder to check for better energy deals that may be available.
Taking a walkaround your business to see how energy is being used may help you to identify areas where you can save energy.
- Use a checklist so that you can make a note of what to look for and whether any action is required. The Energy Saving Trust has an energy walkaround checklist that you can use, or you can make your own.
- Carry out a walkaround at different times of day as energy consumption may be different. For example, one during business hours and one at the end of the day.
- Repeat walkarounds every quarter. This can help capture different approaches to energy consumption at different times in the year.
You may wish to consider a business energy audit where an expert reviews your business usage and can make suggestions on how to save energy. You will usually have to pay for this but contact your supplier to ask if they offer a free audit.
Regular meter readings
It is a good idea to check your meter regularly and to review your energy bills. Doing this will help you to:
- check the impact of energy saving measures you may put in place;
- ensure that you only get billed for energy that is actually used; and
- spot unusual consumption which may need investigation. For example, unexpected high consumption could prompt you to check whether you have a faulty appliance or whether a behavioural change in the workplace has resulted in higher energy use.
You may wish to consider a smart meter if you don’t already have one. Smart meters give you information about your usage automatically, without you having to read them. A smart meter may also help you to see where you need to make adjustments to reduce your energy costs. If you have a smart meter and get into debt with your supplier, they may be able to disconnect your supply without needing access to the actual meter. If you are interested in having a smart meter fitted, contact your energy supplier for more details.
Energy saving tips
An effective way for many businesses to cut costs is to save energy. Even small changes can result in big savings for your business. The measures below can all be put into place at little or no cost. Look through these tips to see if there is anything that may help lower your bills.
- Save up to 10% on your heating consumption by reducing your workspace temperature by 1 degree.
- Try to avoid heating while windows or doors are open. If it is cold, close windows and doors before turning on the heating. If it is hot, turn the down heating before opening windows or doors.
- Make use of heating controls and thermostats to ensure that heating is only used when needed. Remember to make necessary adjustments as your heating needs change, for example when the weather improves or when work patterns change.
- Keep cold air out by making sure windows and doors have been draught proofed.
- Turn off lights when they are not needed, including making sure that the last person to leave checks that lights are turned off.
- Make use of natural light. Check whether there is any furniture or other objects blocking light coming into your workspace. If there is, consider whether you could rearrange things to improve lighting.
- Consider whether timers or sensors may help. For example, timers could ensure lights are turned off at night and movement sensors could be used to reduce how long security lighting is on.
- Turn electrical items off at the plug at the end of the day, including computers and monitors. Leaving equipment on standby costs money.
- Use power-saving settings if they are available. For example, you may have a printer that can be set to go to ‘sleep’ if it has been inactive for a few minutes.
- In the kitchen, only boil the amount of water you need when making a cup of tea. If there are several tea drinkers in your workplace, making a round of tea will be cheaper than each person putting the kettle on separately.
- Keep warm air out by keeping fridge doors shut and by regularly inspecting door seals to ensure they are in good order.
- Store refrigerated products at the correct temperature. If it is safe to do so, increasing the fridge temperature by 1 degree will reduce the energy consumed by 2% to 4%. Fridges containing non-perishable product can be turned off when not in use.
- Avoid overfilling fridges as this prevents cool air circulating and can result in having to lower the fridge temperature to keep the stored product safe.
- If you have employees, encourage them to save energy too. The Energy Saving Trust website has free employee engagement resources to help you, including a guide on engaging employees and stickers and posters that you can use to encourage energy-saving behaviour.
The Carbon Trust has published the following free guides that provide more detailed energy cost saving ideas for business in different sectors.
- Energy saving for retail businesses.
- Energy saving for the hospitality sector.
- Energy saving for manufacturing businesses.
- Energy saving for offices.
The guides give information on low-cost steps you can take as well as some more expensive measures to improve energy efficiency and save in the long term. See the Ofgem website for information on grants and schemes that may help with the cost of improving energy efficiency for your business.
Saving energy at home
As well looking to make energy savings for your business, consider whether you could reduce your household expenses by making energy savings at home.
The Ofgem website and GOV.UK website provide free, impartial information and guidance on how to save energy. The tips given on the websites are broken down into quick and free actions you can take to reduce your energy use and home improvements that can save money in the long term.
If you are a homeowner, you can also use an online service on GOV.UK to get recommendations for home improvements that could make your property cheaper to heat and keep warm. The tool may recommend schemes that can help you. For example, there may be schemes that can provide you with free installation of energy efficiency measures in your home. If you cannot access the tool online, you can call the Home Retrofit Advice and Information Line on 0800 098 7950 (Monday to Friday 8am to 6pm and Saturday 9am to 12pm).
Carbon Trust Phone: 020 3944 0029 Email: email@example.com www.carbontrust.com
Charis Grants - Let's Talk www.lets-talk.online
Citizens Advice consumer service Phone: 0808 223 1133 www.citizensadvice.org.uk
Energy Saving Trust - Business Phone: 020 7222 0101 Email: firstname.lastname@example.org www.energysavingtrust.org.uk
Energy Saving Trust - Domestic Phone: 020 7222 0101 (England) Phone: 0808 808 2282 (Scotland) Phone: 0292 046 8340 (Wales) Email: email@example.com www.energysavingtrust.org.uk
Nest Phone: 0808 808 2244 Email: firstname.lastname@example.org www.nest.gov.wales
Ofgem Phone: 020 7901 7000 www.ofgem.gov.uk
Ombudsman Services: Energy PO Box 966 Warrington WA4 9DF Phone: 0330 440 1624 Email: email@example.com www.ombudsman-services.org/sectors/energy
Other fact sheets that may help you
Gas and electricity arrears fact sheet
Limited companies fact sheet