Commercial energy debt (Scotland)

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.

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.

New contract

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. 

Deemed 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.

If you pay energy costs to a landlord

You may have an agreement under which your landlord is responsible for paying energy bills to the supplier and then they reclaim the money from you. Your landlord cannot charge you more than they have paid for gas and electricity.

You can ask your landlord for details of who the energy supplier is, what the tariff is and when the contract is up for renewal. If you can find a better deal, explain to your landlord why it is a better deal and ask them to consider switching supplier.

Your landlord may have received support towards energy bills from the following schemes.

• The Energy Bill Relief Scheme, which provided an automatic discount on the energy bills of many businesses. This scheme ran from 1 October 2022 to 31 March 2023.
• The Energy Bills Discount Scheme continued to provide discounts to some businesses at a reduced level during the period 1 April 2023 to 31 March 2024.
• The Non-Domestic Alternative Payment Scheme. This provided payments in 2023 to some customers whose commercial properties were off-grid for gas and that used an alternative fuel, such as heating oil (kerosene), wood or liquid petroleum gas.

If your landlord received support from any of these schemes, they had to consider passing on a ‘just and reasonable’ amount of the support to you. Your landlord should have notified you of their decision on how much they would pass on, even if they decided it was not appropriate to pass on any support. Contact us for advice if you feel your landlord has not passed on the right amount of benefit from a government scheme to you. You can also find more information on landlords’ obligations on GOV.UK.

Meter reading

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 if you start trading, and also when 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.

Back billing

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 energyadvice.scot 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 Energy Ombudsman. See the Useful contacts section for details.

Arrears

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 sample letter  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 sample letter  Re-negotiate with your commercial energy supplier if your current repayment arrangement is unaffordable sample letter.

Insolvency protection

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.

Limited companies

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.

Disconnection

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 energyadvice.scot  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 sheriff 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.

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.

Vulnerable customer

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 energyadvice.scot 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 the Energy Ombudsman. This is an independent organisation which will investigate your complaint and make recommendations about what should be done to put things right. See the next 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 the Energy Ombudsman 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

Your contract

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.

Energy walkarounds

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.

Heating

• 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.

Lighting

• 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.

Electrics

• 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.

Refrigeration

• 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.

Involve staff

• 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 Home Energy Scotland website provides free, impartial, expert advice, including information on grants and loans available to make energy efficient home improvements. For example, there may be schemes which can provide you with free installation of energy efficiency measures in your home. The website also has a funding finder tool that you can use to search for schemes that may be able to help. You can call Home Energy Scotland on 0808 808 2282 (Monday to Friday 8am to 8pm and Saturday 9am to 5pm).

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.  

Useful contacts

Charis Grants - Let's Talk  www.lets-talk.online

energyadvice.scot  Phone: 0808 196 8660 www.energyadvice.scot

Energy Saving Trust - Business  Phone: 020 7222 0101 Email: business@est.org.uk www.energysavingtrust.org.uk

Energy Saving Trust - Domestic  Phone: 0808 808 2282 (Scotland) Email: business@est.org.uk www.energysavingtrust.org.uk

Ofgem  Phone: 020 7901 7000 www.ofgem.gov.uk

The Energy Ombudsman An independent body which handles disputes between consumers and energy suppliers Phone: 0330 440 1614 www.energyombudsman.org