Understanding Business Energy Contracts for Business Owners

Q: Is it worth using a broker to find business electricity contracts?

For most businesses particularly those without a dedicated energy manager yes. An independent, whole-of-market energy broker can compare dozens of electricity contracts for business simultaneously, has access to rates not always available directly, and handles contract management and renewal tracking on your behalf. Make sure your broker is transparent about fees and QDSS registration.

Last updated:May 2026

Reviewed by: UK Energy Support Specialist

For businesses in the UK, energy contracts are one of the most important agreements you will sign, yet many business owners do not fully understand the terms until problems arise. Whether you run a small retail shop, a restaurant, an office, or a larger commercial operation, choosing the right business energy contract can have a major impact on your monthly costs. Understanding how UK business energy contracts work can help you avoid hidden charges, secure better rates, and manage your budget more effectively over the long term.

What is a Business Energy Contract?

Business energy contracts are legally binding agreements between a UK business and a licensed energy supplier. The contract sets out the price you pay for each unit of gas or electricity (measured in kilowatt-hours, or kWh), how long the deal lasts, and the terms under which it can be changed or ended.

Unlike household energy tariffs, business energy contracts are not protected by Ofgem's price cap. This means there is no ceiling on what a supplier can charge a non-domestic customer — which makes it essential to compare business electricity contracts before signing anything.

Business energy contracts cover three main supply types:

Business electricity contracts — covering the electricity supply to your premises
Business gas contracts — covering natural gas supply for heating, cooking, or industrial processes
Dual-fuel or multi-energy business energy contracts — covering both electricity and gas under one agreement

Do I Need a Business Energy Contract?

Any business in the UK that uses gas or electricity needs a business energy contract. This includes:

Sole traders and self-employed people with commercial premises
Small and medium enterprises (SMEs)
Large corporations and multi-site businesses
Public sector organisations — schools, hospitals, councils
Charities and not-for-profit organisations
Landlords of commercial properties

Types of Business Energy Contracts

Fixed Rate Tariff

A fixed-rate commercial electricity contract is the most popular type of business electricity contract in the UK. When you sign, your unit rate is locked in for the entire duration of the contract — whether 12, 24, or 36 months. Market prices can rise or fall, but you pay the same rate throughout.

Variable Business Gas Contract

A variable business gas contract — often called a Freedom contract — has a unit rate that moves up or down in line with the wholesale energy market. Your supplier reviews the rate periodically and must give you at least 30 days notice of any change.

Deemed Rate

A deemed business energy contract is applied automatically when you move into new commercial premises that already have an active energy supply but you have not yet agreed a contract with a supplier. The energy does not stop; it continues under the supplier's deemed rate.

⚠ Watch Out Deemed rates are set by the incumbent supplier and are almost always significantly higher than negotiated business electricity contracts or business gas contracts. You are not locked in — you can switch to a fixed or variable contract as soon as you are ready — but every day on a deemed contract costs you more.

Out-of-Contract (OOC) Rates

Out-of-contract rates apply when your existing business electricity contract or business gas contract comes to an end and you have not arranged a new deal. OOC rates are set by your current supplier and are typically 30 to 60% higher than rates on a negotiated commercial electricity contract. Many suppliers rely on businesses failing to act at renewal — which is why setting renewal reminders well in advance is critical.

Rollover Contract

If your business energy contract includes a rollover clause, and you do not give notice within the required window (usually 30 to 90 days before expiry), your supplier will automatically renew your contract on the same terms for a further fixed period. Under Ofgem rules, microbusinesses cannot be locked into a rollover business energy contract for more than 12 months.

Business Energy Contract Comparison

Compare UK business energy contracts side by side:

Contract Type	Best For	Typical Length	Price Stability	Exit Flexibility
Fixed-Rate	Budget-conscious businesses	12–36 months	High – locked rate	Low – exit fees apply
Variable / Freedom	Flexible operations	Rolling 30-day	Low – rates fluctuate	High – 30 days notice
Deemed	New premises, no contract	Until fixed deal agreed	Very Low – costliest rates	N/A – automatic
Out-of-Contract	Expired contract	Until new deal agreed	Very Low – costliest rates	N/A – automatic
Rollover / Evergreen	Businesses missing renewal	Same as previous term	Medium	Restricted by T&Cs

Average Costs of UK Business Energy Contracts

The cost of a business energy contract varies significantly based on your business size, consumption, location, and market conditions at the time of signing. The table below gives indicative annual electricity cost ranges for UK businesses in 2026.

📋 Note These are illustrative estimates only. Your actual costs depend on your tariff, location, and usage profile. Always get a live quote.

Business Size	Est. Annual kWh (Elec)	Fixed Contract (est. p.a.)	Out-of-Contract (est. p.a.)
Micro Business (1–9 staff)	Up to 25,000 kWh	£3,500 – £6,000	£5,000 – £9,000
Small Business (10–49 staff)	25,000 – 100,000 kWh	£6,000 – £20,000	£9,000 – £30,000
Medium Business (50–249 staff)	100,000 – 500,000 kWh	£20,000 – £90,000	£30,000 – £130,000
Large (250+ staff)	500,000 kWh+	Bespoke negotiated rate	Significantly higher

The most important takeaway: Out-of-contract and deemed rates are consistently 30 to 60% higher than negotiated business electricity contracts. For a medium-sized business using 200,000 kWh per year, that difference can easily exceed £15,000 annually.

How to Renew Your Business Electricity Contract

Timing your renewal correctly is just as important as choosing the right contract type. Here is the ideal renewal timeline for business energy contracts:

When	Action	Why It Matters
6 months before expiry	Start reviewing market rates	Gives time to compare without pressure
4–5 months before expiry	Request quotes from multiple suppliers	More lead time = more negotiating power
3 months before expiry	Check renewal window with current supplier	Many lock you in if you miss this window
60 days before expiry	Sign new contract	Seamless switch with no supply gap
30 days before expiry	Notify current supplier of switch	Required notice for most suppliers
At expiry (no action)	Fall onto out-of-contract rates	Can cost 40–60% more than a fixed deal

Common Mistakes Businesses Make with Business Energy Contracts

Businesses across the UK consistently overpay for energy due to the same avoidable mistakes. Understanding these mistakes will save you money on your business energy contracts:

Missing the Renewal Window Most business energy contracts have a notice window — typically 30 to 90 days before expiry — during which you must give notice if you want to switch. Miss this window and you could be automatically rolled over for another full term. Set calendar reminders the day you sign any business electricity contract.

Accepting the First Renewal Offer Your supplier's renewal rate is almost never their best rate. Always get at least three quotes before agreeing any electricity contracts for business.

Ignoring the Standing Charge Many businesses focus only on the unit rate when comparing business energy contracts. But the standing charge — a fixed daily fee — can add £150 to £200 per year on a business electricity contract even before you use a single unit. Always compare the total annual cost, not just the headline unit rate.

Not Checking the Rollover Clause Many commercial electricity contracts include automatic rollover clauses buried in the terms and conditions. If you do not actively cancel within the notice period, you are locked in again — often at above-market rates. Before signing any business energy contracts, check exactly what the rollover terms are.

Agreeing Over the Phone Without Reading the Contract There is no cooling-off period for business energy contracts agreed over the phone. Once you verbally agree, you are legally bound. Always ask for the full contract and terms in writing before confirming — regardless of time pressure from the salesperson.

Forgetting About Half-Hourly Metering Some business electricity contracts require half-hourly metering. If the first two digits of your MPAN start with 05, 06, 07, or 08, your supplier already takes half-hourly readings. This affects which electricity contracts for business are available to you and how your usage is billed. Check your MPAN before comparing deals.

Compare Business Energy Prices

Frequently Asked Questions

Most business electricity contracts run for 12, 24, or 36 months. Some commercial electricity contracts for large businesses can extend to 60 months. Variable contracts run on a rolling basis and can be exited with 30 days notice. Deemed and out-of-contract rates continue until you sign a new business energy contract.

In most cases, fixed-rate electricity contracts for business cannot be exited early without paying a termination fee calculated based on the remaining contract value. Variable business gas contracts and Freedom contracts allow exit with 30 days notice and no penalty. Always check your specific contract terms before attempting to switch suppliers.

Ofgem licences energy suppliers and enforces certain protections particularly around microbusinesses, rollover contract limits, and complaint handling processes. However, business energy contracts are not price-capped the way domestic tariffs are. The onus is entirely on businesses to compare and negotiate their own commercial electricity contract or business gas contract.

Ofgem defines a microbusiness as one that uses fewer than 100,000 kWh of gas per year, or fewer than 100,000 kWh of electricity per year (or fewer than 50 MWh), or has fewer than 10 employees with an annual turnover not exceeding 2 million euros. Microbusinesses get additional protections including a 12-month cap on rollover business energy contracts and the right to take complaints to the Energy Ombudsman.

For most businesses — particularly those without a dedicated energy manager — yes. An independent, whole-of-market energy broker can compare dozens of electricity contracts for business simultaneously, has access to rates not always available directly, and handles contract management and renewal tracking on your behalf. Make sure your broker is transparent about fees and QDSS registration.

If you have recently moved into new commercial premises and have not yet signed a business energy contract, you are almost certainly on a deemed contract. Contact the previous supplier or ask your landlord to confirm who supplies the premises. Then compare business electricity contracts or business gas contracts and get a proper deal in place as quickly as possible.