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Small Business Electricity Contracts - Ultimate Small & Micro Business Guide

There are 5.5 million small businesses in the UK according to the Federation of Small Businesses [1]. SMEs account for a massive three fifths of UK employment numbers, making them crucial to the UK economy. 

With the challenges over the last few years; the pandemic and energy crisis the most notable, it is so important to take control of your business energy contracts. 

In this comprehensive guide, we'll explain small business energy contracts, micro businesses, what you should expect to pay for business electricity and gas in 2023 and whether grabbing a fixed-rate tariff is worth it. 


  1. How small business electricity prices are calculated
  2. Average electricity prices by business size
  3. Does my business qualify as a micro business
  4. Examples of electricity usage by business type
  5. Types of small business electricity tariffs
  6. How to find the best small business energy prices
  7. How to read your meter
  8. How to reduce your business’s electricity bill

What Is A Micro Business & Am I Classed As One? 

It may be the first time you're hearing the term 'micro business'. In fact, most SMEs fall into this category in the eyes of business energy suppliers without realising. There's a few benefits to being classed as a micro business; but as with anything it does have its drawbacks. 

You'll be classed as a micro business by energy suppliers if you fit into one of the following categories: 

  • you employ less than 10 employees and have an annual turnover no greater than €2 million; or 
  • use less than 100,000 kWh of electricity per year; or 
  • use less than 293,000 kWh of gas per year. 

Micro Business vs. Small Business: What Is The Difference? 

When looking for small business electricity suppliers, it can be challenging to understand how to get a great deal. There are some pros and cons to being classed as a micro business. Here are the headline differences between the two: 

Rollover Contracts 

You may be aware of expensive out of contract rates. Essentially, if you do not agree to a new business energy contract before your end date, you will be placed on this type of tariff. For a micro business, this cannot exceed 12 months. As a micro business, if you discover you're on out of contract rates you can terminate without giving any notice. This is not possible for an SME business. 

Rollover contracts are unpopular and seem unfair. Businesses that get caught out will be paying higher rates and locked into the contract for at least 12-months. This is why we advise to place a reminder in your diary! If you switch business energy suppliers with us, we'll remind you when your renewal window opens. 

Back Billing protection 

As a micro business, you have the same back billing protections as you do in the domestic market. This means that you cannot be billed for gas and electricity usage from more than 12 months ago if you have provided meter readings. 

Renewal Notice 

As a micro business, you will receive a renewal notice within 60 days before your contract end date. Unfortunately, SME businesses will not receive the same notice - some energy suppliers will but not all. 

Small businesses who switch business energy suppliers with us will get a free reminder when the renewal window opens to ensure they never end up on out of contract rates. 

Business Energy Rates Per kWh 

This is where small businesses have the advantage over micro businesses. Business electricity prices will be more favourable for SMEs over micro businesses because they typically have a higher usage. 

UK Small Business Energy Electricity Rates 2022

Business size Electricity Price Per kWh Including CCL
Micro business 22.43p
Small business  21.04p
Medium business  18.47p
Large business  17.35p
Extra large business  18.31p
Average 19.33p


Small Business Energy Comparison - Can You Still Switch? 

You can switch business electricity suppliers, but you may be wondering if this is the right move with rising energy prices.

Despite rising prices, many business owners are choosing to lock in their business electricity prices with a new fixed-rate deal. Even with these prices being more expensive than previous prices, the energy market has changed and companies are looking for peace of mind.

Also, switching energy suppliers does not impact any eligibility for the energy bill relief scheme.

How small business electricity prices are calculated

It's important to understand how your business electricity bills are calculated. This can help you find the best deals when switching.

Your small business’ electricity bills will be calculated based on the following factors:

  • Energy consumption — the amount of electricity you have used during a given period.
  • Unit rate — The price you’ve agreed to pay per kilowatt-hour (kWh).
  • Postcode — Businesses pay different rates depending on their geographic area. Each region’s Distribution Network Operator (DNO) charges differently. 
  • Standing charge — The fixed daily amount you agree to pay your business electricity supplier. This covers the costs of transporting electricity and maintenance. Standing charges can vary depending on the supplier. The UK average standing charge for small businesses is around 23p per day.
  • Period of billing — Businesses are billed monthly or quarterly. This depends on what is agreed in the contract.
  • VAT — Small businesses pay 20% VAT. Charities and not-for-profits can pay as little as 5% VAT.
  • Discounts — Suppliers offer discounts as a reward for paying via Direct Debit.

Here’s an example of what a typical SME bill might look like:

Billing period

1st-31st January

Standing charge

26.83p per day




Energy consumption

1,000 kWh

Unit rate (price per kWh)





Pre-tax charge (both subtotals)


VAT (20%)


Direct Debit discount


Grand total



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Examples of electricity usage by business type

Your business electricity usage isn’t simply determined by the size of your business. Your industry and working environment will also have an impact on your business electricity rates.

We have put together some pricing examples for common small businesses.

1. Office

A lot of small businesses today operate online. This means their main expenditure comes from the use of office space.

The Chartered Institution of Building Services Engineers (CIBSE) ran some calculations. A small office pays between £5.00 and £6.50 in energy costs per square meter.  An SME will need around 500m² to house their staff. Offices energy usage is 85% electricity with gas only used for heating and hot water.

Here’s an example of an offices business electricity rates based on that information:

Energy cost per square meter of office space


Office size


% energy used that’s electricity


Total yearly bill


2. Retail store

According to the Carbon Trust, the average UK retailer uses 27,350 kWh of energy per year.

The majority of energy used in shops goes towards customer comfort. This means warmth and lighting. About a third of all a shop’s energy usage goes towards heating alone.

Modern retailers use electric heating. This drives higher costs in comparison to other industries. There are cooling costs for open fridges and any back-office IT costs to consider.

Retailers operate during peak hours when unit rates are higher. This makes it difficult to get discounts from suppliers. 

Here’s what a typical retail stores business electricity prices might look like each year:

Typical annual electricity usage

27,350 kWh

Price per kWh


Daily standing charge


Total yearly bill


Including VAT


3. Restaurant

When it comes to small businesses, the industry that uses by far the most energy is hospitality. Restaurants can spend over ten hours a day with ovens, hobs, dishwashers and microwaves constantly on the go. This racks up staggering business electricity bills.

Gazprom estimates that this industry uses around 20.6 billion kWh of energy each year. With 88,846 businesses registered in this category last year, that’s an average usage of 231,861 kWh per year.

About 60% of a restaurant’s total energy usage comes from electricity. This stems from a having electrical appliances running for 14 hours a day. 

Gas is used in cooking and heating. This means a restaurant can expect to use 139,117 kWh of electricity annually.

Restaurants usually get a better price on their business electricity costs. They get discounts by operating outside peak hours on Economy 7 and Economy 10 meters.

Here’s an example of what a UK restaurant might expect to pay:

Typical annual electricity usage

139,117 kWh

Price per kWh


Daily standing charge


Total yearly bill


Including VAT


Types of Small Business Electricity Tariffs

Before comparing small business electricity prices, it’s important to consider how you use energy. Getting the right tariff for your business can help you maximise your savings.

When you compare small business electricity prices, the following tariff types will be available:

Fixed rate tariff

When you switch to a fixed rate tariff, your unit rate will remain the same throughout your contract. This is great for businesses requiring certainty from their energy prices. You should bear in mind that your monthly bills will still change depending on how much energy you use.

Variable rate tariff

With a variable rate tariff, your unit rate can change during your contract. If your supplier reduces its prices, you will benefit from this. However, your unit rate may increase if the cost of energy goes up.

No standing charge tariff

Your standing charge is a fixed daily fee that is charged regardless of how much gas or electricity you have used. A standing charge covers the cost of your energy provider supplying gas and electricity to your premises.

Under a no standing charge tariff, you won’t be required to pay this daily fee to your supplier. In most cases, your standing charge will be set at zero on your gas or electricity bill. This means that you will only pay for the energy you use.

A no standing charge tariff can be beneficial for businesses who operate seasonally or part-time. When you aren’t using your gas or electricity, you’ll have nothing to pay.

It’s worth bearing in mind that unit rates can be more expensive on no standing charge tariffs. If you have a high energy usage, your business electricity prices could increase with a no standing charge tariff. At Love Energy Savings, we can provide advice on your potential savings based on your current energy usage.

Multi rate tariff

A multi rate tariff allows you to pay different unit rates and different times of the day. These are broken down into on and off-peak hours. During off-peak hours, your unit rates will be lower. However, you will pay more expensive unit rates during peak hours.

If your business operates at night or outside of peak hours, a multi rate tariff could help you reduce your bills.

Green energy tariff

If your business is seeking to go green, a renewable energy tariff could be for you. Green business energy tariffs have become much more affordable in recent years. At Love Energy Savings, we can help you find green energy tariffs that offer your business great value.

How to find great small business electricity prices

It’s vital for small businesses to compare prices regularly to ensure they’re on the best deal. By simply allowing your business energy contract to roll over, you could find yourself overpaying for your electricity.

At Love Energy Savings, we’d always recommend comparing small business electricity prices before accepting renewal prices. As there is very little loyalty in the business energy market, renewal prices are often much higher than negotiated rates.

With Love Energy Savings, you can quickly compare a huge range of suppliers to find great small business energy prices. All you need to do is enter your postcode to complete our quick energy comparison calculator.

How to read your electricity meter

Keeping track of the amount of energy you use is one of the best ways to keep your usage to a minimum. You will need to know how to read your small business’s electricity meter.

Reading a digital meter

If you have a digital electricity meter, you should read the numbers left to right. There are six numbers, but you only need the first five. You should ignore the numbers in red furthest to the right.

Some businesses may have a ‘two-rate’ digital electricity meter. This means you’ll see two sets of numbers rather than just one. A two-rate meter will show a low (or ‘off-peak’) number and a normal (or ‘peak’) number. These are two different rates you will pay for different times of the day.

How to read digital electricity meter

Reading a dial meter

Dial meters are more complicated to read, but they work in the same way. Read the numbers from left to right, ignoring the one on the furthest right.

If any of the dials fall between two numbers, use the lowest number in your reading. If a pointer is exactly on a number, check the next dial along. If this falls on a 9, subtract one from the number on the previous dial.

If the first dial reads 5 and the second dial reads 9, the reading for these first two dials would be ‘4’ and ‘9’.

How to read dial electricity meter

Reading an electronic meter

Electronic meters are read in a similar way to digital meters. The difference is electronic meters include a decimal place after the first five numbers.

When taking your reading, read from left to right and only use the first five numbers.

Some electronic meters work on two rates. You will need to press a button to switch between the two rates. Make note of both readings.

How to read two rate electronic electricity meter

How to reduce your small business’s electricity bill

Regardless of your business type or sector, there are ways you can save money.

Here are some quick and easy measures you can perform to reduce your business electricity bills.

1. Submit regular meter readings

One of two issues can occur if your supplier is estimating your business electricity bills.

  • You get overcharged. This means you're losing out on savings and hurting your cash flow.
  • You get undercharged. This will come back to bite you when your supplier catches up. They will send you a large bill to pay and you won't be expecting it.

This impacts your cash flow and is not ideal for a small business.

Submitting regular meter readings reduces your chances of being overcharged or back billed.

You can make things easier by installing a smart meter. These send readings to your business energy supplier automatically and allow you to easily track your usage. Your supplier may cover the installation costs.

2. Invest in energy-efficient equipment

The two key areas to target to reduce your electricity bill are:

  • Heating — Restaurants and retail stores often use electric heaters. Consider switching to a gas-powered alternative. Gas heating is a lot cheaper to operate. This includes factoring in installation costs.
  • Lighting — You can save a large amount every year by investing in LED bulbs. You may even consider installing motion-activated light sensors. 

3. Switch your business electricity provider

Cutting back on your electricity usage will keep your bills down. This will only save you a little if you are paying more than you should. You can compare business electricity prices online. This will make sure you're on the correct tariff and not overpaying.

When switching with Love Energy Savings, you get a dedicated account manager.  We will handle the entire switching process on your behalf.

Once you’ve found a supplier, you can start saving on your business electricity.  We’ve helped UK businesses save over £100m on their energy bills.

To find out how much you could save, use our comparison tool.

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