Originally defined by the European Union (EU) as a small business with fewer than 10 full-time employees or an annual turnover of £1.8 million (€2 million) or less, microbusinesses enjoy certain benefits when it comes to their energy contracts in the UK. Aside from specially-designed tariffs offered by most energy suppliers, the energy watchdog Ofgem also ensures microbusinesses are protected when it comes to potentially expensive automatic contract renewals, making the process of switching deals and finding the best possible micro business gas and electricity contracts for your small business as easy as possible.
As of December 2019, there were 5.6 million microbusinesses operating in the UK, which accounted for around 96 per cent of all businesses. But do you know if your business is classed as a microbusiness, or if it is eligible for potentially discounted microbusiness energy contracts? In this post we’ll answer questions relating to microbusiness energy prices and explain just how easy finding the best microbusiness energy tariff is with Utility Bidder.
As a rule of thumb, if your business does not employ a dedicated member of staff to take care of energy procurement and utilities management – with these jobs instead carried out by the business owner or an office manager – the likelihood is your business is a microbusiness. However, in order for your business to be officially classified as a microbusiness in the UK, it must satisfy at least one of three criteria set out by the energy industry regulator Ofgem. Your company is classed as a microbusiness if it:
- employs fewer than 10 employees and has an annual turnover no greater than £1.8 million (€2 million) (or)
- uses no more than 100,000 kWh of electricity per year (or)
- uses no more than 293,000 kWh of gas per year.
According to Ofgem, all business electricity and gas suppliers in the UK must take reasonable and necessary steps when determining whether one of their business customers can be classified as a microbusiness. However, in some instances, proving your microbusiness status to your supplier can be tricky, particularly if your business has recently downsized or drastically altered its average energy consumption over a short period of time. If you and your gas or electricity supplier disagree over whether or not your company is a microbusiness, you should get in touch with them and agree to supply supporting evidence to confirm that you do actually qualify. Providing as much information and supporting evidence as possible is key. This should include:
- The number of employees that currently work for the business, supported by payroll information
- Recent evidence that confirms the business’ annual turnover
- Recent evidence that displays the business’ typical electricity and/or gas usage.
What’s different about microbusiness energy contracts?
Energy contracts designed for microbusinesses differ from regular business tariffs and domestic deals in several ways. Typically, regular business energy contracts in the UK are fixed-term tariffs. This means that unlike domestic contracts – that usually start off as fixed-term deals before moving over to a more flexible standard variable rate when the fixed-term expires – business contracts are typically automatically renewed by your supplier. This means if you don’t keep an eye on the expiration date of your business’ energy contract and fail to comply with the specific notice period procedure outlined, your supplier will renew your deal for another fixed-term period, locking you in, often with increased rates. Unlike most domestic energy situations, this can make switching tricky if you are not careful, as a penalty exit fee will likely have to be paid to free you from your contract. Similarly, ‘cooling off’ periods are rarely built into business contracts, unlike domestic deals, meaning you are locked into the fixed-term from the moment you sign your contract. This makes being doubly sure that you fully understand the terms and conditions of your contract and are happy with the rates particularly important.
Unlike regular business energy contracts – in which it is your responsibility as the business owner to read and understand all the terms and conditions of your contract prior to signing, as well as remembering when your contract is coming towards its end date to avoid unwanted automatic contract renewals – microbusiness electricity tariffs, as well as gas deals, are protected by Ofgem regulation. Since 2010, the energy watchdog has made it compulsory for all business energy suppliers to follow a set of simple rules and guidelines that help microbusinesses to avoid being taken advantage of by energy suppliers. From more transparent contracts and notice periods, to rules regarding automatic renewal processes and back billing, Ofgem has ensured that microbusiness in the UK are well protected when it comes to their energy tariffs.
Microbusiness contracts differ from regular business energy contracts in a number of significant ways. These include:
- Contract terms – the supplier (or third party broker that finalises your microbusiness energy tariff) must make contracts as clear as possible, highlight all terms and conditions, making sure you as the business owner are aware it is legally binding, and provide written confirmation of the new contract within 10 days of it being signed. None of these terms are compulsory during the signing of regular business energy contracts.
- Renewal processes – suppliers must send reminders to their small ‘microbusiness’ customers at least three months before the end of their current deal. According to Ofgem, this letter must include detailed information about the specific date your current deal expires and information regarding any price increases involved in a potential automatic contract renewal.
- Termination windows – As well as just reminding you when your contract expires and what your new rates may look like, your current supplier must include specific information regarding your contract’s termination notice period on your renewal letter. This should include the first and last date you can provide notice of termination without incurring exit fees.
- Back billing – unlike regular business energy contracts, in which there is typically no time limit on the issue period for a back bill (a bill from your energy supplier charging you extra due to a past costing not being correctly billed for), microbusiness are protected by maximum back billing policies. These are set at three years for electricity bills and five years for gas bills.
Types of microbusiness tariffs
With practically all business gas and electricity suppliers offering energy contracts tailored for microbusinesses, with differing rates, added service extras and perks, the energy market is strong for those small businesses that qualify for these contracts.
Currently in the UK, microbusinesses, like larger businesses, will usually only find fixed-term contracts lasting one, two or three years offered by suppliers. Unlike domestic energy deals, standard variable tariffs are extremely uncommon for microbusinesses. In this vein, while there is a certain amount of variety in the different rates, focuses on sustainability, services extras and perks your microbusiness can choose from, the contracts themselves tend to work in the same way regular business contracts operate and offer the same level of variety. So, when choosing the best-suited energy supplier for your small business, you will first have to ask yourself what you are looking for in an ideal energy tariff. Whether you want a ‘green’ contract that can make your business more eco-friendly and help hit your sustainability goals, an innovative contract that makes the most of new smart technology, a tariff managed by a locally-run supplier that can guarantee the best maintenance and support services, or simply a contract that offers you the cheapest rates, there is the perfect type of microbusiness tariff to suit the specific needs and requirements of any company.
How do I find the best microbusiness tariffs?
If you think you’re paying more than you should be for your energy, or to simply find the best-suited first time business electricity or gas contracts for your microbusiness, specialist energy comparison and switching service provider Utility Bidder can help. Making it as quick and as easy as possible to find the best microbusiness energy tariff that suits you through a thorough search of all available deals, we also take care of the setting-up or switching process on your behalf, leaving you to concentrate on what matters most – running your business.
Give Utility bidder a call on 0800 007 4001 and have a chat with one of our industry experts today. We will talk you through the whole process and explain the benefits of being a microbusiness when it comes to energy procurement.
Remember – even if you already have an energy deal in place, switching suppliers is one of the most effective ways to help your business cut overheads and save money without having to compromise on the quality of your service. For many microbusinesses, this could be the difference between just surviving and actually thriving.
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