Louise Horscroft 5 min read

Micro business electricity: A practical guide for small companies

Understanding how electricity contracts work for micro businesses can help you avoid unnecessary costs and make smarter decisions about your energy supply.

This guide explains what qualifies as a micro business, how that status affects your contractual rights, and where to get help when you have problems with your business energy.

What is a micro business for energy purposes?

Ofgem defines a micro business for energy contract purposes using the following criteria:

Has fewer than 10 full-time equivalent employees; and
Has an annual turnover or balance sheet total of £2 million or less

Uses less than 100,000 kWh of electricity or 293,000 kWh of gas per year

For example, a small high street cafe with a handful of staff and modest energy use would typically meet the criteria. The same applies to sole traders, independent retailers, and many service-based businesses operating from small properties.

Qualifying as a micro business means you’re entitled to clearer contract terms, easier access to price information, and a simpler process for switching suppliers.

Why being a micro business affects your electricity contract

Being classed as a micro business gives you access to specific rights and rules designed to make energy contracts fairer and easier to manage.

Ofgem requires business energy suppliers to apply the following rules when dealing with microbusiness customers.

Upfront contract information

Suppliers must make key contract terms available before you agree to anything. This includes pricing, contract length, and how to end the contract. It ensures you have a clear view of what you are signing up for.

Renewal notices

Your supplier must send you a renewal reminder at least 60 days before your current contract ends. This gives you time to compare business electricity prices with alternative suppliers or renegotiate your existing one, rather than being automatically locked into more expensive rates.

Ending your contract

Micro businesses have clearer and more flexible rules for ending business energy contracts.

Suppliers can require a maximum of 30 days’ notice before the end of the contract, but no more. Your contract’s termination deadline must be printed on your bill or statement of account. If you miss that window, your contract may roll over into a new term or result in a default rate.

The rules allow you to give a termination notice by phone or email, and suppliers must accept it. They are not allowed to insist on written notice, and they must confirm your request within five working days.

Backbilling limits

Backbilling is when a supplier charges you for energy you used in the past but weren’t billed for at the time. This can happen if there’s been a long gap between meter readings or an issue with your business electricity meter.

For micro businesses, suppliers can only charge for up to 12 months of unpaid usage, even if the error goes back further. This rule protects you from unexpected bills caused by supplier mistakes or delayed billing.

Broker commission transparency

If you’ve used a business energy broker, your supplier must tell you how much commission is being paid to the broker within your business electricity rates. This helps you understand exactly what you are being charged for.

Resolving disputes

Micro businesses have the right to access an Alternative Dispute Resolution (ADR) scheme. This is a free service that helps microbusinesses settle complaints with business energy suppliers or brokers without needing legal action.

VAT rates and CCL exemptions

Most businesses pay 20% VAT on business energy and are also charged the Climate Change Levy (CCL). However, if your average electricity use is 33 kWh per day (1,000 kWh per month) or less, you may qualify for the reduced 5% VAT rate and a CCL exemption.

These lower rates are usually applied automatically based on your business energy consumption, though some suppliers may request a VAT declaration form to apply these lower rates.

Where to get help with micro business electricity

Obtaining support with your electricity supply is crucial, especially if you are unsure about contract terms or need to lodge a complaint. There are several trusted organisations that offer free advice and support specifically for micro businesses.

Citizens Advice

Citizens Advice offers free, impartial guidance for businesses struggling with their energy supply or trying to understand their rights. Their website includes practical advice on contracts, billing issues, energy debt, and switching suppliers. They can also help you prepare to make a formal complaint.

Ombudsman Services

If you have raised a complaint with your supplier or broker and it has not been resolved within eight weeks, you can escalate it to Ombudsman Services. This is the official Alternative Dispute Resolution (ADR) scheme available to micro businesses. It is free to use and offers an independent way to resolve disputes without taking legal action.

Ofgem business energy advice

Ofgem is the UK’s energy regulator and sets the rules that suppliers must follow. Their business energy advice page includes up-to-date guidance on micro business rights, contract standards, billing, and switching. It is a helpful reference if you want to understand what your supplier is obligated to do.

What to do if your micro business is struggling with electricity bills

If your micro business is finding it difficult to keep up with its business electricity bills, there are steps you can take. While government support schemes introduced during the energy crisis have now ended, many suppliers still offer help for businesses that are struggling.

Here’s where to start:

Speak to your supplier early

Most suppliers have dedicated teams to support small and micro businesses in financial difficulty. They may be able to offer payment plans, short-term relief, or help you avoid disconnection. Contact them as soon as you anticipate a problem rather than waiting for a missed payment.

Check for supplier support

Some suppliers offer hardship support, debt advice, or flexible contract options for micro businesses. Check your supplier’s website or contact their business support team to ask what help is available.

Get independent advice

If you are unsure of your options or your supplier is not offering support, organisations like Citizens Advice and Business Debtline can help you understand your rights and next steps.

Next steps for your micro business electricity

Even if your business meets the micro business criteria, it’s still important to make sure you are getting the best electricity rates and contract terms.

If you are unsure where to start, our expert team can help you understand your options and find a contract that fits your usage and business needs.

Compare business energy prices to check current rates and see what’s available for your micro business.