What to Ask Before Signing a Business Energy Contract

Before you sign a business energy contract, get every key figure in writing and check it line by line: the unit rate, the standing charge, the contract length, the notice period, and any broker commission built into the price. A few clear questions at this stage can save you from being locked into a poor deal or rolled onto expensive rates later. The list below works whether you are dealing with a supplier directly or through a broker.

The numbers that make up your price

Most business energy quotes come down to two charges. The unit rate is the price you pay for each kilowatt hour (kWh) you use, in pence. The standing charge is a fixed daily fee in pence that you pay regardless of how much you use. Ask for both, and ask for them separately for electricity and gas, since they are charged differently.

A low unit rate can hide a high standing charge, so look at both together against your actual consumption. For current typical figures and price cap information, check Ofgem and GOV.UK rather than relying on a sales claim. Note that business contracts are not covered by the domestic price cap.

• What is the unit rate in pence per kWh for electricity, and for gas?
• What is the daily standing charge in pence for each?
• Is the quote based on my actual meter readings or on an estimate?

That last point matters. A quote built on estimated usage can look attractive but turn out wrong once real readings come in. Where possible, give an accurate annual consumption figure from past bills so the comparison is fair.

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Fixed, variable, and what 'pass through' means

Ask whether the price is fixed or variable. On a fixed contract, your unit rate and standing charge stay the same for the term, though your bill still changes with how much you use. On a variable contract, the rate can move with the market in either direction.

You may also be offered a 'pass through' or 'partially fixed' contract. Here the wholesale part of the price is fixed, but other costs such as network and distribution charges are passed straight through to you and can rise during the term. These can look cheaper at the start but carry more risk. Ask which parts are fixed and which are not, so you know what could change.

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Contract length, notice, and the renewal trap

Know exactly when the contract starts and ends, and how to leave it. Many businesses get caught because they miss the window to give notice and are rolled onto a more expensive deal automatically.

• How long is the contract and what is the exact end date?
• What is the notice period to leave, and how do I serve it?
• What happens at the end of the term if I do nothing?

If you do not switch or renegotiate in time, you may be moved onto out of contract or deemed rates, which are usually higher. Put the notice deadline in your calendar as soon as you sign. Suppliers should set out their renewal terms clearly, and Ofgem has rules on this, though protections differ for smaller businesses (microbusinesses) compared with larger ones.

Broker commission and the costs on top

If you use a broker, their commission is often built into the unit rate, which means you pay it through your bills without seeing it. Ask plainly whether commission is included, how much it is, and request the answer in writing. Ofgem now expects brokers serving microbusinesses to disclose commission, so a refusal to put it in writing is a warning sign.

• Is any broker commission included in this rate?
• What is the amount, in pence per kWh or as a total?
• Will I get that confirmed in writing before I sign?

Two other costs apply on top. Business energy usually carries VAT at the standard rate, though a reduced rate can apply to low usage or certain premises. The Climate Change Levy is a separate government charge on energy used by business. Check GOV.UK for current VAT and Climate Change Levy details, and ask whether the quoted price includes them or adds them later.

Keep copies of every quote, contract and email. If you have a dispute with a supplier and cannot resolve it, the Energy Ombudsman can review complaints from microbusinesses once the supplier's own process is exhausted. Citizens Advice also offers guidance on business energy issues. None of these questions takes long to ask. Getting clear answers before you sign, rather than after, is what keeps you in control of what you pay.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Out of Contract Energy Rate Checker lets you find out if your business is stuck on expensive out-of-contract energy rates, and how to escape. Try it now →