Run a small business and looking for a cheaper electricity and/or gas tariff? Then you need to understand how Ofgem’s micro business definition may be able to help you save money with our 5 tips.
Ofgem defines a Micro business consumer as a non-domestic consumer that meets one of the following definitions:
- Uses less than 100,000 kWh of electricity per year, or
- Uses less than 293,000 kWh of gas per year, or
- Employs fewer than 10 employees (or their full time equivalent) and has an annual turnover or balance sheet no greater than €2 million (approx: £1.8 million)
If you pay less than £12,000 per year for either electricity or gas you may be considered a micro business.
The majority of small businesses in the UK meet one or more of the criteria above ,and so may benefit from the following tips:
1. You can give your termination notice at any time during your contract
Unlike larger businesses, you don’t need to worry about renewal windows when looking for a new contract. The maximum notice period for terminating a micro-business contract is now just 30 days.
This means you can start thinking about switching as early or as late into your contract as you’d like.
Furthermore Ofgem also states that:
“Suppliers must also clearly state the contract end date and notice period on bills and statements of account for micro business consumers on fixed term contracts.”
“Suppliers must take all reasonable steps to acknowledge termination notice within five working days of receipt.”
2. Your fixed term renewal letter has to include your current prices, new prices and annual consumption
This is designed to make it as easy as possible to compare suppliers. And if you’re unsure whether or not you’d benefit by switching you can always easily compare business electricity and gas prices using our free quote service. Alternatively, you can use a business energy broker to do the legwork for you.
With over 50 business energy suppliers now operating in the UK, it’s unlikely you’re on the best available tariff and now you can quickly compare and easily find out.
3. Ofgem’s Standards of Conduct (SOC) covers most, but not all, interactions with your supplier
Under Ofgem’s Standards of Conduct suppliers have to ensure they treat micro business consumers fairly with respect to billing, contracts and customer transfers.
With regards to billing, the SOC cover the accuracy of bills, the timeframe for receiving and paying a bill, and any communications about billing. The actual amount of a bill is not covered by the SOC.
4. However, Ofgem does not regulate back-billing and not all suppliers limit the duration of when they are at fault to one year
Ofgem defines back-bills as: “catch-up bills for historical charges and relate to periods further back than normal billing.”
These generally occur when your reported or estimated usage turns out to be lower than the actual amount of electricity or gas used.
Normally, energy companies pick these discrepancies up during routine meter readings, but sometimes they slip through the cracks. And there have been cases in the past where energy companies went back as far as 6 years.
Obviously, back-bills can significantly harm a businesses cash flow, especially if the issue goes back several years. That’s why most major suppliers now voluntarily limit the back-billing duration when they are at fault to one year.
However, the emphasis is on voluntary, which means they under no legal obligation to do so and not all suppliers follow this guideline.
So as a small business owner you should make sure and ask what a supplier’s back-billing policy is before switching.
5. Ofgem publishes an annual Micro and small business customer engagement in the energy market report
It provides good background information to the current business energy market and climate. It includes such information as:
- Business switching rates
- Motivations for switching behaviours
- Activity in the energy market
- Contract conditions
- Sources of information and influences
- Switched supplier in the previous 12 months
- Key findings
You can read the 2016 report here.
Ready to start saving money today? Then visit our Compare Business Electricity Prices page and get a comparison quote today.