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Last updated October 2026.
What is a business electricity contract?
A business electricity contract is an agreement between a non-domestic customer and a licensed supplier that fixes how the electricity for a specific meter (identified by its MPAN) will be priced and billed for a set period. Unlike a domestic tariff, there is no price cap, no cooling-off period once you have agreed it, and the price is built for your meter rather than published as a rate card. The supplier looks at your meter type, annual consumption, region, credit profile and the wholesale market on the day, then offers a unit rate (pence per kWh) and a standing charge (pence per day) for a term of one to five years.
Everything else on the bill, the network charges, the Climate Change Levy and VAT, passes through whichever supplier you choose. The contract decides the wholesale element, the supplier’s margin and the standing charge, and those are the parts you can negotiate.
What types of business electricity contract are there?
| Contract type | How the price works | Who it suits |
|---|---|---|
| Fixed | Unit rate and standing charge held for the whole term, usually one to five years. Non-commodity charges are normally included in the rate. | Most small and medium businesses that want a known cost |
| Fixed with pass-through | The energy element is fixed; network and policy charges are passed through at cost and can change during the term. | Larger sites with a finance team comfortable with a variable line |
| Variable | The rate can change with the market, usually with 30 days’ notice. No fixed term, so you can leave with notice. | Businesses waiting for a better moment to fix, or between contracts |
| Flexible (tranche) procurement | Energy is bought in blocks over time against the forward market under a framework agreement. | Half-hourly sites and multi-site groups with large consumption |
| Deemed | Not a contract you sign. Applies when you use electricity with no agreement, for example after moving in. Rates are published by the supplier and can be left at any time with no notice or fee. | Nobody by choice: it is the default to move off |
| Out-of-contract (rollover) | Applies when a fixed term ends and nothing replaces it. Supplier-published rates, typically well above contracted rates. | Nobody by choice: the renewal window exists to avoid it |
Fixed versus flexible goes deeper on the trade-off, and pass-through contracts explains what floats and what does not.
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Send us a recent bill and we will compare the suppliers on our panel on the same start date and term, and show you the annual cost of each option. No obligation.
What do the terms in a business electricity contract mean?
- Unit rate. The price per kWh. Some contracts have day and night rates, or peak, off-peak and weekend rates on half-hourly supplies.
- Standing charge. A fixed daily amount regardless of use. It varies widely between suppliers and carries most of the network cost, so it matters more on low-usage meters.
- Term and end date. The fixed period and the date it finishes. Write the end date down the day you sign.
- Termination window. The period before the end date in which written notice must be given. For microbusinesses it can be no longer than 30 days and many contracts need none at all; larger customers can be asked for 30 to 180 days.
- Annual quantity or estimated annual consumption. The usage the price was built on. If you use far more or less, the supplier may re-price or apply tolerance charges, so hand over twelve months of real data.
- Credit terms and security deposit. Payment method, payment period and any deposit. Deposits and supplier failure covers what is negotiable.
- Early termination. Business contracts generally cannot be cancelled early without a termination fee calculated on the remaining volume. Cancelling and cooling off explains the rules.
- Change of tenancy. What happens if you leave the premises. The contract usually ends when you leave, but you must tell the supplier.
How long should a business electricity contract be?
One to five years are offered; one, two and three are the most common. A shorter term keeps you flexible and means you re-price sooner, and you re-price on whatever the market is doing at that point. A longer term gives budgeting certainty and prices the whole term against the forward curve rather than the near-term price alone; which proves cheaper over the term cannot be known in advance. The right length depends on how much certainty the business needs and where the forward curve sits when you sign; there is no answer that is always right.
Whatever the term, the supplier can price it to start on the day your current contract ends, up to around twelve months ahead. That is how you avoid buying at the day-ahead price when the renewal lands.
What rules protect businesses on electricity contracts?
Ofgem’s supply licence conditions give microbusinesses specific protections: the contract end date and notice period must appear on bills, the notice a supplier can require is capped at 30 days, suppliers must send a renewal letter around 60 days before the end date showing current and proposed prices, rollovers cannot exceed twelve months, deemed contracts cannot carry a termination fee, and any broker commission must be disclosed in the contract terms. A microbusiness has fewer than ten employees and turnover under €2 million, or uses no more than 100,000 kWh of electricity a year.
Since 19 December 2024 small businesses (fewer than 50 employees, or up to 200,000 kWh of electricity a year) also have access to the Energy Ombudsman and formal complaints standards. Since 1 October 2024 suppliers must disclose broker fees to all business customers. Ofgem’s guide to business energy contracts sets this out in full.
How do you sign a business electricity contract?
- Gather the data. A recent bill gives the MPAN, meter type, current rates, contract end date and annual consumption.
- Get like-for-like quotes. Every quote on the same start date and term, with the annual cost shown. That is what we do across the suppliers on our panel.
- Check the terms, not just the price. Standing charge, notice period, tolerance clauses, deposit, early termination.
- Agree it. Business contracts are usually agreed by signature or verbal agreement with a letter of authority if a broker is acting for you; there is no cooling-off period, so read first.
- Serve notice on the old contract inside its termination window, if one applies.
- Diary the new end date. The supplier will send a renewal letter, but the reminder should be yours too.
What a letter of authority does explains the paperwork when a broker handles it for you.
What happens when a business electricity contract ends?
If you have agreed a new contract, it starts the day after the old one ends and nothing changes at the site. If you have not, the supplier moves you to its out-of-contract rate, which is published and considerably higher than contracted prices, until a new agreement is in place. You can leave an out-of-contract arrangement at any time with no exit fee. What to do when your contract is ending walks through the timeline, and out-of-contract rates explains how to get off them.
Business electricity contract questions
How do business electricity contracts work?
A supplier prices your specific meter for a fixed term, usually one to five years, based on your consumption, meter type, region, credit profile and the wholesale market on the day. You pay a unit rate per kWh and a daily standing charge; network charges, the Climate Change Levy and VAT pass through on top. At the end of the term you either agree a new contract or move to the supplier’s out-of-contract rate.
What is the difference between a business and a domestic electricity contract?
Business contracts have no price cap, no cooling-off period, fixed terms with termination windows, VAT at 20 percent rather than 5 percent for most customers, and the Climate Change Levy. Prices are built per meter rather than published. Microbusinesses do have specific Ofgem protections on notice periods, renewal letters and commission disclosure.
Can I sign a business electricity contract online?
Yes. Most suppliers and brokers can agree a contract by e-signature once they have your MPAN, consumption and company details, and a letter of authority if a broker is acting for you. Because there is no cooling-off period on business contracts, read the terms before you sign rather than after.
What is a fixed business electricity contract?
A contract where the unit rate and standing charge are held for the whole term, so your price does not change if wholesale prices move. Most contracts also fix the non-commodity charges inside the rate, though pass-through variants let network charges move at cost.
What is the difference between fixed and variable business electricity?
Fixed holds the price for the term and usually requires notice to end. Variable can change with the market, normally with 30 days’ notice, and has no fixed term, so you can leave with notice. Fixed buys certainty; variable buys flexibility.
How long is a typical business electricity contract?
One, two or three years are most common; up to five are available. Shorter terms re-price sooner; longer terms give certainty and spread the near-term wholesale price across later forward seasons.
Do I have to give notice to end a business electricity contract?
Only if the contract says so. Microbusinesses cannot be asked for more than 30 days and many microbusiness contracts need no notice at all; larger customers can be asked for 30 to 180 days. Deemed and out-of-contract arrangements need no notice.
Why would a business use a contract rather than stay on deemed rates?
Because deemed and out-of-contract rates are published by the supplier at a level well above contracted prices, and because a contract gives you a known cost for budgeting. Moving off deemed rates is usually the single biggest saving available to a business that has never switched.
Want this priced for your meters?
Send us a recent bill and we will compare the suppliers on our panel on the same start date and term, and show you the annual cost of each option. No obligation.