A lot of micro-businesses have been thriving hard the past few months – even during the wrath of COVID-19. According to the UK Government, the population for private sector businesses have increased to a total of 1.9%. There are currently at least 5.7 million businesses in the UK, 96% of which are micro businesses that employ 0 – 9 people.
Small businesses aren’t that much different from micro businesses, but in terms of energy being supplied – there is a certain significance.
If you are currently an owner of a micro business, then you probably know how vital tight budgeting is – that means lowering your utility costs and prioritising business essentials. However, there’s a pretty good chance that you’re paying more than you actually should for your gas and electricity.
According to an investigation that was undergone by the Office of Gas and Electricity Markets (Ofgem), engaging in the energy market has been one of micro-businesses’ weaknesses. With that being said, the government regulator has decided to protect micro-businesses from rip-offs by putting a series of regulatory reforms in place, which have made switching suppliers much easier for micro businesses. Additionally, micro-businesses have gained additional protection for common issues concerning contracting, billing, and other complaints.
Am I Classified As A Micro Business?
According to Ofgem, you are classified as a micro-business if you meet the following criteria:
- Consume less than 200,000 kWh of gas a year, or
- Consume less than 55,000 kWh of electricity a year, or
- Have less than ten employees (or their full-time equivalent) and a turnover of less than or an annual balance sheet total not exceeding € 2 million.
You can check your energy bills to find out how much energy your business consumes; we’ve dissected energy bills in the UK to make it easier for consumers to understand how their energy is priced, find the information they are looking for, and determine if they’ve been overpaying their bills.
There will be some cases wherein a supplier might not agree re: your classification as a micro business. If you find yourself in this situation, you are free to collate any supporting evidence that you know will qualify your business under the conditions of a micro business using the criteria provided by Ofgem. Send the evidence to your supplier and it will surely be settled.
What Makes Micro business Energy Contracts Different?
Energy contracts for Micro businesses are a lot simpler.
One underlying difference between micro business energy contracts and other business energy contracts is that you can easily inform your energy supplier at any point whenever you feel like switching to a different supplier; whereas SMEs have to wait for the Switching Window or Notice Period before informing their suppliers about their plans on switching.
In 2014, Ofgem brought in a new rule which obliges energy suppliers to provide clear details and show their customers (especially those that are on fixed-term contracts) when their contracts begin and end, including notice periods. This has made it a whole lot easier to ascertain when you should switch and avoid costly traps such as rollover contracts and pricy default plans.
Relying on estimated meter readings can eventually lead to huge energy bills. However, Ofgem has recently released a set of guidelines that states energy providers are NOT ALLOWED to backdate bills that exceed 12 months. Even with this at hand, it’s always a good habit to provide accurate readings to avoid under or overpaying. You might also want to consider going for a Smart Meter to lessen the risk – this type of meter is definitely a must-have for small and micro-businesses.
What Are The Benefits of Micro Business Energy Contracts?
Ofgem regulation 7A
The intent of The Standard License Condition 7A (SLC 71) is to govern a contractual relationship between Micro business consumers and business/non-domestic electricity and gas suppliers. Yes, that means these energy firms MUST abide by its controls.
Under this regulation lies four key sections:
1) Provide Contract Clairifaction – Business energy suppliers are mandated to ensure that their customers UNDERSTAND their contract. The few steps they must take include providing their customers with clarity and clear information regarding the contract duration, price, and exit terms.
2. Remind SMEs about Contract Renewal Deadline to prevent roll-overs – Electricity and gas providers must inform their customers at least 30 days before their contract reaches its contract renewal deadline. On top of that, they MUST provide their customers with clear terms and conditions of the renewed contract. Note: Larger companies should remember the terms and when their contract is set to renew by themselves. Otherwise, they will have to directly contact the supplier as they will not be reminded 30 days prior unlike small businesses.
3) Prevention of changing contract terms – Fortunately, the UK energy regulator have taken extra measures to prevent business energy suppliers from changing contract terms if they BELIEVE that you are no longer classified as a micro business. Whether or not your company grows during the duration of the contract – they must respect the fixed-term contract that you have been offered initially.
4) Use of intelligible language – Just like in most industries, a lot of companies just love to confuse their prospects and clients with flowery language and confusing jargon. However, energy suppliers are required by Ofgem to communicate with micro businesses in plain, intelligible language when sending information and answering queries.
It’s quite a common mistake for suppliers to incorrectly estimate and charge customers for their energy – when this happens and they notice that you’ve underpaid your energy bill, you will be “back-billed” for this payment. In some scenarios, companies and small businesses have found themselves paying for years of incorrect billing – which oftentimes amounted to more than £100,000.
Luckily, The UK regulator Ofgem have empathised with domestic and micro-business consumers, and that they shouldn’t be met with such burden. As such, energy companies are only allowed to back bill micro businesses for the previous 12 months ONLY. They cannot go greater than that. Otherwise, they must write off any bills that exceed 12 months.
The Energy Ombudsman’s job is to investigate complaints that are filed against energy suppliers in the UK. This is a free service and an independent scheme for household and micro business consumers. Should there be any disputes to resolve, the aforementioned consumers can settle these for free with the aid of the ombudsman – who, by the way – has the power to push suppliers to take action such as correcting billing errors, apologising, refunding, and explaining the issue/scenario. Whatever the ombudsman’s decision is, cannot be disputed by the supplier whatsoever.
Lower VAT Rate
Large businesses pay 20% of VAT for electricity and gas, while domestic consumers, on the other hand, are only charged 5%.
If your business consumes less than 145kWh of gas and/or 33kWh of electricity a day, then you are eligible to pay only 5% of VAT which can be reduced by your supplier.
I Run My Business From Home, Do I Qualify For A Business Tariff?
…But Domestic Energy has better Cancellation Terms
Let’s say 50% of your energy goes to business (in which you are running from home), then you are more than qualified to swapping your household energy tariff for a business energy one. This is presumably a smart idea since energy prices for businesses are often cheaper than domestic use.
Ready to make the switch? BetterBusinessQuotes is more than willing to help you find the best, cheapest, business energy deals that are available in your area. Just pop your postcode in our Free Business Energy Comparison Tool which can be found on top of this page.
Should you have any questions, feel free to give us a call at +1 647 697 2525 so we can figure something out together.