Commercial energy debt

 January 2016

Fact sheet no. BDL50 EWS Commercial energy debt

Important

priority debts

Commercial gas and electricity arrears are priority debts because the suppliers have the power to disconnect your supply if you do not pay. They do not need to apply to court to do this. However, they do need to go to court if they intend to break into your commercial property.

This fact sheet tells you how to deal with gas and electricity debt at commercial premises, such as shops, warehouses and factories. Most of the debt advice in this fact sheet only applies to micro-businesses. See the next section to work out if it applies to you.

Use this fact sheet to:

  • help you sort out common problems with commercial energy accounts;
  • deal with energy arrears; and
  • help you to negotiate with your suppliers.

The sample letters mentioned in this fact sheet can be filled in on our website. This fact sheet also includes some useful contacts and links for you to get further debt help.

What is a micro-business?

Information

micro-business

A business only has to meet one of these criteria to be a micro-business. If you are unsure how to check whether your business meets any of these criteria, contact us for advice.

Ofgem is the regulator for gas and electricity suppliers. Ofgem says that a micro-business is a business that:

  • has less than the equivalent of ten full-time employees and an annual turnover (total business takings) of no more than €2 million (two million euros); or
  • uses no more than 100,000 kWh of electricity each year; or
  • uses no more than 293,000 kWh of gas each year.

Supply and renewal

Gas and electricity suppliers usually buy their energy in advance and then sell it to business users under a contract. You will normally be tied into a contract that says how long the energy will be supplied for and how much it will cost. Many suppliers will agree contracts on the phone. Once a fixed price contract is agreed, the supplier must send a copy of all terms and conditions of the contract within 10 days. They must also send information on future renewals (including how to prevent automatic renewals) within 10 days.

When the contract ends, you will still be supplied with energy, but it will normally cost more. This process is called automatic renewal. Suppliers must contact you in writing, or by email, at least 60 days before your contract is due to end. They must explain what you need to do to prevent automatic renewal, and the terms that will apply if you do not renegotiate a new contract. Suppliers must include the current prices, new prices and annual consumption on renewal letters for fixed-term contracts to make comparisons between suppliers easier.

For contracts starting from 30 April 2015, the maximum notice period for terminating a contract is 30 days.  But if your micro-business contract began before 30 April 2015 your supplier can still require up to 90 days' notice of termination.

Extra advice:

new contract

Check your bills regularly. You could negotiate a new contract with your supplier when your current contract comes to an end. You can contact the supplier by phone, but you should always get a written copy of the contract.

Important:

higher energy costs

If you do not re-negotiate with your supplier when your contract ends, you could automatically be tied into another contract. This could be for a maximum of one year at higher prices. If you don’t want your contract to be automatically renewed for another fixed-term, you can
send notice to your supplier from the first day of the contract. Contact us for advice.

 

If you take over a business from someone else, contact the utility supplier to negotiate a new contract. Otherwise, you may find that you have a ‘deemed contract’. This will usually mean that your gas and electricity will be expensive.

You may want to shop around to find the best energy deal for you and your business. You can use the website www.uswitchforbusiness.com to help you do this. If you want more than one estimate, you could use any of the switching sites which have Ofgem's Confidence Code. Get more information about the Confidence Code on Ofgem's website, www.ofgem.gov.uk.

Meter reading

Commercial suppliers should try to read your meter at least once every year. It is a good idea to read your meters regularly yourself and give the readings to your supplier. This means that you will only be billed for the energy you use, rather than getting estimated bills. It is especially important to read the meters when you start trading, and also when you cease trading.

Back billing

If your meter has not been read for a certain period of time, you may receive a ‘back bill’ for energy you have previously used but not yet paid for. This frequently happens when your previous bills were estimated, and the actual readings show that you used more fuel than was estimated. As long as you have done all you reasonably can to keep your supplier informed, you should not be back billed for more than three years for an electricity bill and four years for a gas bill. This may still mean you have a large bill, which will be treated as arrears if you cannot pay the whole amount at once.

Most suppliers have agreed to follow a set of voluntary guidelines when dealing with back billing. The guidelines describe:

  • your responsibilities as a consumer; and
  • the supplier’s commitments about how they will deal with the bill and your ability to repay.

Suppliers should take all circumstances into account when dealing with this, including what you have done to try to prevent a back bill and arranging to repay the debt. To view a copy of the guidelines, see www.energy-uk.org.uk. Contact us for advice.

Arrears

Important:

insolvency protection

If your business becomes insolvent, your supply of gas and electricity may be protected once your official receiver or insolvency practitioner has agreed that you can ask for the supply to be continued. Contact us for advice.

If your business enters administration or a voluntary arrangement is approved for either yourself as an individual or your business, your supplier may not be able to use an insolvency-related term in the contract to end your supply. Contact us for advice.

If you find that you cannot pay your bill, or you have arrears, contact your supplier as soon as you can. Ask if they have a special department that deals with arrears and arrangements to repay. Explain your circumstances fully and the reasons why you cannot pay. If you find the person you speak to unhelpful, ask to speak to a manager. If you need to write to your supplier, see our sample letter Ask your commercial energy supplier to accept affordable payments towards your arrears sample letter.

Information:

disconnection

Your supplier does not have to offer you a pre-payment meter before disconnecting your fuel.

Most suppliers will try to give you time to pay what you owe. However, you will need to show that you can pay for your ongoing fuel plus something towards the arrears. The supplier will normally look at your payment history when deciding what repayments they will accept.

If your circumstances change and you need to adjust payments on your arrangement, you may need to write to your supplier.  See our sample letter Re-negotiate with your commercial energy supplier if your current repayment arrangement is unaffordable sample letter.

Our self-help pack includes further information on types of debt, guidance on completing a budget and how to negotiate with creditors. Contact us for a copy on 0800 197 6026.

Your contract will often state that the supplier only has to give days’ notice before they disconnect you. However, before it gets to this stage, you will usually receive several letters or phone calls from them.

Remember:

contact your supplier

If you are struggling to pay your bill, speak to your supplier as soon as you can and contact us for advice.

The Citizens Advice Extra Help Unit may be able to help you if you are threatened with disconnection. You cannot contact them directly. You need to speak to the Citizens Advice consumer service first and ask to be transferred to the Extra Help Unit. See Useful contacts at the end of this fact sheet.

The supplier will need to get a warrant from the magistrates' court (England and Wales) or sheriff court (Scotland), giving them permission to break in to your premises (if necessary) to disconnect the supply. You should always receive a letter notifying you of the date, time and location of the hearing. It is always a good idea to attend the hearing and explain what you are trying to do to resolve the issue. The court has the power to delay disconnection while further investigation takes place.

Living at the premises

It is very important to check what type of supply contract you have. If you have a residential supply contract, your supplier needs to follow Standard Licence Condition 12 and offer you a pre-payment meter before disconnecting you. If you agree to have this type of meter installed, they cannot disconnect your supply.

Information:

vulnerable customer

An example of a situation where you may be classed as vulnerable is if you run a shop and live in the flat above. If there is not a separate fuel supply for your personal use, you may have a commercial supply for the whole premises. If you fall behind with your commercial fuel bill, you risk your home supply being cut off. In this case, you could contact your supplier and ask them to treat you as vulnerable.

Our self-help pack includes further information about residential energy supplies. Contact us for a copy on 0800 197 6026.

However, if you have a commercial supply contract, you have less protection. Your supplier does not have to follow the rules that apply to residential supplies before disconnecting you. If you are in arrears, tell the supplier that you live at the premises. Ask them to treat you as a vulnerable customer. They may be prepared to do this in certain circumstances.

If you are trading from home, it could be that you have a residential supply. If this is the case, your rights will be different. Contact us for advice.

Remember:

contact us for advice

If you are being threatened with disconnection in any situation, contact us for advice.

If:

  • you do not live at your business premises;
  • your fuel supplier is the same at both your home and business address; and
  • your supplier threatens to disconnect you at one address for arrears at the other;

contact us for advice.

Making a complaint

If you are unhappy about the way your supplier has dealt with you, the first step is to complain to them in writing. Ask for a copy of their complaints procedure.

You can ask the Citizens Advice consumer service for help and support with this process. They will refer all clients they identify as being vulnerable, threatened with disconnection or been disconnected to their Extra Help Unit . They have the power to investigate any complaint about actual or threatened disconnection, and complaints from vulnerable clients.

If you are unhappy with the response from your supplier, or the problem has not been sorted out after eight weeks from when you made your complaint, you can take your complaint to Ombudsman Services: Energy. This is an independent organisation which will investigate your complaint and make recommendations about what should be done to put things right. See the next section Useful contacts for contact details.

Useful contacts

Citizens Advice consumer service
Phone: 0345 404 0506
www.citizensadvice.org.uk

Energy UK
Phone: 020 7930 9390
www.energy-uk.org.uk

Ofgem
Phone: 020 7901 7295
www.ofgem.gov.uk

Ombudsman Services: Energy
PO Box 966
Warrington
WA4 9DF
Phone: 0330 440 1624
www.ombudsman-services.org/energy