Commercial energy debt

 March 2019

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.

 

Deemed contract

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. Ofgem, the energy regulator, advises that deemed contracts are on average 80% more expensive than negotiated contracts.

If you are a business customer using energy on a deemed contract, the supplier cannot:

  • prevent you from switching to another supplier, for any reason or at any time, (ie they cannot object to you transferring for reasons of debt or contract); or
  • require you to give notice before terminating the contract or charge you a termination fee.
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

From 1 November 2018, a change to the Standard Licence Conditions for gas and electricity suppliers means that energy suppliers to micro-businesses should not back bill for energy used more than 12 months previously. The exception to this is where consumers actively prevent suppliers from taking or receiving accurate meter readings; for example, by tampering with a meter or obstructing access to the meter.

If you cannot resolve a complaint with your energy supplier about back billing and you are a sole micro-business, you can contact Citizens Advice consumer service for help. See the Useful contacts section for details.

If you have received your supplier’s final response to your complaint and you are not happy, or the complaint has not been resolved within 8 weeks, you can escalate the matter to Ombudsman Services: Energy. See the Useful contacts section for details.

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 sample letter.

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.

Business energy funds and other help

Both BES Utilities and E.ON have funds that can help certain business customers.

  • You can apply to the BES Energy Fund if you are a current business account holder of BES Utilities, have been a customer for over 12 months and you are finding it difficult to pay for your energy bills. You will need to have received debt advice from us and completed Your budget before you complete the application form.
  • The E.ON Sustainable Business Fund helps E.ON small and medium business customers who are struggling to pay their bills to remain financially sustainable. You will need to speak to E.ON's SME Customer Services Team on 0345 301 5898 first, as they make the decision to refer you for help.

These funds are administered by Charis Grants from their Let's Talk website. Go to the website and click on the ‘Business Energy Debt’ link to get more information on either fund. See the Useful contacts section for details.

British Gas provides support to its business users through its Expert Credit Solutions team. Go to the British Gas website’s Financial difficulty page for more details about the help it can provide. See the Useful contacts section for details.

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.

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.

Your contract will often state that the supplier only has to give 7 days’ notice before they disconnect you. However, before it gets to this stage, you will usually receive several letters or phone calls from them.

Information:

disconnection

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

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. If permission is given, it will last for up to 28 days from the date it was granted. 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.

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 8 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.

Energy efficiency

If you haven’t done so already, acting to make your business more energy-efficient will save you money and keep your running costs as low as possible. We can help you to think this through for your business.

Heating and lighting are areas for all businesses to look at; but you might also have a particular energy cost, such as refrigeration or information technology (IT) that could benefit from an energy audit.

Saving energy in your business

Take a walk around your business and see how energy is being used, perhaps at different times of the day and night, when energy consumption will be different. Use a checklist that covers heating, lighting, IT hardware and specific high-consumption items in your business. You could repeat this each quarter to see if you need to have different approaches to energy consumption over the year.

Heating and lighting

Heating and lighting account for up to 60% of energy costs.

  • A 1 degree drop in average space temperature can save 8% on heating energy consumption.
  • Do staff turn out lights when they are not in use? It might be worth exploring whether combining your lighting in particular areas with a motion detector would help to cut down on unnecessary energy consumption and be worth the investment.
  • Consider what types of bulb you use. If you have the older (T12) type of fluorescent bulb, you could replace them with the newer (T5) version. Would a compact bulb work just as well, if it would save money in the longer term? LED bulbs are more efficient – would it be worth replacing existing bulbs with their LED equivalent?
  • How much equipment is using energy on standby? Would it be better to set the appliances on an energy-saving regime, shutting them down when they are not in use, especially overnight.

Meters

It’s a good idea to read your meter regularly, if it’s not a smart meter, so that you get a better understanding of when and how you use energy. Consider taking meter readings every week for a specific period and monitor usage against this. Make sure you provide your meter reading to your energy supplier to ensure accurate bills.

Smart meters give you information about your usage automatically, without you having to read them. You can get accurate bills automatically, see how your usage changes over time and not pay for energy that you have not used. A smart meter might help you to see where you need to make adjustments to reduce your energy costs. Gas and electricity suppliers are required by their licence to take all reasonable steps to roll out smart meters to all of their small business customers by the end of 2020. Smart meters can be set up to operate so that they communicate directly with the energy supplier. If this is the case, the supplier is able to disconnect the supply without needing access to the actual meter, if you cannot pay your energy bill. If you are interested in having a smart meter fitted, contact your energy supplier for more details.

Tariffs

Make sure you know the terms of your current contract. For example, how long before your existing contract ends can you tell your supplier that you want to switch? Many contracts will only allow you to do this at certain times.

Shop around, starting with your current supplier’s best future offer. When you talk to a competing supplier, ask them to explain the terms and conditions of their deal so you can make sure you fully understand them before you sign up. Some tariffs have a cheaper rate at “off peak” times. Consider using more energy at these times if that is an option for you.

Most business deals do not offer a cooling off period (this is the option of cancelling a contract within a certain amount of days after it is agreed). This includes when you have agreed to the contract over the telephone. So be sure that you are fully happy with all the terms and conditions before you agree to it.

Make sure you have a negotiated tariff that gives you the best deal before your current contract ends, otherwise you will be switched to a deemed rate which is much more expensive.

Refrigeration

Cooling down spaces uses high amounts of energy. Are you making the best use of it?

  • Make sure seals are intact and fit properly.
  • Don’t overstock refrigerators as this can restrict airflow.
  • Consider draw down blinds to prevent cold air escaping.
  • Consider isolating goods and fitting  devices to switch the refrigeration off at night where appropriate.
  • Consider a 1 degree increase in the cool down temperature setting (but only when it is food safe to do so). This can reduce energy consumption by 2% to 4%.

Further steps you can take

Many suppliers will actually arrange for an ‘energy audit’. This might be done over the phone and usually won’t cost you anything. A deeper audit would be done by a visiting adviser who conducts a review of the business leading to advice and options. A site visit would normally be charged. Check out from the company what they would charge you before you agree to a visit. Check with your supplier to see if they offer this service. See npower’s website page Cost-cutting advice or E.ON’s website page Business energy advice for ideas of how to cut energy costs in different types of business.

Financial support

You may be able to get financial support for energy efficiency improvement work.

  • The Carbon Trust Green Business Fund is the energy efficiency support service for small and medium-sized companies in England, Wales and Scotland. It provides direct funded support through energy assessments, training workshops, equipment procurement support and up to £5,000 capital contribution towards your energy saving equipment purchase.
  • In Wales, through the Carbon Trust you may be eligible for an interest-free energy efficiency loan for new energy efficiency and renewable energy projects with interest-free loans of between £3,000 and £200,000. They are designed so that, in most cases, the monthly energy savings should exceed the monthly repayments.
  • In Scotland you may be able to get an interest-free SME Loan from the Scottish Government’s SME Loan Fund which gives unsecured loans from £1,000 up to £100,000 for the installation of energy efficient measures such as lighting and heating upgrades, double glazing, insulation and other items.
  • Claim Enhanced Capital Allowances. You may be able to offset expenses for items such as water heating systems, air conditioning, hot and cold water systems, lighting systems, items that you keep to use in your business. If you need more advice, contact your accountant.

Saving energy in your home

Heating and lighting

Make sure your boiler is regularly serviced and energy efficient. The most efficient will be labelled Band A or B. An efficient boiler can save up to 35% on your energy bills. Look for the ‘Energy Saving Trust – Endorsed Product’ logo.

  • Check the settings on your central heating and hot water programmer. Does heating and hot water only turn on when it is needed? Can you set the thermostat to give you heating when you need it and not when you don’t? Do you need to heat every room in your home? Can you heat only the rooms you use?
  • Check for deals or offers to update your boiler and central heating system. Start by asking your energy supplier if they can give you any deals.
  • Make sure your home is draft proofed and insulated; grants may be available to assist with this. The Simple Energy Advice website has helpful information. If you cannot use the internet, contact on 0800 444 202. GOV.UK has a calculator which tells you what help you can get with energy grants and heating costs. The Energy Saving Trust has additional information.
  • In Wales, you can also apply for free energy grants and help through the Nest scheme. Contact Nest on 0808 808 2244 or use a call back request form on their website. See the Useful contacts section for details.
  • In Scotland, you may be able to apply for other grants, depending on the benefits you receive and your age. Contact Home Energy Scotland on 0808 808 2282 or use a callback request form on their website.
  • Consider LED bulbs as these are far more efficient than other types of bulbs.

Around the home

Cooking and washing contribute a considerable amount to your energy bills. See if you can get into useful habits that will keep your costs down.

  • Only fill the kettle with the amount you water you need.
  • Using a microwave can be more energy efficient than using the cooker for some meals; but always check the label for cooking instructions, as not all food is microwaveable.
  • Run your washing machine on full loads and energy-saving programmes
  • If your shower takes water from your boiler or hot water tank consider fitting a water-efficient shower head.
  • The Consumer Council for Water website page Using water wisely may give you ideas about how to reduce the amount of water you use. Contact your water supplier to see what free help they can offer too. 

Useful contacts

British Gas
Phone: 0800 980 7543
Email: timetopay@britishgas.co.uk
www.britishgas.co.uk

Carbon Trust
Phone: 020 3944 0029
Email: info@carbontrust.com
www.carbontrust.com

Charis Grants - Let's Talk
www.lets-talk.online

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

Energy Saving Trust - Business
Phone: 020 7222 0101
Email: business@est.org.uk
www.energysavingtrust.org.uk

Energy Saving Trust - Domestic
Phone: 020 7222 0101 (England)
Phone: 0808 808 2282 (Scotland)
Phone: 0292 046 8340 (Wales)
Email: business@est.org.uk
www.energysavingtrust.org.uk

Nest
Phone: 0808 808 2244
Email: advicewales@est.org.uk
www.nest.gov.wales

Ofgem
Phone: 020 7901 7000
www.ofgem.gov.uk

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

Simple Energy Advice
Phone: 0800 444 202
www.simpleenergyadvice.org.uk