Business energy contract terms: what to check before you sign

A business energy contract usually comes as a short price summary plus a longer set of terms and conditions. The prices get all the attention, but the terms decide what happens when your usage changes, you pay late, you move or you want to leave early. This guide goes through the clauses worth checking, with examples from suppliers’ own published terms.

What should you check in a business energy contract?

Check which charges are fixed, the annual usage the price is based on, the payment and deposit terms, the notice and renewal rules, and how an exit fee is worked out. Business energy contracts have no cooling-off period, so do this before you agree, not after.

Use this as a checklist when a quote or contract arrives:

Term	What to look for	Why it matters
Customer and sites	Your business’s legal name, every site address and its MPAN or MPRN	The contract binds that business at those sites
Dates	Start date, end date and length of the fixed term	Sets when you can leave without an exit fee
Charges	Unit rates, standing charges, and which costs are fixed	Some costs can still be passed through
Estimated usage	The annual consumption the price assumes	Usage far above or below it can bring extra charges
Payment	Method, due date, late payment interest and fees	Paying outside the agreed method can cost more
Security	Deposit, guarantee and credit check terms	A deposit can be asked for at the start or later
Renewal and notice	What happens at the end and how much notice you must give	Missing a notice window can roll you onto new terms
Exit fees	How early termination is charged	Can be large on a long fixed term
Moving, selling, closing	Notice you must give and whether the contract can be transferred	You can stay liable after you leave
Broker fees	The fee shown in the principal terms	Paid through your energy charges
Taxes	VAT and Climate Change Levy treatment	The wrong rate means you pay the wrong amount

The rest of this guide explains each one.

What must a supplier tell you before you agree?

Every business customer is covered by Ofgem’s Standards of Conduct, and microbusinesses get extra rules on how the terms must be presented.

Since 1 July 2024, the Standards of Conduct in the supply licence apply to all non-domestic customers. Among other things, the supplier must give you information that:

• is complete, accurate and not misleading
• is in plain and intelligible language, with more important information given appropriate prominence
• does not create a material imbalance in rights and obligations in the supplier’s favour

If you are a microbusiness, the licence goes further:

• Before you agree, the supplier (or the broker selling for it) must tell you it is seeking a legally binding contract and bring the principal terms to your attention, in plain language.
• All the express terms must be in writing and in plain language.
• Within 10 days of agreeing, the supplier must take all reasonable steps to send you a copy of all the terms and, for a fixed contract, a statement of renewal terms showing the end date and how to stop it renewing.

What counts as a principal term?

The licence defines principal terms as the terms about:

1. the charges
2. any requirement to pay through a prepayment meter
3. any requirement for a security deposit
4. the length of the contract, including how it renews or extends
5. your rights to end it, including any termination fee
6. any other term that could significantly affect your view of the deal, including third party costs such as broker fees

For contracts agreed from 1 October 2024, suppliers must show broker fees clearly in the principal terms for every non-domestic customer, whatever its size. Our energy brokers guide explains how those fees work.

There is no cooling-off period. Ofgem says this applies even when you agree the contract over the phone. If a broker is selling to you, Ofgem advises making sure it will send the offer and terms before you agree.

Which charges are fixed, and which can change?

A fixed contract usually fixes your unit rates and standing charges, but the terms often list situations where the supplier can still change them or pass on extra costs. The price variation clause is the one to read slowly.

Examples from published terms:

• Octopus Energy for Business (terms v2.0) says it will not change your charges while they are fixed. The same terms then list situations where it may vary charges or pass through higher costs, including where information you gave was incorrect or incomplete, where your supply summary says a charge is passed through, and where third party charges change because of a change in law or industry rules. It also passes on costs such as reactive energy or excess capacity charges from the network operator.
• TruEnergy (terms v2.7) has a very similar list: incorrect or incomplete information, charges marked as pass-through in your contract, and changes in third party charges caused by a change in law or industry rules.
• Both sets of terms also include a general right to vary charges on 30 calendar days’ notice. If the supplier uses it, you can end the contract on 30 days’ notice, even if your contract’s notice period is longer.
• Good Energy (small business terms, December 2024) lists its charges as a standing charge, a unit rate, any pass-through charges levied by third parties (set out in your quote summary) and a charge if your usage breaks a tolerance band.

When you compare quotes, ask whether each one is fully fixed or has pass-through elements. A lower headline rate with pass-through costs is not the same deal as a fully fixed one. Our guide to unit rates and standing charges explains the two main parts of the price, and the quote comparison calculator helps you compare them side by side.

What usage does the price assume?

Your price is based on an estimate of how much energy you will use, and some contracts charge extra if you use far more or far less. Check the estimated annual consumption on the quote matches your bills.

Some terms include a tolerance band around that estimate. Good Energy’s terms set upper and lower limits around each month’s estimated volume. SSE Energy Solutions’ gas terms, for sites with a nominated annual consumption of 732,000 kWh or more, commit you to taking at least 70% of it, and let SSE charge for the shortfall if you do not.

If you have a half-hourly meter, some terms also let the supplier vary charges where a planned change to your supply is forecast to change your expected consumption, or your consumption profile, over the next 12 months by more than a set amount. That threshold is 20% in TruEnergy’s terms and 25% in Octopus’s.

Our volume tolerance guide explains these clauses with a worked example.

What are the payment and credit terms?

Check how you must pay, when, and what it costs if you pay late. Terms vary more than most people expect.

• Payment method. Octopus’s terms say you pay by Direct Debit or another method agreed. TruEnergy’s say bank transfer or Direct Debit.
• Late payment. Octopus charges interest at Bank of England base rate plus 4% on sums unpaid 30 days after you receive the invoice. TruEnergy charges the greater of a £50 late payment fee per address or interest at base rate plus 8%.
• Security. Both suppliers’ terms let them ask for a deposit or other security if your credit rating worsens or your account falls overdue, to be provided within seven calendar days. TruEnergy’s terms set this at its estimate of three months’ supply. Neither pays interest on cash deposits.

Ofgem’s good practice guidance says a security deposit should not exceed a reasonable amount. See our guides to paying business energy bills and credit checks and deposits.

How does the contract end or renew?

Check the end date, what happens if you do nothing, and how much notice you must give. This is where many businesses get caught.

For microbusinesses, the licence requires the supplier to:

• show the fixed-term end date on every bill
• send renewal information around 60 days before the end, including the charges that apply now and what happens if you do nothing

Ofgem says microbusinesses cannot be rolled over onto a contract for more than 12 months.

Other businesses depend more on the contract wording:

• TruEnergy asks for at least 30 days’ notice to end the agreement. Without it, you may be charged its business deemed tariff or rolled onto a 12-month contract.
• Octopus sets the notice period in the supply summary. If no renewal is agreed by the end date, your supply moves to its standard variable tariff as a deemed contract.

Our contract renewal guide and out-of-contract rates guide cover what happens next.

What does it cost to leave early?

Usually an exit fee, and the formula matters more than any headline figure. TruEnergy’s terms, for example, charge the greatest of the estimated value of the rest of the contract, the losses from unwinding energy it bought for you, or any exit fee in the contract, plus a £100 administrative termination charge per supply point.

Ask for the exit fee in writing before you rely on leaving early. Our guide to cancelling a business energy contract explains when you can leave without a fee.

What happens if you move, sell or close the business?

You normally stay liable until someone else takes over the supply, and you usually cannot hand the contract to someone else without the supplier’s consent.

• Octopus and TruEnergy both ask for as much notice as possible, and at least 45 days, when you stop being the owner or occupier of a site, with your new address and the new occupier’s details.
• Both say you remain liable for charges until a new owner or occupier takes responsibility, or the supply is permanently isolated.
• Neither lets you transfer the contract without its prior written consent.

See energy contracts when buying or selling a business, energy bills when a business closes and our change of tenancy guide.

Can your supplier stop you switching?

Only in limited cases. For business customers, the supply licence lets a supplier object to a switch where your contract contains a term allowing it in the circumstances, or where you tell it you did not agree a contract with the new supplier. If it objects, it must tell you, give the grounds and explain how to resolve them.

TruEnergy’s terms, for example, allow an objection if you try to switch before the end date, or if you have overdue invoices that are not in dispute.

What if your business grows or shrinks during the contract?

A microbusiness contract cannot be ended or changed during the fixed term just because you stop being a microbusiness. The licence bans terms that allow this.

A change in size can still matter through your usage. If your consumption moves outside a tolerance band, that clause can apply whatever your business size.

What should you do before you sign?

1. Ask for the full terms and the quote summary in writing, not just the prices.
2. Work through the checklist at the top of this page.
3. Put questions in writing and keep the answers, especially on pass-through costs, tolerance bands and exit fees.
4. Check the taxes. Make sure the right VAT rate and Climate Change Levy treatment will apply.
5. Compare like with like. When you compare business energy quotes with us, ask for the terms behind each price so you can check them the same way.

Frequently asked questions