Microbusiness energy: definition and protections

If you run a small firm, the energy market treats you differently from a large company. Microbusinesses get specific protections written into suppliers’ licences, and since December 2024 some of them also cover small businesses. This guide explains who counts and what the rules actually say.

What is a microbusiness for energy purposes?

For energy, a microbusiness is one that uses no more than 100,000 kWh of electricity or 293,000 kWh of gas a year, or has fewer than 10 employees (or full-time equivalent) and an annual turnover or balance sheet of no more than £2 million. You only need to meet one of the two tests.

The definition comes from the Gas and Electricity Regulated Providers (Redress Scheme) Order 2008, as amended. The consumption thresholds were raised to 100,000 kWh and 293,000 kWh in 2014, and a 2024 amendment changed the turnover limit from 2 million euros to £2 million.

Electricity and gas are assessed separately, so a business can be a microbusiness for one fuel and not the other.

	Microbusiness	Small business
Electricity use	Up to 100,000 kWh a year	Up to 200,000 kWh a year
Gas use	Up to 293,000 kWh a year	Up to 500,000 kWh a year
Or size	Fewer than 10 employees and turnover or balance sheet up to £2m	Fewer than 50 employees and turnover up to £6.5m or balance sheet up to £5m
In the rules since	2008 (thresholds last raised in 2014)	19 December 2024

A small business is one that is not a microbusiness but meets one of the small business tests.

When a supplier agrees or extends a contract, its licence says it must take all reasonable steps to find out whether you are a microbusiness, or treat you as one. It also cannot end your contract or change its terms during a fixed term just because you no longer meet the definition.

What protections do microbusinesses get?

The main rules are in standard licence condition 7A of the supply licences, strengthened by Ofgem’s Microbusiness Strategic Review in 2022. In summary:

• clear principal terms before you agree a contract, including what your broker is paid
• written terms and a renewal statement after you agree
• your contract end date on every bill
• renewal information around 60 days before your fixed term ends
• no notice needed to leave at the end of a fixed term
• rollovers limited to 12 months, with no exit fees during a rollover
• a 12-month limit on back-billing
• brokers who must belong to a dispute resolution scheme
• free access to the Energy Ombudsman

Before you agree a contract

The supplier must take all reasonable steps to tell you, in plain language, that it is seeking to enter a legally binding contract and what its principal terms are. Ofgem has said that simply sending you a link or email during a sales call is not enough: whoever is selling the contract verbally must clearly explain the principal terms before you agree.

Principal terms include the charges, contract length, renewal arrangements, exit rights and fees, and any broker costs. For microbusinesses, broker costs must be shown as money (actual or estimated) for the full contract, and as a cost per unit or per day where they are built into your rates.

There is no cooling-off period. Ofgem decided in 2022 not to introduce one, and Citizens Advice confirms you won’t get one when you switch.

After you agree

Within 10 days, or as soon as reasonably practicable after, the supplier must take all reasonable steps to send you a copy of all the contract terms and, for a fixed-term contract, a Statement of Renewal Terms. That statement shows when your fixed term ends, where to send notice, and what happens if you don’t renew or agree a new contract.

On every bill

For a fixed-term contract, each bill must prominently show the date the fixed term ends, and a statement that you can write to the supplier before then to stop it extending the contract and to end it at the end of the term.

At renewal time

On or about 60 days before your fixed term ends, unless you have already agreed a new contract, the supplier must send you:

• the Statement of Renewal Terms
• the principal terms that would apply if you do nothing
• a statement of the charges you currently pay
• your annual consumption details

At least one renewal offer must be in writing and open for you to accept at any time before the fixed term ends. See our contract renewal guide.

Leaving at the end of your contract

Since 1 October 2022, suppliers must make sure a microbusiness is not required to give any form of notice to end a fixed-term contract, or to switch supplier, from the end of the fixed term. This is subject to the supplier’s limited rights to object to a switch under condition 14 of its licence, for example where your contract contains a term that allows it.

Rollovers

If your contract has a rollover clause, the supplier can only extend it for another fixed term if:

• it sent you the contract terms and renewal information on time
• you did not write to it before the end of your fixed term to stop the extension
• the new fixed term is 12 months or less

During a rollover period, you don’t need to give notice to leave, and you can switch at any time without paying a termination fee or facing higher standing charges or unit rates for doing so.

Evergreen and out-of-contract supply

On an evergreen (rolling, no fixed term) microbusiness contract, the notice period can be no longer than 30 days and you can switch without a termination fee. If your contract has ended and the supplier keeps supplying you on out-of-contract terms, you can switch at any time, with no termination fee and no notice. Our guides on out-of-contract rates and deemed contracts cover what you pay in the meantime.

Back-billing

Suppliers can only bill a microbusiness for units used, and standing charges built up, in the 12 months before the bill or other attempt to recover the money. Ofgem introduced this rule for both electricity and gas in 2018. The main exception is where the supplier could not bill correctly because the customer behaved in an obstructive or manifestly unreasonable way.

Brokers and complaints

Since 1 December 2022, suppliers may only work with brokers on microbusiness contracts if the broker belongs to a qualifying dispute settlement scheme. Microbusinesses can also take unresolved complaints about suppliers to the Energy Ombudsman for free. See our guides to energy brokers and business energy complaints.

Which protections were extended to small businesses in December 2024?

From 19 December 2024, small businesses gained four protections that were previously only for microbusinesses and households:

1. The Energy Ombudsman. Small businesses can take unresolved supplier complaints to the Ombudsman for free.
2. Complaints handling standards. The Gas and Electricity (Consumer Complaints Handling Standards) Regulations 2008 now cover small businesses, so suppliers must handle their complaints properly and point them to the Ombudsman.
3. Broker dispute resolution. Suppliers may only work with brokers on small business contracts if the broker is in a qualifying dispute settlement scheme.
4. Citizens Advice signposting. Suppliers must tell small business customers, at least once a year, that Citizens Advice can help and how to contact Citizens Advice and Citizens Advice Scotland.

Earlier in 2024, two changes also reached businesses of every size:

• From 1 July 2024, Ofgem’s Standards of Conduct apply to all non-domestic customers, so suppliers must treat every business customer fairly.
• For contracts signed on or after 1 October 2024, principal terms must clearly show any broker fees, for all non-domestic customers.

The contract rules in condition 7A (renewal letters, no-notice exits and the 12-month rollover limit) and the back-billing limit are written for microbusinesses. If you are a small business but not a microbusiness, check your own contract terms for notice periods and renewal dates.

How do you check whether you are a microbusiness?

• Find your annual usage. Add up a year of bills, or use the annual consumption details your supplier must send with its renewal information. Compare electricity against 100,000 kWh and gas against 293,000 kWh.
• Check your size. Count employees (or full-time equivalent) and look at your latest turnover and balance sheet figures.
• Tell your supplier or broker. If you think you qualify and are being treated as a larger business, say so in writing. The supplier has to take reasonable steps to identify microbusinesses.

If you disagree with how your supplier has treated you, our complaints guide explains the 8-week rule and how to reach the Energy Ombudsman.

Frequently asked questions