Is business energy cheaper than domestic energy?

Domestic and business energy tariffs aren't the same – although the unit measurements are identical, the actual plans themselves are very different in both cost and contract details.

And while changing suppliers for your home energy is relatively simple, comparing the best business gas suppliers and commercial electricity providers for your business can be more confusing and time consuming.

But the energy experts here at UKPower make the hard work easy and get you a great business energy deal in the process.

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"Don't switch" is good advice for households. But business energy is different and there's no price cap to protect you*. "Compare now" is good advice for businesses!

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*with no price cap in place for businesses, some out of contract rates are up between 15% and 120%

Why is business energy more expensive?

If you work from home and you’re considering a business energy deal, you might be wondering are business or domestic energy tariffs cheaper?

Although business energy bills often appear more expensive than domestic ones, business energy rates are actually often cheaper than household rates.

But most businesses will pay VAT at a rate of 20% on business gas and electricity, compared to the 5% rate paid by domestic energy customers and this, along with additional costs like the Climate Change Levy, can push up costs.

If you run a charity or not-for-profit organisation you may qualify for a reduced VAT rate of 5%.

Similarly, your businesses will be able to pay a reduced rate of 5% if it uses less than 33 kilowatt hours of electricity or less than 145kw hours of gas per day. This is known as the 'de minimis' amount.

That’s why it pays to speak to our energy experts, as they can make sure your business is on the right deal and paying the correct rates and charges.

For more information, check out our guide to business energy bills.

How is business energy different from domestic energy?

Here are just some of the ways that business suppliers differ from domestic suppliers:

  • Cheaper energy - Suppliers buy commercial energy in bulk to last throughout the duration of the contract, whereas home gas suppliers will buy it on a monthly basis. This means that the supplier gets business energy at a better rate, and passes this rate on to the commercial sector. Additional charges such as VAT and the Climate Change Levy can increase costs quite significantly, however.
  • Longer contracts – Most businesses take out their energy contracts across a long period of time - often around 5 years. This means a few things. Firstly, the price they get given is better because the supplier can bulk buy the energy. On the other hand, though, it means that it’s almost impossible for a commercial customer to leave that contract early. They will have to wait until the cancellation period, which is usually 6 months before the contract end-date. And because of this, businesses won’t regularly be able to find better deals. Domestic gas suppliers, for example may only contract you for 12 months, three of which are cancellation windows.
  • No dual fuel – Energy suppliers don’t offer dual fuel contracts for businesses. Commercial customers have to have seperate gas and electricity contracts, making securing deals that much more time consuming. This can be a bit of a headache, especially if each utility contract has a separate end date. This is where a company like UKPower can help take the pain away from power.
  • No ‘off-the-shelf’ tariffs – Each business has different energy demands, and so suppliers don’t offer businesses the same off-the-shelf tariffs they offer domestic customers. Instead, they assess the needs of each business on a case-by-case basis and offer a bespoke quote accordingly. Whilst this is ideal because it suits your needs specifically, it also makes it difficult to know whether you’ve been offered the most competitive rates unless you compare energy plans with every supplier. Something that is really time consuming. Running the same process once with us allows you to find quick results, easily.
  • No cooling-off period – Commercial energy deals don’t often come with a cooling-off period, so once you’ve signed a contract you’re tied in for the long haul. This is why, although it’s a pain, reading through the terms and conditions is always advisable.

How does average business energy usage compare to average business energy usage?

The amount of energy you use – as well as how and when you use it – plays a big part in the cost of your energy bills.

What is average business gas usage?

Business size Usage (in kWh)
Microbusiness 8,000
Small business 12,000
Medium business 17,000

What is average domestic gas usage?

Consumption rate Usage (in kWh)
Low 8,000
Medium 12,000
High 17,000

What is average business electricity usage?

Business size Usage (in kWh)
Microbusiness 5,000 to 15,000
Small business 15,000 to 25,000
Medium business 30,000 to 50,000

What is average domestic electricity usage?

Electrcity Profile Class 1

Consumption rate Usage (in kWh)
Low 1,800
Medium 2,900
High 4,300

Electrcity Profile Class 2

Consumption rate Usage (in kWH)
Low 2,400
Medium 4,200
High 7,100

Are business or domestic energy tariffs cheaper?

Although business energy bills can appear more expensive, gas and electricity rates are often cheaper than domestic rates. But because business often use more energy than households, and many have to pay 20% VAT on their bills, then business energy bills seem more expensive.

Here’s how the average domestic and business energy bills break down.

What is an average business gas bill?

Business size Average business gas bill (per year)
Microbusiness £430
Small business £856
Medium business £1,424

What is an average domestic gas bill?

House size Monthly cost Annual cost
1-2 bedroom £33 £396
3-4 bedroom £48 £576

What is an average business electricity bill?

Business size Average business electric bill (per year)
Microbusiness £1,062
Small business £2,038
Medium business £3,146

How to switch business energy

You might think that switching suppliers for your business energy is time-consuming and a bit of a headache. This can be frustrating if it’s just one part of a much larger operation you have to manage. But changing suppliers and finding great deals is what we’re about. Our team of energy-savvy experts can make sure you’re on the absolute best deal on the market. Here’s what we do, in a nutshell:

  • Give us your postcode - Give us your business postcode and our energy team will get the info needed to run a business energy comparison
  • Get your quotes - Compare quotes from our trusted panel of business energy suppliers. We’ll quickly talk you through the options and you choose the deal that’s best for your business.

- Switch business energy - We’ll take it from there and manage the rest of the switch for you. We’ll even take care of renewals to get you the best deals every year. We told you it was simple.

There’s little stopping you running through your own quotes, but you’ll soon find it takes up a lot of time getting separate quotes for gas and electricity from each individual supplier. But a 10 minute call to our business energy experts means they can take care of the switch, and you can be sure you’re getting the best deal available. And we don’t charge you a penny for using our service.

Should you have a business energy when working from home?

If you are a sole trader and work from home, you’ll probably be classed as a microbusiness and may be eligible for a commercial energy deal. If so, Ofgem rules stipulate your contract will work differently to that of a larger business, and you’ll have more protections in place, such as a reduced notice period and the option of a cooling-off period, similar to those on domestic energy contracts.

What is a microbusiness?

A microbusiness is defined by the European Commission (EC) as a venture with fewer than 10 employees and a turnover or balance sheet total of less than €2 million. In order to qualify for a microbusiness energy contract though, the criteria is slightly different, and your business must use less than 200,000 kWh of gas or 55,000 kWh of electricity a year.

For more information, check out our energy for microbusinesses guide.

How to change electricity meter from commercial to domestic

If you move into a property that doesn’t have an electricity supply, one that has a meter that doesn’t work, or you need to change to a specialist meter, such as time of use or half hourly meter, then you might need to get a new meter installed. In this instance, you’ll need to get in touch with your local distribution network operator (DNO).

Similarly, if you’ve moved into a former commercial property that has been redeveloped for domestic use and changing from business electricity to domestic, you’ll also need to get in touch with your DNO.

To find out who your local DNO is, check out our guide page: Who supplies my gas and electricity.

Are you eligible for a business energy contract in your home?

In order to meet the criteria for commercial energy tariff, you’ll not only need to prove you are running a business from home, but also that 50% or more of the energy you use is for business purposes.

This may sound a high proportion, but you’ll probably find that just using lighting, heating and electricity to run your office equipment takes you over this threshold, but remember to deduct any appliances that would be on regardless of your business being there, such as fridges.

If you need further advice on finding the best deal on your business’s energy contract, give us a call on 0800 326 5517. Or leave us a few details in the box at the top of the page and we’ll give you a call back.

Should holiday homes have domestic or business energy?

This is a tricky one – on the face of it, holiday homes should have a domestic energy deal, as they’re run exactly the same as a normal household. But your holiday home is available to guests for short rental periods over 30 weeks or more in a year, it will be classified as a business and will need to be registered for business rates.

This means you might benefit from the rates offered by a business energy deal. If your holiday home is left empty for large parts of the year, it’s also worth considering a no standing charge or a low standing charge energy deal.

It’s also advisable to get an Energy Performance Certificate (EPC) for your holiday home if the following apply:

Your property qualifies as a Furnished Holiday Let

Is available for short term rentals of less than 31 days per let

Is occupied for over a combined total of at least four months in a single year

If you have any questions on business energy, chat to our business energy experts by calling 0800 326 5517.