SME Energy Contracts: How to Compare, Negotiate, and Switch Without Getting Burned

How business energy differs from residential supply

Business energy contracts operate under different rules from residential supply. There is no automatic price cap protection, no default tariff that limits what suppliers can charge, and far fewer automatic consumer protections. Business customers are expected to negotiate, and those who do not are almost always on worse terms than those who engage actively with the market.

The regulator — Ofgem — has limited jurisdiction over business energy disputes, particularly for larger SME consumers. Complaints must typically be handled through the supplier's own process and, if unresolved, through the Energy Ombudsman — but only for businesses with fewer than 50 employees and a turnover under £6.5 million.

Contract types explained

Fixed-rate contracts lock in a unit rate for the contract term — typically 12, 24, or 36 months. They provide cost certainty but no upside if wholesale prices fall. Variable-rate contracts move with market prices, offering potential savings when wholesale costs drop but significant exposure when they rise. Deemed rate contracts — the tariff you fall onto if your contract expires without renewal — are almost always the most expensive option and should be treated as an emergency situation requiring immediate action.

Half-hourly metering, mandatory for larger consumers and increasingly common for SMEs, enables more sophisticated contract structures including time-of-use tariffs where the rate varies by time of day. These can offer significant savings for businesses with flexible energy consumption patterns.

Hidden costs and broker commissions

The unit rate quoted by a supplier or broker is rarely the full cost of business energy supply. Third-party charges — network charges, balancing charges, capacity market charges, and various levies — are applied on top of the commodity cost and typically account for 40-60% of a business energy bill. These are largely non-negotiable and apply across all suppliers, but suppliers differ in how they embed or separate these costs in their quoted rates.

Energy brokers — who arrange supply contracts on behalf of businesses — are typically paid a commission by the supplier, embedded in the unit rate you pay. This commission is often not disclosed proactively and can be significant: 0.3-2p per kWh is common, representing thousands of pounds over a multi-year contract on a medium-sized SME consumption. Since 2023, brokers are required to disclose their commission on request — ask before signing.

How to compare properly

Genuine like-for-like comparison requires obtaining quotes based on identical consumption assumptions, the same contract length, and the same start date. Unit rate alone is insufficient — standing charge, any capacity charges, and the treatment of third-party costs must all be included to produce a total annual cost comparison.

Request quotes directly from at least two suppliers in addition to any broker quote. Suppliers including British Gas, EDF, E.ON, and Opus Energy offer direct quoting for SME customers. Comparing a direct supplier quote against a broker quote quickly reveals the scale of broker commission being embedded.

When and how to switch

The optimal time to negotiate a new contract is three to six months before your current contract expires. Approaching the market too early limits your options; leaving it too late risks your contract expiring and rolling onto a deemed rate. Set a calendar reminder for four months before your contract end date.

To switch supplier, you will need your current contract end date, your MPAN (electricity) or MPRN (gas) reference numbers from your current bill, your current consumption data (typically 12 months of bills or smart meter data), and confirmation that there are no outstanding balances with your current supplier. Most switches complete within 21 days, during which supply is uninterrupted.