Business Energy Tariffs for Small Businesses — compared and explained
Not all business energy tariffs are created equal. We break down every major tariff type, when it makes sense, and how to pick the right contract length for your business.
The six business energy tariff types every UK business should know
Choosing the cheapest business energy tariff isn't just about picking the lowest headline unit rate. The right tariff type — matched to your usage profile, cash flow and risk appetite — makes far more difference to your annual bill than shaving a fraction of a penny off the p/kWh.
1. Fixed-rate business energy tariffs
The dominant choice for UK SMEs. Both your unit rate and standing charge are locked for the contract term (typically 1-4 years). Bills fluctuate only with your consumption, never the market. Ideal if you want to know exactly what next winter's energy line will cost.
2. Variable-rate tariffs
Your unit rate moves in line with wholesale gas and electricity markets. When wholesale prices fall you benefit almost immediately; when they rise, your bill does too. Best suited to businesses with strong cash flow, financial hedging elsewhere, or a genuine market view.
3. Renewable / REGO-backed tariffs
100% of your electricity is matched to renewable generation via Renewable Energy Guarantees of Origin (REGOs). Increasingly available across gas too (via carbon offsetting or biomethane). Often within 1-3% of standard pricing — the differential has narrowed dramatically.
4. Deemed & out-of-contract rates
Not a tariff you'd ever choose deliberately. Deemed rates apply when you move into a premises with no active contract; out-of-contract rates apply when your existing deal expires and you haven't renewed. Both are typically 40-80% more expensive than a properly negotiated tariff. If you're on either, switching is usually the fastest saving you can make.
5. Flexible / basket-purchase tariffs
For very large consumers (typically 400,000+ kWh/year on electricity). Rather than locking a single price for the whole contract, you buy energy in tranches (e.g. 25% blocks) at different points against the wholesale market. Offers the potential for the lowest overall cost, but requires internal energy management or an appointed consultant.
6. Dual-fuel & bundled business energy
Unlike domestic energy, business gas and electricity are always contracted separately — there's no true "dual-fuel discount". But holding both with the same supplier means one login, one account manager and simpler admin. We can quote both at once.
How long should you fix your business energy for?
Contract length is a bet on your view of future prices, and on your operational stability:
- 12 months — maximum flexibility, but you're renegotiating annually.
- 24 months — the SME sweet spot: enough certainty to plan, not too long to lock in a bad rate.
- 36 months — meaningful discount vs 24-month rates from many suppliers, particularly when wholesale is low.
- 48 months — deepest discount available, only sensible when wholesale looks structurally low or your business is stable and long-lease.
Business energy tariff comparison table
| Tariff type | Pros | Cons | Best for |
|---|---|---|---|
| Fixed-rate | Budget certainty, protection from wholesale spikes | No benefit if prices fall mid-contract | SMEs wanting predictable bills for 1-4 years |
| Variable-rate | Benefit if wholesale falls, no early exit fees | Exposed to price rises, harder to budget | Businesses with strong cash-flow tolerance |
| Renewable / green | REGO-backed, sustainability wins, often price-competitive | Marginal premium (0-3%) on some tariffs | Brands with visible sustainability commitments |
| Deemed / out-of-contract | None — this is a default, not a choice | Typically 40-80% more expensive | Nobody — exit as soon as possible |
| Flexible / basket | Buy in tranches, potentially lowest total cost | Requires energy management resource | Large users (400,000+ kWh/year) |
| Dual-fuel (bundled) | Single supplier, easier admin | No true price discount vs separate contracts | Businesses simplifying supplier count |
Business energy tariff FAQs
What's the difference between fixed and variable business energy tariffs?
A fixed tariff locks your unit rate and standing charge for the length of the contract — great for budgeting certainty. A variable tariff moves with wholesale prices, so bills go up or down each month. Most UK SMEs pick fixed for predictability.
How long can I fix my business energy tariff for?
Business energy contracts are usually available in 1, 2, 3 or 4 year fixed terms. Longer contracts give more price certainty and often marginally lower rates, but reduce your flexibility if prices fall or your business changes.
Are renewable business energy tariffs more expensive?
Not necessarily. Many green tariffs — backed by REGO certificates — are priced within 1-3% of standard tariffs, and some are even cheaper. They're a strong option if you want to reduce Scope 2 emissions without adding significant cost.
What is a deemed or out-of-contract rate?
Deemed rates apply when you move into a premises and haven't yet agreed a contract; out-of-contract rates apply when your existing deal expires and you haven't renewed. Both are significantly more expensive than a negotiated tariff and should be exited as soon as possible.
Can I combine gas and electricity into one dual-fuel tariff?
Business energy doesn't have true dual-fuel discounts like domestic energy — gas and electricity are contracted separately. However you can hold both with the same supplier for simpler billing, and we can quote both at the same time.
What's a flexible/bulk-purchase tariff and who is it for?
Flexible or basket-purchase tariffs let very large users (typically 400,000+ kWh a year) buy energy in tranches against the wholesale market rather than at one fixed rate. They can lower costs but require active energy management and appetite for market risk.
Not sure which tariff is right for you?
Send us your business details — we'll model fixed, variable and renewable options side-by-side.