Business Energy Payment Plans UK: How to Negotiate When You Cannot Pay

When to Request a Payment Plan and Why Timing Matters

A payment plan is a formal arrangement between a business and its energy supplier to repay an accumulated debt in instalments while continuing to pay for ongoing consumption. The window for negotiating favourable plan terms is widest at the earliest stage of the debt: once formal disconnection proceedings have begun, the supplier's negotiating posture typically hardens and the range of options available narrows.

The appropriate moment to request a payment plan is as soon as it becomes apparent that the next invoice cannot be paid in full on the due date. This might arise from a temporary cash flow difficulty, an unexpectedly large catch-up bill following a period of estimated reads, or a broader financial difficulty affecting the business. The specific reason matters to the supplier's affordability assessment, but the right to request a plan exists regardless of the cause.

Early engagement with the supplier also preserves the business's credit standing. A business that requests a plan before falling into formal arrears is treated differently in the supplier's records from one that has ignored payment demands. The credit implications of arrears on an energy account, while less directly reported than bank debt, can affect the supplier's willingness to offer competitive rates at renewal and the likelihood of a security deposit being required.

Supplier Obligations Under Ofgem Licence Conditions

For microbusiness customers, Ofgem's Standard Licence Conditions impose specific obligations on suppliers in relation to customers experiencing payment difficulty. SLC 27 of the electricity supply licence (and the equivalent condition in the gas supply licence) requires suppliers to make reasonable efforts to agree a payment plan with a microbusiness customer before taking disconnection or enforcement action.

The obligation to offer a plan is not merely procedural. The plan offered must be genuinely affordable relative to the business's demonstrated ability to pay. A supplier that offers a token plan with repayment terms that are clearly unworkable given the business's financial position, and then proceeds to disconnection when the business cannot meet those terms, has not complied with the spirit or letter of the licence condition.

For larger businesses above the microbusiness threshold, there is no equivalent regulatory obligation on the supplier to offer a payment plan. Larger businesses must negotiate plan terms commercially, without the regulatory backstop available to microbusinesses. This makes early engagement even more important for larger businesses, as the leverage available before formal debt recovery begins is greater than that available once the supplier has decided to pursue enforcement.

What Reasonable Repayment Terms Look Like

Industry practice and Ofgem's guidance on microbusiness protections establish a framework for what constitutes reasonable payment plan terms:

Repayment period: For a debt equivalent to up to 6 months of average consumption charges, a repayment period of 12 to 24 months is standard industry practice. Shorter periods that result in monthly repayments the business cannot sustain are not considered reasonable where the business has provided evidence of its cash flow position.

Ongoing consumption: The plan covers the debt repayment separately from the ongoing charge for current consumption. The business must continue to pay for energy it is currently using, either by direct debit, BACS, or prepayment. Conflating the two in a single monthly figure without clearly separating the ongoing charge from the debt repayment makes it harder to track whether the plan is working.

Review clauses: Reasonable plans include a review mechanism, typically at 6-month intervals, that allows either party to request a reassessment of the repayment terms if the business's financial position changes materially. A plan that locked in fixed repayments for 24 months with no review mechanism would not reflect changes in the business's ability to pay.

Written confirmation: The plan must be confirmed in writing, specifying the total debt amount, the monthly repayment, the review dates, and the consequences of missing payments. A verbal agreement over the phone is not a reliable basis for a payment plan and does not provide the business with the evidence it needs if a dispute arises.

The Evidence a Business Needs to Provide

Suppliers will carry out an affordability assessment before agreeing a payment plan, particularly where the repayment period requested is longer than 12 months or the debt is above a threshold level. The evidence the business should prepare includes:

Current cash flow or management accounts: A simple monthly cash flow showing income and fixed outgoings demonstrates the business's actual ability to pay. It does not need to be audited accounts: a management summary prepared by the business owner or bookkeeper is sufficient for most supplier assessments.

Explanation of the cause of the arrears: Where the arrears resulted from a specific and temporary cause (a delayed customer payment, a seasonal cash flow trough, a billing error that has since been identified), documenting this helps the supplier assess whether the difficulty is structural or temporary. Temporary difficulties support longer repayment periods and more flexible terms.

History of payment on the account: If the business has a track record of paying on time before the current difficulty arose, this strengthens the case for a plan rather than immediate enforcement action. Request a billing history from the supplier showing payment dates and amounts.

Any external financial support: If the business is engaging with a bank, an insolvency practitioner, or a business support programme, note this in the plan request. Suppliers are less likely to pursue aggressive enforcement against a business that is actively managing its financial position with professional support.

The Debt Assignment Protocol: Switching With Debt

The Debt Assignment Protocol (DAP) is an industry mechanism that allows a business customer in arrears to switch to a new supplier, with the existing debt transferred to the gaining supplier as part of the new supply arrangement. It provides an alternative route for businesses whose current supplier is unwilling to offer acceptable payment plan terms, but where another supplier is prepared to take on the account and manage the debt repayment.

Under the DAP, the losing supplier, gaining supplier, and customer must all agree to the assignment. The gaining supplier sets the terms on which it will manage the debt repayment, which are incorporated into the new supply contract. The customer's obligation is to the gaining supplier from the date the switch completes.

The DAP is not available in all circumstances. The gaining supplier must be willing to accept the debt, which depends on the size of the debt, the business's credit profile, and the gaining supplier's commercial appetite. For very large debts or businesses with a poor repayment track record, finding a supplier willing to participate in a DAP may be difficult. In these cases, agreeing a plan with the existing supplier remains the primary route.

What Happens If a Payment Plan Fails

Where a business misses payments under an agreed plan, the supplier typically issues a notice of plan failure and requests the business to contact them to discuss revised terms. At this stage, the options available are:

• Renegotiating the plan at lower monthly repayments over a longer period, supported by updated financial evidence
• Requesting a temporary payment holiday where the difficulty is genuinely short-term, for example a period of illness or a delayed contract payment
• Switching via the Debt Assignment Protocol if another supplier is willing to take on the account

Where none of these options is feasible, the supplier will proceed toward formal debt recovery and potentially disconnection. At this stage, seeking independent financial advice and engaging Citizens Advice is important. Suppliers are required to signpost customers toward free debt advice as part of their obligations under Ofgem's licence conditions.

Frequently Asked Questions

Editorial disclaimer: The following guidance is provided for general information only. Payment plan terms are subject to negotiation and the specific licence conditions applicable to your supplier. For tailored advice, contact Citizens Advice Business Debt Line or an independent energy adviser.

Is there a minimum payment plan period a supplier must offer a microbusiness?

Ofgem's licence conditions do not specify a minimum repayment period by number of months. The requirement is that the plan terms are affordable relative to the business's demonstrated ability to pay. In practice, 12 to 24 months for debts up to 6 months of average charges represents the standard market expectation. A supplier that offers only a 3-month plan for a debt that would require unaffordable monthly payments under that timeframe has not met its obligations.

Can a supplier report a payment plan to credit reference agencies?

Suppliers do not typically report commercial energy account data directly to the major UK credit reference agencies in the same way that banks report loan or credit card payment history. However, if debt proceeds to a County Court Judgement (CCJ), that judgement will appear on the business's credit record and on any personal credit record where a sole trader or director has provided a personal guarantee. Avoiding a CCJ is a strong reason to reach a payment plan agreement before debt recovery proceedings begin.

What if the supplier will not agree to a payment plan?

For microbusiness customers, the refusal to offer a payment plan when one has been requested in good faith with supporting evidence is a breach of the supplier's licence condition obligations. Raise a formal complaint citing the specific SLC obligation and the evidence provided. If the complaint reaches deadlock, refer to the Energy Ombudsman. The Ombudsman can direct a supplier to offer a payment plan where the refusal is not justified.

Can I request a payment plan if the arrears resulted from a billing error?

Yes, and where the arrears resulted from a supplier billing error, the business is in a stronger position than a customer who simply did not pay. In this scenario, raise a formal billing dispute about the erroneous element and request a payment plan for any undisputed balance. The supplier cannot decline a payment plan request on the grounds that the arrears originated in a billing dispute that has not yet been resolved.

Does an agreed payment plan affect my ability to switch supplier?

An active payment plan does not automatically prevent switching, but most suppliers will not accept a switch where the losing supplier has a registered debt on the meter point. The Debt Assignment Protocol provides the mechanism for switching with debt where the gaining supplier agrees to accept it. Outside of DAP, clearing the debt or completing the repayment plan before switching is the standard route.

How we verified this

This article draws on Ofgem's Standard Licence Conditions for electricity and gas suppliers, specifically the conditions governing microbusiness protections and payment plan obligations, Ofgem's published microbusiness consumer guidance, Citizens Advice guidance on business energy debt, and the industry Debt Assignment Protocol documentation published by Energy UK. The Gas Act 1986 and Electricity Act 1989 form the legislative basis for the disconnection and enforcement framework referenced throughout.

Sources

• Ofgem Standard Licence Conditions for electricity and gas suppliers
• Ofgem microbusiness consumer protections
• Citizens Advice: if you cannot pay your energy bill
• Gas Act 1986, legislation.gov.uk

For the disconnection process that follows when a payment plan is not agreed or fails, see business energy disconnection rules UK. For the rights available if the arrears stem from a billing dispute rather than genuine non-payment, see business energy back-billing UK.