| Energy Bills |
Ofgem is the Office of Gas and Electricity Markets, the regulator for the UK energy industry. It issues licences to suppliers, including those serving business customers. The non-domestic market includes many suppliers, from large utilities to niche providers. A key threshold is 100,000 kWh electricity use per year, which defines a microbusiness for certain protections.
Ofgem regulates UK energy suppliers, and the business market includes many licensed providers, with microbusinesses defined by thresholds like 100,000 kWh electricity use.
KEY FACTS
|
LAST REVIEWED 2026-09-06
Who are Ofgem and what do they do?
Ofgem is the Office of Gas and Electricity Markets, the independent regulator for Great Britain's energy markets. It protects consumers, promotes competition, and ensures secure, sustainable energy. For businesses, Ofgem issues supply licences and sets rules for how suppliers must treat non-domestic customers.
Ofgem's role includes monitoring the market, enforcing compliance, and handling disputes. It does not set prices for business energy, but it does regulate network charges and licence conditions. Suppliers must hold a licence to operate, and Ofgem can revoke licences if rules are broken.
For business customers, Ofgem's key functions include defining microbusinesses, setting standards for contract terms, and overseeing the Energy Ombudsman scheme. Ofgem also publishes data on supplier performance and market shares.
When checking a supplier, businesses can verify their licence on Ofgem's public register. This ensures the supplier is authorised to sell energy. Ofgem's website provides guidance on switching, complaints, and protections.
How does business energy supply licensing work?
Business energy supply licensing works through Ofgem, which grants licences to companies to supply gas and electricity to non-domestic premises. Licences are separate for gas and electricity, and suppliers must comply with conditions covering customer service, billing, and financial stability.
Ofgem's licensing regime is designed to protect consumers while allowing competition. Suppliers must demonstrate they have the resources and systems to operate reliably. They also need to participate in industry codes and settlement processes.
For businesses, the licence ensures a minimum standard of service. Suppliers must provide clear contracts, accurate bills, and fair treatment. If a supplier fails, Ofgem can step in, and the Energy Ombudsman can resolve disputes.
To check if a supplier is licensed, businesses can search Ofgem's register. This is important because dealing with an unlicensed supplier offers no regulatory protection. The register is updated regularly and is free to access.
| Rule | Detail | Source |
|---|---|---|
| Domestic price cap | does not apply to non-domestic contracts | Ofgem |
| Microbusiness test | fewer than 10 employees and under 2 million euros turnover, or under 100,000 kWh electricity or 293,000 kWh gas a year | Ofgem |
| VAT | 20% standard; 5% reduced rate below 33 kWh electricity or 145 kWh gas a day | HMRC |
| Complaints | Energy Ombudsman after 8 weeks or deadlock letter | Energy Ombudsman |
What is the structural difference from the domestic market?
The structural difference from the domestic market is that business energy is not subject to the domestic price cap. Instead, business contracts are negotiated freely between supplier and customer. This means prices vary widely based on usage, location, and contract terms.
Another difference is that microbusinesses have specific protections, but larger businesses have fewer safeguards. The domestic market has a cap set by Ofgem, but for non-domestic, there is no equivalent cap. Businesses must rely on competitive quotes and careful contract review.
Also, the domestic market has a single standard tariff, while business energy offers a range of products, including fixed, flexible, and pass-through contracts. Suppliers may offer different rates for electricity and gas, and there are separate distribution charges.
Understanding these differences helps businesses navigate the market. For example, a microbusiness using under 100,000 kWh electricity a year may qualify for additional protections, such as a longer notice period for contract changes.
Which suppliers are active in the non-domestic market?
Many suppliers are active in the non-domestic market, ranging from large utilities like British Gas, E.ON, and EDF to smaller, specialist providers. The market is competitive, with over 30 licensed suppliers offering business energy contracts.
Some suppliers focus solely on business customers, while others serve both domestic and non-domestic. The market includes traditional utilities, new entrants, and brokers that act as intermediaries. Ofgem's register lists all licensed suppliers.
For businesses, choosing a supplier involves comparing prices, service, and contract terms. Some suppliers offer green energy tariffs, while others provide flexible purchasing options. The right choice depends on the business's size and energy needs.
It is important to verify that a supplier holds a valid licence. This can be done on Ofgem's website. A licensed supplier is subject to regulatory oversight, which provides a level of protection for business customers.
How do SME-focused and I&C-focused suppliers differ?
SME-focused suppliers typically serve small and medium-sized enterprises, offering simpler contracts and customer support. I&C-focused suppliers handle large industrial and commercial customers, providing bespoke energy management and flexible procurement.
SME suppliers often have online platforms for account management and may offer fixed tariffs for simplicity. I&C suppliers work with energy consultants and may offer pass-through pricing, where costs are passed directly to the customer.
The difference also lies in the level of service. SMEs may need help understanding bills, while I&C customers require detailed reporting and risk management. Suppliers tailor their offerings accordingly.
For a microbusiness, an SME-focused supplier may be more suitable, as they understand the needs of smaller operations. Larger businesses might prefer an I&C supplier with expertise in complex energy portfolios.
How does Ofgem oversee the non-domestic market?
Ofgem oversees the non-domestic market by enforcing licence conditions, monitoring competition, and handling complaints. It sets rules for supplier conduct, including how they must treat microbusinesses and other customers.
Ofgem can investigate suppliers for breaches and impose fines or revoke licences. It also runs the Energy Ombudsman scheme, which businesses can use after 8 weeks of complaint or a deadlock letter.
Ofgem publishes market reviews and data on switching rates, prices, and customer satisfaction. This helps businesses make informed choices. Ofgem also works with other regulators to ensure fair treatment.
For businesses, knowing Ofgem's role is important. If a supplier acts unfairly, businesses can complain to Ofgem or the Ombudsman. Ofgem's website provides guidance on how to raise issues.
| Date | Event | Source |
|---|---|---|
| January 2019 | Default tariff cap introduced | Ofgem |
| October 2022 | Cap moves to quarterly reviews | Ofgem |
| July 2026 | Typical consumption values reset to 2,500 kWh electricity and 9,500 kWh gas | Ofgem |
| 26 August 2026 | Q4 2026 cap announced at £1,723 | Ofgem |
| 1 October 2026 | Q4 cap in force; VAT on domestic electricity cut to 0% until 31 March 2027 | Ofgem |
What are the rules for entering and exiting the non-domestic market?
Entering the non-domestic market requires obtaining a licence from Ofgem. Suppliers must meet financial and operational criteria, and they must comply with industry codes. Exiting the market involves notifying Ofgem and ensuring customers are transferred or supplied.
Ofgem's licence application process is rigorous. It includes checks on the applicant's ability to supply energy reliably. Once licensed, suppliers must maintain standards or face penalties.
If a supplier exits, Ofgem has a Supplier of Last Resort process to protect customers. This ensures continuity of supply. Businesses may be transferred to another supplier, and their contracts are honoured.
For businesses, understanding these rules helps when choosing a supplier. A supplier's stability is important, and Ofgem's oversight provides some assurance.
What are the typical consumption values for the price cap in 2026?
In 2026, the typical consumption values for the domestic price cap are reset to 2,500 kWh electricity and 9,500 kWh gas per year. These values are used to calculate the cap level, which is announced quarterly.
On 26 August 2026, Ofgem announced the Q4 2026 cap at £1,723. This came into force on 1 October 2026. Additionally, VAT on domestic electricity was cut to 0% until 31 March 2027.
These figures are for domestic customers, not businesses. Business energy is not subject to the price cap. However, understanding these values can help businesses compare their own usage.
For a business, the relevant threshold is 100,000 kWh electricity per year for microbusiness status. This is different from the domestic typical values.
How do VAT rules apply to business energy?
VAT on business energy is generally 20% standard rate. However, a reduced rate of 5% applies to businesses that use less than 33 kWh electricity or 145 kWh gas per day. This is based on the microbusiness threshold.
To qualify for the reduced rate, a business must be a microbusiness as defined by Ofgem: fewer than 10 employees and under 2 million euros turnover, or under 100,000 kWh electricity or 293,000 kWh gas per year.
Businesses should check their daily usage to determine the correct VAT rate. Suppliers will apply the appropriate rate based on the contract. If a business exceeds the threshold, it must pay 20% VAT.
These rules are set by HMRC, not Ofgem. Businesses should consult a tax advisor for specific advice.
How can businesses verify a supplier's Ofgem licence?
Businesses can verify a supplier's Ofgem licence by checking the public register on Ofgem's website. The register lists all licensed suppliers for gas and electricity, including their licence numbers and status.
To use the register, search for the supplier's name. If the supplier is not listed, they are not licensed, and dealing with them carries risks. Licensed suppliers must comply with Ofgem's rules.
Ofgem's register is updated regularly. It also shows if a supplier has had any enforcement action. This information helps businesses make informed decisions.
If a business is unsure about a supplier, they can contact Ofgem directly. Ofgem's website provides contact details and guidance.
Glossary: the terms on an energy bill explained
Ofgem: The Office of Gas and Electricity Markets, the UK's energy regulator. It issues licences and protects consumers.
Microbusiness: A business with fewer than 10 employees and under 2 million euros turnover, or using under 100,000 kWh electricity or 293,000 kWh gas a year.
Price cap: A limit on the maximum price a supplier can charge for domestic energy. It does not apply to business contracts.
Energy Ombudsman: An independent body that resolves disputes between energy suppliers and customers, including businesses, after 8 weeks.
Licence: A legal permission granted by Ofgem to supply gas or electricity. Suppliers must hold a licence to operate.
VAT: Value Added Tax. On business energy, the standard rate is 20%, but a reduced rate of 5% applies to low usage.
Related Guides |
Disclaimer. This guide is editorial information drawn from primary sources. It is not financial, legal or tax advice and does not recommend any provider. Figures are those published by the named sources on the review date and may change. Kael Tripton Ltd receives no commission, referral fee or lead payment from any provider named on this page. |
Frequently asked questions
Who are Ofgem?
Ofgem is the Office of Gas and Electricity Markets, the independent regulator for Great Britain's energy markets. It protects consumers, promotes competition, and ensures secure, sustainable energy. For businesses, Ofgem issues supply licences and sets rules for how suppliers must treat non-domestic customers.
Does the price cap apply to business energy?
No, the domestic price cap does not apply to non-domestic contracts. Business energy prices are negotiated freely between supplier and customer. However, microbusinesses have specific protections, such as a longer notice period for contract changes.
What is a microbusiness for energy purposes?
A microbusiness is defined as having fewer than 10 employees and under 2 million euros turnover, or using under 100,000 kWh electricity or 293,000 kWh gas per year. These businesses have additional protections under Ofgem rules.
How can I check if a supplier is licensed by Ofgem?
You can check Ofgem's public register on their website. The register lists all licensed suppliers for gas and electricity. If a supplier is not listed, they are not licensed, and dealing with them carries risks.
What is the Energy Ombudsman?
The Energy Ombudsman is an independent body that resolves disputes between energy suppliers and customers. Businesses can complain to the Ombudsman after 8 weeks of complaint or receiving a deadlock letter from the supplier.
What is the VAT rate on business energy?
The standard VAT rate on business energy is 20%. However, a reduced rate of 5% applies to businesses that use less than 33 kWh electricity or 145 kWh gas per day, typically microbusinesses.
