Microbusiness Energy Definition Reform UK: Who Is Protected and Who Should Be

TL;DR

Ofgem's microbusiness definition under SLC 7A protects customers who are below specific employee, consumption, or turnover thresholds. Many small businesses with 11 to 49 employees fall outside the definition despite facing the same market dynamics as covered microbusinesses. Ofgem's ongoing review of the definition has generated calls for expansion from Citizens Advice and trade bodies, but no regulatory change has been implemented as of May 2026. The definition gap is particularly acute in hospitality and retail.

Last reviewed: 12 May 2026

The Current Ofgem Microbusiness Definition: What SLC 7A Says

The Ofgem microbusiness definition is set out in Standard Licence Condition 7A of the electricity and gas supply licences. A customer qualifies as a microbusiness if it meets any one of the following criteria:

Fewer than 10 employees (or full-time equivalent)
Annual electricity consumption below 100,000 kWh
Annual gas consumption below 293,000 kWh
Annual turnover or annual balance sheet total not exceeding EUR 2 million

The definition uses an "or" test: satisfying any single criterion is sufficient to qualify. A business with 15 employees but electricity consumption of 80,000 kWh per year qualifies because of the consumption criterion even though it exceeds the employee threshold. This design means the practical scope of the definition is broader than the employee threshold alone suggests, as many small businesses are captured through the consumption or turnover criteria even if their headcount exceeds 10.

The protections attached to microbusiness status include: enhanced broker commission disclosure obligations on suppliers, renewal notification windows, an accessible complaints pathway, back-billing limits under SLC 21B, payment plan requirements before disconnection, and access to the Energy Ombudsman. These protections do not apply to businesses that fall outside all four criteria.

The Gap: Small Businesses That Fall Outside the Definition

The 10-employee threshold originates in EU small and medium enterprise (SME) definitions and was adopted into Ofgem's licensing framework. It captures the smallest businesses but excludes those in the 11 to 49 employee range that the EU would classify as "small" enterprises and that many policy analysts argue face comparable information asymmetries and market vulnerabilities to microbusinesses.

A pub employing 15 staff, a small hotel with 20 employees, or a retail unit with 12 people on the payroll all fall outside the microbusiness definition on the employee criterion. If their consumption and turnover also exceed the relevant thresholds, which is likely for businesses of that size, they have no access to the broker commission disclosure rights, the renewal notification protections, or the Energy Ombudsman.

Ofgem's non-domestic market review evidence base documented harm in this segment. Citizens Advice's published responses to Ofgem consultations have consistently argued that the 11 to 49 employee range faces structurally similar market failures to microbusinesses: lower bargaining power than large commercial customers, reliance on brokers with potential commission conflicts, and limited capacity to invest in specialist energy procurement expertise.

Sector-Specific Cases Where the Definition Under-Protects

Two sectors have been particularly prominent in the policy debate about definition reform:

Hospitality: Pubs, restaurants, hotels, and catering businesses typically employ more than 10 people but share the energy market characteristics of microbusinesses. They are often owned by single operators or small partnerships with limited procurement resource, they use energy-intensive equipment (catering, refrigeration, HVAC) that drives consumption above some microbusiness thresholds, and they have faced acute exposure to energy cost increases since 2021. UK Hospitality, the sector trade body, has publicly supported expansion of the microbusiness definition to capture hospitality operators with up to 50 employees.

Retail: Independent retailers and small chains frequently employ between 10 and 25 people across multiple sites. Each site may be below the consumption threshold, qualifying the individual meter points for microbusiness treatment, while the overall business falls outside the definition at the company level. The interaction between the site-level consumption test and the business-level employee test creates inconsistent application of protections across a retail portfolio.

Both sectors were heavily represented in Ofgem's non-domestic market review evidence and in the subsequent policy discussion about definition reform.

Ofgem's Review of the Definition: What Has Been Published

Ofgem's non-domestic market review documentation published between 2021 and 2023 explicitly acknowledged the question of whether the microbusiness definition should be expanded. Ofgem's published analysis noted that the current definition was set without a rigorous assessment of the optimal threshold and that the case for reviewing it was supported by the evidence of harm in the 11 to 49 employee segment.

The December 2022 licence condition amendments did not change the microbusiness definition itself. Ofgem's published decision on those amendments stated that the definition review would be conducted as a separate workstream, with any changes requiring their own consultation process given the significance of the threshold to the scope of the enhanced protection regime.

As of May 2026, Ofgem has not published a formal consultation proposing changes to the employee threshold in SLC 7A. The review is ongoing and DESNZ has indicated support in principle for broader protections, but the mechanism and timeline for implementation of supplier-side licence reform remain to be determined. Energy UK's published position on definition reform has been more cautious, noting the compliance cost implications for suppliers of extending the enhanced regime to a larger customer population.

Partial reform has, however, already taken effect on the redress side. The Gas and Electricity Regulated Providers (Redress Scheme) (Amendment) Order 2024 expanded Energy Ombudsman access from December 2024 to cover a new small business category (fewer than 50 employees, turnover below £6.5 million or balance sheet below £5.0 million, and consumption below specified thresholds), alongside the existing microbusiness category. This brought Energy Ombudsman access into rough alignment with the Financial Ombudsman Service's SME threshold, though the underlying Ofgem licence protections for suppliers continue to apply only to the narrower SLC 7A microbusiness definition.

What Reform Proposals Have Been Published

Three substantive reform proposals have featured in published consultation responses and policy documents:

Expanding the employee threshold to 50: This would bring the Ofgem definition into line with the EU SME definition of a small enterprise and would capture the majority of the businesses identified as falling in the current gap. Citizens Advice's published consultation responses have supported this approach. The compliance cost for suppliers would be material: the population of qualifying customers would increase significantly.

A tiered protection regime: Rather than a single binary threshold, this proposal would create graduated protection levels keyed to business size. Businesses with 10 to 50 employees would receive a subset of the full microbusiness protections, for example broker commission disclosure and renewal notifications but not the full back-billing and payment plan regime. This approach would extend some protection to the gap segment while limiting supplier compliance costs.

Consumption-based threshold reform: Raising the electricity consumption threshold from 100,000 kWh to 200,000 or 300,000 kWh per year would capture a larger proportion of small businesses through the consumption criterion, without changing the employee threshold. This would be simpler to implement because it adjusts an existing numerical threshold rather than adding a new definitional category.

What Businesses in the Gap Can Do Now

Businesses that fall outside the current microbusiness definition lack access to the statutory protections but are not entirely without recourse:

Contractual rights remain: All businesses, regardless of size, retain their general contract law rights, including the right to pursue mis-selling claims under the Misrepresentation Act 1967. The absence of Ofgem protections does not remove the ability to challenge a contract that was induced by false representations.

Voluntary code access: Brokers who are members of the Utilities Intermediaries Association or signatories to the Energy UK broker code are bound by those codes regardless of whether the customer is a regulatory microbusiness. UIA membership includes a complaints process that businesses can use even if they fall outside the Ofgem microbusiness definition.

Civil litigation for material claims: For businesses with significant mis-selling or billing claims, civil litigation remains available. The small claims track covers claims up to £10,000 in England and Wales; larger claims require solicitor representation.

Responding to Ofgem consultations: Businesses and trade bodies in the gap segment can submit evidence to Ofgem's ongoing review. Published evidence of harm in specific sectors or size categories directly influences the pace and scope of definition reform.

Frequently Asked Questions

Editorial disclaimer: The following guidance is provided for general information only. The microbusiness definition is subject to ongoing regulatory review. Verify the current definition against Ofgem's published SLC 7A at the time of any contract decision.

How do I know if my business qualifies as a microbusiness under Ofgem's definition?

Apply the four criteria in SLC 7A. If your business has fewer than 10 employees, or electricity consumption below 100,000 kWh per year, or gas consumption below 293,000 kWh per year, or annual turnover or balance sheet below EUR 2 million, it qualifies as a microbusiness. Only one criterion needs to be met. The consumption thresholds are assessed per meter point, which can mean that individual sites of a larger business qualify even if the overall business does not.

Why was the 10-employee threshold chosen for the Ofgem definition?

The 10-employee threshold derives from the EU microenterprise definition, which distinguishes microenterprises (fewer than 10 employees) from small enterprises (10 to 49 employees). Ofgem adopted this threshold when implementing microbusiness-specific protections, as it represented an existing and well-understood definitional boundary. Critics have argued that using the microenterprise threshold rather than the small enterprise threshold understates the population that needs enhanced protection in the energy market.

Will the microbusiness threshold definitely be changed?

No. Ofgem has reviewed the definition but has not published a formal proposal to change it. Any change would require a statutory consultation and licence condition amendment process. While the policy direction appears to favour some expansion, the timing and scope of any reform are not certain as of May 2026.

Do the consumption thresholds apply per meter or per business?

The consumption thresholds in the SLC 7A definition are applied at the level of the individual supply point (meter). A business with multiple sites, each consuming below 100,000 kWh of electricity per year, qualifies as a microbusiness at each of those sites, even if aggregate consumption across all sites would exceed the threshold. This creates the situation where a larger retail or hospitality business may have sites that are individually within the microbusiness protection regime while the business as a whole would not qualify under the employee or turnover criteria.

What is Citizens Advice's published position on definition reform?

Citizens Advice has consistently argued in its published consultation responses to Ofgem that the microbusiness definition should be expanded to capture businesses with up to 50 employees. Its published analysis has documented harm in the 11 to 49 employee segment, particularly in hospitality and retail, and has identified the current definition as a significant gap in consumer protection in the business energy market. These responses are publicly available on the Citizens Advice and Ofgem consultation response repositories.

How we verified this

This article draws on Ofgem's published Standard Licence Condition 7A, Ofgem's non-domestic market review consultation documents and decision letters, Citizens Advice published consultation responses to Ofgem's non-domestic market review, Energy UK published policy positions on definition reform, and DESNZ policy statements on non-domestic energy market protections. All primary sources are publicly available on ofgem.gov.uk, citizensadvice.org.uk, and gov.uk.

Sources

For a full breakdown of the current protections that apply to qualifying microbusiness customers, see microbusiness energy rights UK. For how the broker commission disclosure rules that derive from the microbusiness framework work in practice, see business energy broker commission UK.