Energy contract jargon buster: A no-nonsense guide to small business contracts & invoices

Running a business is hard enough without having to decode energy industry jargon. This guide breaks down key terms you’ll see so you can make confident, informed decisions for your business.

Ofgem

Who is Ofgem? Ofgem is the energy regulator for Great Britain. They ensure fair treatment for households and businesses across the UK and can benefit from a cleaner, greener environment. Suppliers use Ofgem-aligned terminology to ensure consistency across the industry for clearer consumer protection. 

Jargon busting library 

Contract terms

• Start date: The day your energy contract officially begins, when your agreed rates take effect.
• End date: The final day your agreed rates are active.
• Renewal period: A window before your contract ends, typically up to 6 months before, where you can agree a new deal or switch suppliers. Missing this window could cost your business money.
• Cooling off period: Domestic customers get 14 days to cancel their contracts. Most small business contracts do not include this, so always check before signing.
• Early termination fee: A charge applied if you leave your contract before the end date.

Contract types

• Fixed: In a fixed term contract, your unit rate and standing charge stay the same for the full term, helpful for budgeting and cash-flow planning.
• Variable: In a variable contract, prices can move up or down on wholesale market conditions, offering flexibility but can make budgeting harder.
• Deemed: A deemed contract automatically applies when you move into a property and do not agree a fixed contract, usually being more expensive than a fixed contract.
• Out of contract: When your fixed deal ends and a new contract is not agreed you fall onto out of contract rates. These rates are typically higher and can impact operating costs.

Metering terms

• AMR meter: Sends readings to your supplier automatically. Good for accurate billing, but suppliers can’t communicate back to the meter
• Smart meter: A Smart meter provides real-time usage data to both you and your supplier, as well as sending meter readings automatically, saving you time.
• Half-hourly meter: Half-hourly meters are mandatory for larger businesses with high demand, recording electricity usage every 30 minutes.
• MPAN/MPRN: These are unique identifiers for your meters, MPAN refers to your electricity supply number, while MPRN refers to your gas supply number. You’ll need these when switching or querying bills.
• Meter serial number (MSN): Your MSN is the unique identifier for a gas or electric meter.

Invoice & Billing terms

• Unit Rate: The price you pay per kWh of energy used.
• kWh: The unit used to measure consumption in both electricity and gas
• Standing Charge: A fixed daily fee.
• Credit: You’ve paid more to your supplier than your usage. This can happen when your business is seasonal or your direct debit is set too high.
• Debit: You’ve used more gas/electricity than you’ve paid to your supplier. This may result in a catch-up bill.
• Credit Note: Issued when you’ve been overcharged or refunded.
• Estimated bill: A bill based on estimated readings, rather than actual usage. This can lead to being over or under charged.
• VAT & CCL: VAT for businesses is usually 20%. CCL (Climate Change Levy) is an environmental tax added to most energy bills, unless you qualify for exemptions or discounts.
• Direct debit: A payment method where a fixed or variable amount is taken from a bank account on a regular interval. Many suppliers offer discounted rates for paying by direct debit.

Understanding these key terms helps you stay in control of your energy costs and avoid surprises on your bill. For a quick breakdown of how this all comes together, watch this short, animated video on what makes up your business energy and why it changes:

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