Business energy vs domestic energy: What’s the difference?

Many business owners assume energy deals work the same way on their sites as they do at home.

After all, electricity is electricity and gas is gas.

However, business energy works very differently to domestic use. For starters, your business is not protected by Ofgem’s UK energy price cap.

Understanding the differences between business and domestic energy can help you avoid costly mistakes, compare suppliers more effectively and secure a contract that supports your business.

In this article:

• Learn the main differences between business and domestic energy.

• Understand how business energy contracts work - and why they’re not protected by the UK energy price cap.
• Discover what the differences mean for your business.

Businesses are not protected by the UK energy price cap 

One of the most fundamental differences between business and domestic energy is that businesses are not protected by Ofgem’s UK energy price cap.

No two businesses are the same. One standardised energy price cap would be tricky to effectively roll out across a variety of sectors.

Ultimately, businesses are expected to have more time, resource and incentive to shop around when it comes to signing new energy deals. Knowing your needs is important.

Our simple guide to business energy includes more information about suppliers and contracts types.

Businesses usually sign fixed-term contracts 

Businesses are far more likely to sign fixed-term contracts for their energy usage than domestic customers. As of May 2026, Ofgem found just 40% of domestic energy accounts are on fixed contracts.

In 2023, an Ofgem study found over three quarters of businesses were on a fixed-rate deal for gas and more than two thirds were on a fixed rate for electricity.

Businesses enjoy the predictability and protection against price volatility to allow for budgeting and long-term planning, while domestic users are already offered some protection thanks to the energy price cap.

• Top tip: Power Purchase Agreements (PPAs) are long-term contracts that allow a business to buy electricity directly from a renewable energy generator, often at a fixed or predictable price.

Energy prices are tailored to each business 

Unlike domestic energy, there is no one-size-fits-all business energy tariff.

Business energy use is more varied than domestic use. A small office, a bakery and a manufacturing site all use energy in completely different ways, which is why suppliers assess each business individually.

UK households use different amounts of energy but patterns of usage are predictable.

Suppliers assess each business individually, which is why comparing quotes is often far more important for businesses than it is for households.

Businesses can negotiate energy contracts

Following on from the previous point, households are usually offered a standard price by suppliers. What you see is what you get. You sign up and away you go.

Businesses have greater scope to compare suppliers and find tariffs that suit their needs:

The larger the business, the greater the opportunity to negotiate. Suppliers want your business.

Businesses may pay more VAT

Domestic energy users are usually subjected to a reduced 5% VAT rate, but businesses generally pay the standard 20% rate.

Several categories of business may benefit from the reduced rate:

• Low energy users (approx. less than 4,397kWh gas or 1,000kWh electricity).
• Mixed-use premises (if at least 60% of the site is used for domestic purposes).
• Charities (and not-for-profit organisations).
• Residential (hospices, care homes, self-catering holiday lets).

Make sure you’re paying VAT at the correct rate.

Business energy contracts have renewal deadlines 

Domestic users have a contract end date when their tariff expires and they are moved onto a standard variable tariff until they sign up for a new contract.

However, business energy contracts tend to come with strict renewal deadlines and notice periods that require you to take action anywhere between 30 to 120 days before your deal ends.

You must negotiate a new contract with your current or a new supplier within this renewal window or you could be automatically enrolled on a new deal, often with higher rates.

What businesses should do before renewing an energy contract 

1. Know how much energy you use: this gives you a baseline for comparing quotes.
2. Know your usage patterns: you could benefit from time-of-use tariffs with different day/night rates.
3. Know what you’re paying for: look beyond the headline kWh unit rate and check you’re paying the correct non-commodity costs, including VAT, other taxes and levies.
4. Know the differences between fixed and flexible contracts: each comes with pros and cons.
5. Know when your contract ends: don’t roll over onto out-of-contract rates which are usually far higher.

How we can help

Business energy is confusing. You know you need to stay on top of such a major cost, but that can be difficult while focusing on running your business and serving your customers.

We get it. We can support you.

Troo exists to help businesses like yours make sense of their energy needs, simplify complex information and make smart decisions that lead to real change and reduced costs.

We are not here to sell you a quick fix. We're here to understand what matters to you, offer clear advice, and take ownership of the hard parts, so energy becomes one less thing to worry about.

Book a free energy health check today for practical guidance on your business electricity, gas or water bills.