Micro Business Electricity Explained

Most small business owners have never heard the term “micro business” in an energy context. That’s a problem, because Ofgem’s definition of a micro business determines what protections apply to your contract, what dispute resolution routes are available to you, and in some cases, which tariff structures you can access.

If you don’t know which category your business sits in, there’s a reasonable chance you’re not getting the treatment you’re entitled to.

The Ofgem definition

Under Ofgem’s rules, a business qualifies as a micro business if it meets at least one of the following criteria:

Fewer than 10 employees
Annual electricity consumption below 100,000 kWh
Annual gas consumption below 293,000 kWh
Annual turnover or balance sheet total below €2 million

It’s an “or” test, not an “and” test. A business with 8 employees and electricity consumption of 150,000 kWh still qualifies as a micro business on the employee headcount alone. The practical significance: micro businesses are classified as non-domestic consumers but are afforded a set of protections that don’t apply to larger commercial customers.

To contextualise the consumption thresholds: 100,000 kWh of electricity is roughly what a small hotel, a busy restaurant, or a mid-sized office building might consume in a year. If you’re a sole trader running a shop or a small professional services firm, you’re almost certainly well under that threshold.

What the classification actually gives you

The micro business classification isn’t just a label. It carries concrete protections under the supply licence conditions that Ofgem mandates for licensed electricity and gas suppliers:

Shorter notice periods for contract changes. Suppliers must give micro business customers at least 30 days’ notice before making any changes to contract terms or prices. Larger non-domestic customers don’t automatically get this protection.

Auto-rollover restrictions. Suppliers can only roll over a micro business contract once, and must notify you within a specified window before doing so. If they don’t give proper notice, you can exit the rolled-over contract without penalty. This is a significant protection given how many businesses end up locked into overpriced rollover deals simply through inaction.

Access to the Dispute Resolution Ombudsman. Micro businesses have the right to escalate unresolved complaints to the Dispute Resolution Ombudsman (formerly the Energy Ombudsman) — a free, independent dispute resolution service. This route isn’t available to larger commercial customers, who must pursue disputes through more expensive legal or commercial channels.

Clearer billing requirements. Suppliers must provide micro business customers with bills and statements in a clear, intelligible format. There are also requirements around estimated vs actual meter readings and the timeframes for issuing bills after a contract ends.

Where micro businesses most commonly get it wrong

In practice, I see two recurring issues with micro business customers across Telnergy’s client base.

Unnoticed auto-rollovers. Supplier notification letters for contract renewals are easy to miss or misfile. Many businesses don’t realise they’ve been rolled over until the bill goes up noticeably. By that point, they’re already locked in. If you’re a micro business and your supplier didn’t give you the required notice before rolling your contract, you have grounds to challenge it. We regularly help clients identify and act on exactly this.

Incorrect classification by the supplier. Some suppliers misclassify micro businesses as standard commercial customers, either through data errors or because the account was set up without the right consumption or headcount information. This means they’re not receiving the protections they’re entitled to. If your account is on a standard commercial tariff and your consumption and headcount meet the micro business criteria, it’s worth checking how your supplier has classified you.

Smart meters and micro businesses

The smart meter rollout for business customers is ongoing, and micro businesses are within scope. A smart meter provides half-hourly consumption data transmitted directly to your supplier, replacing estimated billing with actual reads. For most micro businesses, this is straightforwardly beneficial — it removes billing disputes caused by estimated reads and gives you visibility over your consumption patterns.

However, smart meters don’t automatically mean lower bills. They give you data. What you do with it matters. A business that reviews its consumption data and identifies that it’s running significant load during peak periods can shift that load and reduce costs. A business that ignores the data gets the same bill it would have had with an old meter, just more accurately measured.

One practical note: smart meter readings should still be cross-checked against your bills, particularly in the early months after installation. Metering data errors do occur, and catching them quickly is easier than untangling months of incorrect charges later.

Procurement considerations for micro businesses

At sub-100,000 kWh consumption, a micro business is in a part of the market where the difference between the best and worst available rates can be significant in percentage terms, even if the absolute annual saving is smaller than for larger sites.

The key variables are the same as for any commercial customer: contract timing relative to wholesale market conditions, the choice between fixed and flexible pricing, and the quality of the contract terms beyond the headline unit rate. What differs is that micro businesses often have more flexibility in contract length and switching rights than larger commercial customers, particularly given the auto-rollover protections.

For businesses at or near the micro business consumption threshold, it’s also worth understanding that crossing 100,000 kWh moves you into half-hourly mandatory metering territory — which changes both your cost structure and your reporting obligations. If you’re growing towards that threshold, planning for it in advance avoids an unwelcome surprise at your next renewal.

Need help reviewing your position?

Telnergy works with micro businesses across the UK on contract procurement, bill auditing, and supplier disputes. If you’re not sure whether your current contract is right for your consumption level, or if you think you’ve been misclassified, we’re happy to take a look.

Call 01202 028888 or email hello@telnergy.com.

FAQ

Does my business automatically get micro business protections?

Only if your supplier has correctly classified you. It’s worth confirming this with your supplier directly, particularly if you’re a newer customer or your account was set up on a standard commercial tariff.

What if my supplier didn’t notify me before auto-rolling my contract?

As a micro business, you have grounds to challenge the rollover. Contact your supplier in writing, citing the Ofgem supply licence condition requirement for advance notice. If they don’t resolve it, escalate to the DRO.

My consumption is under 100,000 kWh but I have 15 staff — am I a micro business?

Yes, under Ofgem’s rules. The consumption threshold alone qualifies you. You don’t need to meet all the criteria — any one of them is sufficient.

Is Ofgem’s micro business definition the same as the Companies Act definition?

No. The Companies Act has its own micro-entity accounting thresholds (turnover under £632,000, balance sheet under £316,000, 10 or fewer employees). For energy supply purposes, Ofgem’s definition is what applies. The two frameworks serve different purposes and don’t align precisely.

Telnergy Limited is an independent commercial energy consultancy established in 2002, based in Christchurch, Dorset. Ofgem registered TPI · ADR Ref E3561 · CRN 04576876.