Introduction

Energy prices have been a major concern for UK businesses over the past few years. The energy price cap is a government measure designed to protect consumers from excessively high bills. But what does this cap mean for commercial customers?

In this article, we’ll explain what the energy price cap is, how it applies (or doesn’t apply) to businesses, and what UK commercial customers should do to manage their energy costs effectively. Whether you’re running a small shop, a growing SME, or managing a large commercial facility, understanding the implications of the price cap is crucial for financial planning and sustainability.

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✅ What Is the Energy Price Cap?

The energy price cap is a limit set by Ofgem, the UK’s energy regulator, on the unit rates and standing charges that energy suppliers can charge domestic customers on standard variable or default tariffs. It is reviewed and updated quarterly to reflect wholesale market conditions and government interventions.

The cap is designed to:

• Protect domestic consumers from volatile market prices.
• Prevent suppliers from charging unreasonably high rates.
• Offer a benchmark for energy tariffs.

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✅ Does the Price Cap Apply to Commercial Customers?

No, the energy price cap does not apply to commercial or business customers. It is strictly for domestic users. Businesses negotiate their energy contracts directly with suppliers, and the rates are determined by:

• Market conditions at the time of the contract.
• Contract length and terms.
• Business size, usage, and credit profile.

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✅ Temporary Government Support for Businesses

Although the price cap doesn’t protect commercial customers, the UK government has previously introduced temporary relief measures during energy crises, such as:

• Energy Bill Relief Scheme (EBRS) – Introduced in October 2022 and ended in March 2023, this scheme offered discounts to non-domestic energy users.
• Energy Bills Discount Scheme (EBDS) – A replacement for EBRS, providing limited support from April 2023 to March 2024 for eligible non-domestic customers.

Important: These schemes are not the same as a price cap and are subject to change or expiration.

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✅ How Commercial Energy Pricing Works

Commercial energy tariffs are not regulated by a cap. Here’s how pricing is typically structured:

• Fixed Contracts: Lock in unit prices for a period (1-5 years).
• Variable/Deemed Contracts: Prices can fluctuate and are often higher.
• Flexible Purchasing: Large businesses may opt for contracts that allow purchasing energy in tranches based on market trends.

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✅ Key Factors That Affect Business Energy Costs

1. Market Wholesale Prices
2. Contract Type (Fixed or Variable)
3. Time of Use and Load Profile
4. Business Size and Location
5. Energy Broker or Consultant Involvement

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✅ What Can Businesses Do to Manage Energy Costs?

Even without a cap, businesses can take steps to minimize their exposure to high energy costs:

✔️ 1. Work with a Trusted Energy Broker

Energy brokers help businesses secure competitive deals by comparing multiple suppliers and tailoring contracts to your usage profile.

✔️ 2. Review Your Contract Regularly

Don’t wait until your contract expires. Start reviewing it 3–6 months before expiry to lock in better rates.

✔️ 3. Implement Energy Efficiency Measures

Upgrade lighting, insulate buildings, install smart meters, and encourage staff energy awareness.

✔️ 4. Use Energy at Off-Peak Times

Some tariffs offer cheaper energy during evenings or weekends. Shift operations where possible to benefit.

✔️ 5. Monitor Market Trends

Keep an eye on energy market news or partner with brokers who can advise on when to fix prices.

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✅ Benefits of Understanding the Energy Price Cap

While the cap doesn’t apply to you directly, understanding how it shapes the energy landscape can help:

• Anticipate shifts in your own energy rates.
• Recognize market trends that may affect business contracts.
• Communicate more effectively with suppliers and brokers.

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✅ Conclusion

The UK energy price cap is a vital tool for domestic consumers, but unfortunately, it offers no direct protection for commercial energy users. However, by staying informed, working with energy consultants, and implementing strategic purchasing and efficiency plans, UK businesses can mitigate rising costs and gain better control over their energy spending.

If you’re unsure whether your business is paying too much or you need help securing a better contract, FMG Energy Solutions Ltd is here to help. Contact our expert team for a free consultation today.

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✅ FAQs

❓1. Does the UK energy price cap apply to commercial properties?

No. The cap only applies to domestic energy customers.

❓2. Can businesses get any form of government energy support?

Yes, schemes like EBRS and EBDS provided temporary support, but they are not permanent or guaranteed.

❓3. How can my business reduce energy costs?

Use energy brokers, review contracts early, invest in efficiency, and consider fixed-rate deals when prices are low.

❓4. Are fixed-rate contracts better for businesses?

Fixed-rate contracts provide budget certainty and protect you from future price hikes.

❓5. Who sets the energy price cap in the UK?

The energy price cap is set by Ofgem, the energy regulator for Great Britain.