Is There an Energy Price Cap for Businesses?

Rapidly escalating costs throughout 2022 brought the issue of energy prices to the top of the news agenda, drawing particular attention towards the level of the energy price cap for consumers. But does this also apply to businesses? After all, energy is one of the biggest expenses that many businesses incur, and if you want to keep control of your overheads, energy costs are one of the best places to start. 

What is the Energy Price Cap?

The energy price cap was introduced in January 2019. It limits what consumers pay for each unit of gas and electricity used and sets a maximum daily standing charge (the cost of having a property connected to the grid). It's based largely on wholesale energy prices (those that the suppliers themselves pay) and applies only to providers' standard and default tariffs. The price cap changes every three months: January, April, July, and October.

Does the Energy Price Cap Apply to Businesses?

The energy price cap applies only to residential customers on standard variable tariffs.

There is no equivalent energy price cap for businesses. Market conditions and negotiated contracts between businesses and suppliers determine commercial energy rates. Business size, energy usage, and contract terms influence pricing. 

Unlike residential customers, businesses must actively manage their energy contracts to secure competitive rates. As of April 2025, companies continue to face fluctuating energy costs due to ongoing volatility in the global energy marketplace. While government schemes like the Energy Bill Relief and Discount Schemes previously provided temporary support, these measures ended as of April 2024.

Current Energy Price Caps

As of the 1st of April 2025, the UK energy price cap for households on standard variable tariffs is set at £1,849 per year for typical usage, marking a 6.4% increase from the previous cap of £1,738. This cap, regulated by Ofgem, limits the maximum unit rates and standing charges suppliers can impose. For electricity, the unit rate is 27.03p per kWh, with a daily standing charge of 53.80p. For gas, the unit rate is 6.99p per kWh, with a daily standing charge of 32.67p.

Recent changes include consecutive quarterly increases driven by rising wholesale energy costs. The cap rose by 10% in October 2024, followed by a 1.2% increase in January 2025. Despite these increases, the current cap is 22% lower than its peak during the energy crisis in early 2023. While the cap ensures fair pricing, the size of your bill will ultimately depend on your energy consumption. Fixed-rate tariffs may offer savings compared to the cap, especially as analysts predict a potential drop in the cap to £1,712 in July 2025.

How Commercial Energy Prices Affect SMEs

Fluctuating energy prices significantly impact UK small businesses, particularly those in energy-intensive sectors such as manufacturing and hospitality. Rising costs strain operational budgets, disrupt cash flow and reduce profit margins, making it challenging for businesses to remain competitive.

One study by Octopus Energy highlights how regional pricing reforms could benefit businesses. By relocating operations to areas with abundant renewable energy, such as Scotland, businesses could reduce wholesale energy costs by up to 65%. Flexible energy usage during off-peak times could further cut costs by over 99%. Another example involves a PwC survey from last year, which found that 81% of UK businesses expect to raise prices in response to high energy costs. In comparison, over 70% reported reduced domestically and internationally competitiveness. 

Managing Business Energy Costs Within the Price Cap Framework

Managing energy costs effectively is crucial for businesses, especially in a volatile market, and there are actionable strategies for keeping them down.

Renewable energy is the future, and investing in on-site renewable energy sources like solar panels could significantly benefit your bottom line in the long term. You may wish to explore green energy tariffs to reduce both your long-term costs and your carbon footprint.

It is also important to reduce your energy consumption through greater energy efficiency. Upgrading to energy-efficient equipment and lighting will cut your costs, while you can also implement smart energy management systems to monitor and optimise usage. By conducting regular energy audits, you'll be able to identify inefficiencies and areas for improvement.

You can even benefit from changing the times during which your business is operational. Shifting energy-intensive operations to off-peak hours could allow you to benefit from lower rates, while using Demand-Side Response programmes may earn your business incentives for reducing consumption during peak times.

Energy audits can also be crucial when negotiating new contracts with suppliers. By understanding your own energy usage, you’ll be better positioned to determine which tariffs best suit your business. Consider contract length, pricing structure (fixed vs. variable, for example), and flexibility. 

The period before signing the contract is the only time that you’ll be able to change anything, so make sure that you research thoroughly and get quotes from more than one supplier to compare and contrast them. Using energy brokers or consultants for expert advice may get you better deals than you can find yourself.

And you can always attempt to leverage during negotiations. Suppose you can negotiate contracts when market prices are low, typically during periods of reduced demand. In that case, you may find better deals on offer, while you should also try to ensure that contracts have clauses for price reviews and early termination, as well as having the flexibility to adjust usage further down the line, should you need to. 

Future of Energy Prices for Businesses

Energy prices for businesses in the UK are expected to remain volatile due to global market conditions. Experts predict fluctuations driven by geopolitical tensions, supply chain disruptions, and the transition to renewable energy sources. Analysts suggest that businesses should prepare for potential price increases in late 2025, with wholesale gas having already hit a two-year high this year.

Previous government statements have emphasised the importance of energy efficiency and renewable adoption to mitigate costs. The Department for Energy Security and Net Zero have highlighted plans to expand clean energy infrastructure to reduce reliance on fossil fuels. 

Potential regulatory changes include incentives for renewable energy investments and reforms in regional pricing to benefit businesses in areas with abundant renewable resources. However, no new legislation addressing business energy price caps has been announced.

Even without the protections still being afforded to domestic energy users, businesses can take action to keep their costs under control. Greater energy efficiency is crucial, and auditing your use to gain a greater understanding of how your business uses its energy is a great way to begin to understand what you can do. 

The key to lowering those prices once your contract is up for renewal is to negotiate. Business energy use is treated quite differently from residential energy use, and bringing in someone to negotiate on your behalf may benefit your bottom line. 

It’s widely expected that prices will increase again later this year, so what are you waiting for? Making robust changes to your practices will have a positive effect on the well-being of both your business and the planet, and with winter now a long way away; there’s plenty of opportunity to make those switches today!