What To Do If You Can’t Afford to Pay Your Business Energy Bills
If your business can’t pay its energy bills, you have various options. But you’ll need to proceed carefully, as a failure to pay bills when due is one indicator of potential insolvency.
Follow the guidelines below to explore setting up a payment plan, negotiate a payment holiday, or taking professional debt advice.
- Managing Increased Company Gas and Electricity Utility Bills
- What Happens If I Can’t Pay My Energy Bills on Time?
- How Can I Negotiate Payment Terms with My Energy Supplier?
- Is It Possible to Get a Payment Holiday for Business Energy Bills?
- What Options Are Available If Our Business Cannot Afford its Energy Bills?
- What are the Disconnection Rules for Gas and Electricity for Businesses?
- Rescuing a Company that Can’t Pay Energy Bills
- If your Business Cannot pay its Energy bills and Needs to Close Down or Liquidate
Managing Increased Company Gas and Electricity Utility Bills
It’s a very tough time to be an energy-intensive business in the UK. Unlike households cushioned by the price cap, businesses are exposed to the full force of the volatile market, leading to triple-digit cost increases when your contract comes up for renewal. This financial squeeze comes as many contracts expire, leaving you vulnerable to provider discretion and no cap on tariffs or standing charges.
The pressure doesn’t stop there. Rising energy costs threaten operations and finances. Businesses grapple with reduced hours, potential layoffs, price hikes, and even closure. Planning for the future is clouded by market uncertainty fuelled by global factors and limited government support.
What Happens If I Can’t Pay My Energy Bills on Time?
If you can’t pay your company’s gas and electricity bills on time, several things can happen, and it’s essential to address the issue proactively to mitigate potential consequences. Here’s a general outline of what might occur:
- You’ll be Charged Late Fees and Interest: Most energy suppliers will charge late fees or interest on overdue payments, increasing the amount you owe.
- It Can Affect Your Business Credit Rating: Consistent late payments or defaults can negatively impact your business’s credit rating, making it harder to secure loans or negotiate favourable terms with suppliers in the future.
- You Could Risk Disconnection: In extreme cases, if bills remain unpaid for an extended period, your energy supplier may cut off your gas and electricity supply, severely impacting your operations.
How Can I Negotiate Payment Terms with My Energy Supplier?
Many suppliers are open to discussions about payment terms. Before reaching out to them, prepare a clear outline of your financial situation and how it’s impacting your ability to meet your energy bills. Have a proposal in mind, whether it’s extending payment deadlines, setting up a payment plan, or seeking a temporary reduction in charges.
Contact your supplier’s customer service or accounts department sooner rather than later. It’s important to ask for a meeting or call with someone who has the authority to make decisions.
During your conversation, articulate the challenges you’re facing and present your proposal. While it’s crucial to listen to any counteroffers the supplier may have, you should also be prepared to negotiate terms that are realistic and sustainable for your business.
If you reach an agreement, ensure that all new payment terms are documented in writing.
Is It Possible to Get a Payment Holiday for Business Energy Bills?
Yes, obtaining a payment holiday for business energy bills is possible under certain circumstances, but it largely depends on your supplier’s policies. A payment holiday allows a temporary pause on payments to help businesses manage through financial difficulties, but it’s not a standard offering and requires negotiation.
What Options Are Available If Our Business Cannot Afford its Energy Bills?
When you genuinely can’t pay, you have four options:
(1) Get a Business Energy Payment Plan
Most energy suppliers are willing to work with businesses to create payment plans that are affordable. To get started, contact your supplier’s payment arrears department.
(2) Get an Energy Efficiency Grant
Taking advantage of grants available to green your business and make it more energy efficient is a great way to save money on your energy bills in the long run. There are currently over £5 billion worth of grants available to UK businesses of all sizes, so it’s worth checking to see if you’re eligible.
(3) Get Help from the Energy Bill Discount Scheme
The Energy Bill Discount Scheme offers limited financial relief for businesses from 1 April 2023 to 31 March 2024. Businesses do not need to apply, as any eligible discounts will be applied to bills automatically.
However, the scheme will only provide discounts when the wholesale prices exceed £302/MWh for electricity and £107/MWh for gas. The maximum discount available is £19.61/MWh for electricity and £6.97/MWh for gas.
(4) Get Business Debt Advice
If you cannot afford the instalments on your energy plan, or your supplier won’t offer that to you because of your credit history, you’ll need to take business debt advice from an experienced insolvency practitioner such as ourselves.
This doesn’t necessarily mean the company will be closed down. There are restructuring options such as administration or a company voluntary arrangement that would mean protection from creditor threats for the duration. Speak with us to learn more about options via a free, no-obligation conversation.
What are the Disconnection Rules for Gas and Electricity for Businesses?
If your UK business faces the risk of gas or electricity disconnection due to unpaid bills, here’s a concise guide to the disconnection rules:
- You’ll Get Reminders: Expect reminder notices and final demands alerting you to outstanding debts.
- You’ll Receive a Formal Warning: A formal warning will be issued if payment issues are not resolved, indicating potential disconnection.
- A Final Notice Will Be Sent: This notice provides a final payment deadline to avoid disconnection.
- Legal Steps Are Required for Disconnection: Suppliers must obtain a court warrant to proceed with disconnection legally.
- Winter Disconnection Is Prohibited for Vulnerable Businesses: Disconnection is not allowed during winter (October to March) for small businesses considered vulnerable.
It’s worth noting that the exact process may vary slightly depending on the supplier and the specific circumstances of the business, but the above steps provide a general framework that all suppliers are expected to follow.
Rescuing a Company that Can’t Pay Energy Bills
For businesses grappling with energy bills they can’t afford, here are two formal rescue and restructuring pathways that could offer a lifeline, allowing the company to recover and potentially avoid liquidation.
Company Voluntary Arrangement (CVA)
- What It Is: A CVA is a legally binding agreement between your business and its creditors to repay a portion of its debts over a specified period.
- How It Helps: It allows your company to continue operating while paying off debts in a more manageable way. The terms often involve reduced payments and can sometimes include writing off a portion of the debt.
- Process: To initiate a CVA, you’ll need to work with an insolvency practitioner (IP) who will draft a proposal for your creditors. This proposal requires approval from creditors representing at least 75% (by debt value) of those voting on the proposal.
- What It Is: Administration provides a company with protection from its creditors while a plan is developed to restructure or repay debts, or to sell the business to repay debts.
- How It Helps: The aim is to rescue the company as a going concern, or at least achieve a better outcome for creditors than would be possible if the company were immediately wound up.
- Process: An administrator (an IP) is appointed to take control of the company. The administrator’s role includes making operational decisions, exploring restructuring options, or finding a buyer for the business or its assets.
Both options require careful consideration and professional advice, as they can have significant implications for the future of the business and its directors. It’s essential to consult with an insolvency practitioner such as ourselves early.
If your Business Cannot pay its Energy bills and Needs to Close Down or Liquidate
If your UK business cannot manage its energy bills and there’s no way to recover, a Creditors’ Voluntary Liquidation (CVL) is a formal process to close down the business responsibly.
Here’s a straightforward breakdown of the CVL process:
- Agree on Insolvency: The first step is for all directors to acknowledge the business can’t pay its debts and is insolvent.
- Appoint an Expert: An insolvency practitioner (IP) is appointed to manage the liquidation process.
- Inform Creditors: Creditors are notified about the decision to enter CVL and the forthcoming steps.
- Sell Company Assets: The IP sells the company’s assets to raise funds.
- Pay Debts: Money from the sale is used to pay creditors, following a legal order of priority.
- Dissolve the Business: Once debts have been addressed, the company is formally dissolved.
This process allows for an orderly wind-down, ensuring creditors are treated as fairly as possible.