Do business energy deposits get refunded?

What a deposit is

A security deposit is money a supplier asks for up front to cover the risk that you won't pay. It isn't a payment towards your usage. Ofgem notes that suppliers can pick customers using factors such as size of supply or credit rating, and a deposit is a common result of a weak credit profile. See business energy security deposits for the full picture.

Will you get it back?

We found no rule that fixes a refund date for business deposits, and Ofgem's good-practice guidance for non-domestic suppliers on debt and disconnection lists whether a deposit is appropriate, and its size, as areas it looks at, but it sets no formula, review date or refund date, and it is not a licence condition. The practical answer is in your contract or deposit letter. Ask:

• When will the deposit be reviewed?
• What payment record gets it released or credited to your account?
• What happens if you leave the supplier? Is it returned or offset against your final bill?

Get the answers in writing.

If you leave or the supplier fails

On leaving, the usual outcome is the deposit is used against what you owe, with any remainder returned, but check your terms. If your supplier fails, Ofgem says business credit balances are not protected by its Safety Net. It will try to get the replacement supplier to honour some or all credit, but that is not guaranteed, and in most cases you claim from the failed supplier's administrator. Ofgem's page does not mention deposits separately, so ask both the administrator and the new supplier how yours will be treated, and have proof of payment ready. See what happens if your supplier goes bust.

Challenging a deposit

In a letter to non-domestic suppliers dated 15 November 2022, Ofgem said it had seen deposit demands that "appear unreasonable in the circumstances" and could block firms from getting a contract. So you can push back.

1. Ask how the amount was calculated. There is no published standard method, so the supplier should be able to explain its own.
2. Offer evidence of payment history, or alternatives such as direct debit or paying more often.
3. Get quotes from other suppliers.
4. Complain, then escalate to the Energy Ombudsman after 8 weeks if you are a micro or small business.

Example: a deposit of £1,500 on a bill of £500 a month equals three months' bills. Ask whether a smaller amount would work.

Keep records of what you paid

Note the date, amount and payment method of any deposit, and keep the supplier's letter. If you later move premises or switch, quote those details when asking for the money back. If the supplier is slow, put the request in writing and follow the complaints route.

A deposit paid to a broker rather than a supplier is a different matter; ask what it is for and whether it is part of the contract.

What a fair process looks like

A reasonable supplier should explain why it wants a deposit, how the sum was set, when it will be reviewed and how it will be returned. If you only get a demand with a deadline, ask for those details before paying anything.

Next steps

Read how your credit score affects prices and business energy credit checks.