Hotel business energy

A hotel, guest house or B&B buys energy as a business, on a commercial contract, with no Ofgem price cap and no cooling-off period once you agree a deal. What you pay depends mainly on how much electricity and gas you burn, how your meter is set up, and when your contract ends. The sections below cover the points that matter most for accommodation businesses.

Why hotels and B&Bs are a distinct case

Accommodation is one of the few sectors where energy use runs all day and all night. Guests expect hot water at 6am, a warm room at midnight and a lit reception at all hours. Unlike a shop, you cannot simply switch things off when the doors close, and your busiest energy days (cold weekends, full houses) are exactly when you can least afford to cut back.

Typical heavy users are hot water and heating (often gas), laundry, kitchens, lighting, and, in bigger hotels, lifts, ventilation and any pool or spa. A six-room B&B may look more like a large household than an office, but it is still a business supply, so business rules apply.

Are you a microbusiness, a small business or neither?

This decides which protections you get. Under Ofgem's definitions you are a microbusiness if you meet any one of these: fewer than 10 employees and turnover or balance sheet no more than €2m; or electricity use under 100,000 kWh a year; or gas use under 293,000 kWh a year. A small business is under 50 employees and turnover up to £6.5m (or balance sheet up to £5m), or electricity up to 200,000 kWh, or gas up to 500,000 kWh.

Because each fuel is tested separately, a mid-sized hotel can be a microbusiness for electricity and a small business for gas. Our guide to what counts as a microbusiness for energy explains the tests in more detail. The practical gains are the right to take an unresolved complaint to the Energy Ombudsman (micro and small), and extra protections on notice, rollovers and back-billing (micro only).

What accommodation businesses pay: a worked example

Take a six-room B&B using 45,000 kWh of electricity and 60,000 kWh of gas a year. For illustration we use the micro-sized average fixed rates published by Moneysupermarket Business on 21 October 2026: electricity 28.4p/kWh plus 58.0p a day standing charge; gas 8.8p/kWh plus 44.9p a day. Those are comparison-site averages, not a quote, and your own rate depends on region, credit and meter.

Item	Sum	Cost
Electricity units	45,000 × £0.284	£12,780.00
Electricity standing charge	365 × £0.58	£211.70
Gas units	60,000 × £0.088	£5,280.00
Gas standing charge	365 × £0.449	£163.89
Before VAT		£18,435.59
VAT at 20%	£18,435.59 × 0.20	£3,687.12
Total		£22,122.71

Whether the quoted unit rate already includes Climate Change Levy varies by supplier, so always ask. The levy is 0.801p/kWh from 1 April 2026 for both electricity and gas.

Changing the unit rate by just 1p/kWh on 45,000 kWh of electricity moves the bill by £450 before VAT. That is why the rate on your renewal letter matters more than the sticker price of any extra.

VAT: hotels pay 20%, self-catering may not

HMRC's fuel and power notice says hotels, inns and similar establishments do not count as residential accommodation, so supplies to them are standard-rated, so 20% VAT is the normal position for a hotel, inn or B&B. The reduced 5% rate only applies to qualifying use. For a business that means the small-use limits: up to 33 kWh a day of electricity or 145 kWh a day of gas at a premises.

Our B&B uses 45,000 ÷ 365 = about 123 kWh of electricity a day, well over 33, so the full 20% applies. The notice does list self-catering holiday accommodation among qualifying residential uses, so a holiday cottage that is separately metered may be treated differently from your main guest house. The temporary 0% VAT on electricity, which runs from 1 October 2026 to 30 June 2027 (extended from the 31 March 2027 end date HMRC first announced), covers only qualifying domestic and charity non-business use, not hotel use. See which VAT rate applies to your business energy and whether zero VAT applies to your business.

If you live on the premises, part of the supply may be domestic. The 60% rule applies: if at least 60% of the supply is for qualifying use the whole supply is reduced-rated; below 60%, only the qualifying share is. You would normally need a separate meter or a reasonable written split.

Meters, supply type and seasonality

Small guest houses are usually on a basic (non-half-hourly) electricity meter with a profile class, meaning your supplier estimates how your use is spread. Larger hotels often have a half-hourly meter, which records every 30 minutes and tends to bring separate charges for network use. If your hotel sits in a seaside or rural area with big seasonal swings, ask any supplier how they price you if your use is much lower in winter, and check the standing charge, because that is payable even if rooms are empty.

Gas is often your biggest swing factor. If you run a commercial boiler for hot water, a fixed price shields you from winter spikes, but a fixed deal also stops you benefiting if wholesale prices fall.

Contracts and renewals to watch

Most hotels sign a fixed term of one to three years. The things that catch accommodation businesses out are:

• Auto-rolling contracts. Suppliers can roll a fixed term over only on certain conditions and for no more than 12 months. Diary your end date and your supplier's notice window. See rollover contracts.
• Deemed or out-of-contract rates. If you take over a hotel or your contract lapses, you may land on a pricier default rate. There is no termination fee, so you can leave at once. Our out-of-contract cost calculator shows what that costs.
• Change of ownership. Buying a going concern does not move the old contract to you automatically. Tell the supplier the date you took over and take meter readings.

Cutting use without cutting guest comfort

The cheapest kilowatt hour is the one you do not buy. Common, low-risk steps for accommodation include keycard systems that cut power in empty rooms, LED lighting in corridors, boiler servicing and sensible hot-water temperatures, and laundry loads timed to avoid half-empty machines. A simple energy audit can show which of these pays back fastest at your site. We do not promise a percentage saving, because it depends on your building.

If something goes wrong

If your supplier bills you wrongly, complain to them first. If it is not resolved after eight weeks, or you receive a deadlock letter, a micro or small business can take the complaint to the Energy Ombudsman, normally within 12 months of the deadlock letter. Our page on energy disputes and the Ombudsman walks through it.

Next steps

1. Find your contract end date and annual kWh for each fuel on your latest bill.
2. Work out whether you are micro or small for each fuel.
3. Use our business energy cost calculator to check you are not overpaying.
4. Ask at least two suppliers or an independent broker for quotes, and request the broker's fee in writing (see energy brokers and commission).