Energy is one of the biggest costs in any care home — and suppliers know it. From VAT errors to hidden rollover contracts, here are the ten most common ways operators are overcharged, and exactly what to do if you spot them.
By AI Edge UK Energy Team:
Important: Unlike domestic customers, businesses and care homes have no Ofgem price cap protection. Commercial energy is entirely unregulated — which means suppliers can and do charge significantly above market rates, particularly if you're out of contract or on a deemed rate. Research consistently shows businesses on out-of-contract rates overpay by 33% or more compared to fixed-rate deals.
You're Paying 20% VAT When You Should Be Paying 5% VERY COMMON
This is the single biggest and most overlooked overcharge in care home energy billing. Care homes are classified as residential premises, which means they qualify for the reduced VAT rate of 5% on gas and electricity — not the standard commercial rate of 20%.
The problem is suppliers don't apply this automatically. They default every commercial premises to 20% unless you submit a VAT declaration certificate. Many care homes have been paying the wrong rate for years without realising it.
The difference is enormous. On a combined gas and electricity bill of £10,000 per quarter, paying 20% instead of 5% costs you an extra £1,500 every quarter — £6,000 a year. And you can claim refunds going back up to four years.
✅ What To Do
Check your bill right now — find the VAT section and confirm whether it shows 5% or 20%. If it shows 20%, contact your supplier immediately and ask for a VAT Declaration Certificate. Complete it, citing that your premises is residential care accommodation. Request a refund for up to four years of overpaid VAT. Reference HMRC VAT Notice 701/19 if they push back.
You're on a Rollover or "Out of Contract" Rate VERY COMMON
When a fixed-term energy contract expires, most suppliers automatically roll you onto their default "out of contract" or "deemed" rate. These rates are significantly higher — industry research consistently shows businesses on out-of-contract rates pay 30–50% more per unit than they would on a negotiated fixed deal.
Suppliers are not required to notify you prominently when your contract is about to expire, and renewal windows can be as short as 30 days before the contract end date. Miss that window and you could be stuck on punishing rates for months.
✅ What To Do
Find your contract end date on your bill or by calling your supplier today. If you are already out of contract, get competitive quotes immediately — comparison brokers like Bionic, Uswitch for Business, or Utility Bidder can obtain multiple quotes within 24 hours. Diarise your renewal date 6 months in advance going forward so you never get caught out again.
Your Bills Are Based on Estimated Meter Readings
If you see the letter "E" next to a meter reading on your bill, that figure is estimated — meaning your supplier has guessed your consumption rather than reading the actual meter. Care homes with high and variable energy usage are particularly vulnerable to this, as estimated readings are often based on historic data that doesn't reflect your current operation.
Estimates can go wrong in both directions. A run of underestimates leads to a large "catch-up" bill that arrives without warning. Overestimates mean you're paying for energy you haven't used — money that sits with the supplier earning nothing for you.
✅ WHAT TO DO
Check your bill for "E" (Estimated) vs "A" (Actual) or "C" (Customer submitted) meter readings. Submit actual meter readings to your supplier every month — most have an online portal or phone line to do this. Ask your supplier about a smart meter, which sends automatic readings and eliminates estimates entirely. If you've been overestimated, submit an actual reading immediately and request a corrected bill.
You're Being Charged Climate Change Levy (CCL) When You Shouldn't Be
The Climate Change Levy is an environmental tax added to commercial energy bills. Most businesses pay it — but care homes and residential facilities may be fully or partially exempt. If your premises qualifies for 5% VAT on the basis of domestic residential use, you should also be exempt from CCL on that qualifying portion.
This is almost always missed. Suppliers apply CCL by default to all commercial accounts and rarely flag the exemption to care home operators. For a medium-sized care home spending £80,000 a year on energy, CCL could be adding several thousand pounds to your bill unnecessarily.
✅ WHAT TO DO
Check your bill for a line item marked "CCL" or "Climate Change Levy." If you see it, and you've already submitted a VAT declaration for the reduced rate, contact your supplier and request CCL exemption at the same time. The exemption applies to the same qualifying residential portion of your usage. You may be able to claim back overpaid CCL historically.
Your Standing Charges Are Excessive or Wrong COMMON
The standing charge is the fixed daily fee you pay simply to be connected to the grid — regardless of how much energy you use. For commercial accounts, standing charges are entirely unregulated (unlike domestic bills which fall under the Ofgem price cap) and suppliers can set them at whatever level they choose.
Care homes with multiple meters — separate supplies for main building, laundry, catering, outbuildings — may be paying standing charges on meters that are barely used. Additionally, some suppliers add standing charges at the wrong contract rate, or fail to apply agreed caps or discounts.
✅ WHAT TO DO
List every meter you have on site and cross-reference each one with your bills. For any meter with very low usage, consider whether it can be de-energised or consolidated. Compare your daily standing charge against current market rates using a business energy comparison service. If you have a fixed contract, check that the standing charge matches what was agreed and signed.
You Have the Wrong Meter Profile Class
Every electricity meter in the UK is assigned a Profile Class — a number from 01 to 08 that describes your usage pattern and is used to calculate your bill. If your meter has been assigned the wrong profile class, you could be billed on entirely the wrong basis. Profile Class 00 (Half Hourly meters) is required for large users and attracts different charges to smaller profile classes.
This is a technical error that most operators would never spot without specialist knowledge, but it can mean thousands of pounds in overcharges accumulating silently over years.
✅ WHAT TO DO
Your profile class appears on your electricity bill, usually alongside your MPAN (Meter Point Administration Number). Compare it against your actual usage pattern. If your care home uses over 100,000 kWh per year on a single meter, ask your supplier or an independent energy consultant to confirm you're on the right profile class for your consumption level.
Your MPAN or MPRN Doesn't Match Your Meter SERIOUS
Your MPAN (Meter Point Administration Number for electricity) and MPRN (Meter Point Reference Number for gas) are the unique identifiers for your specific meters. If these numbers don't exactly match the physical meters on your premises, you could be paying someone else's bill — or another property could be benefiting from your supply.
This is particularly common after building works, extensions, or when moving into a property previously occupied by another business. It's a serious billing error that suppliers are obligated to correct and refund.
✅ WHAT TO DO
Find your MPAN on your electricity bill (it's a 13-digit number) and your MPRN on your gas bill (10 digits). Then physically check these numbers against the serial number displayed on your actual meters. If they don't match, contact your supplier immediately in writing and request an urgent investigation. Keep records of all correspondence.
You're on the Wrong Tariff for Your Usage Pattern
Care homes run 24 hours a day, 365 days a year — which means your energy usage pattern is very different from a typical office or retail premises. A standard flat-rate tariff may not be the most cost-effective option. Time-of-use tariffs (such as those offering cheaper off-peak rates during the night) can deliver significant savings for operations that can shift some consumption to cheaper periods — laundry, dishwashing, charging equipment.
Equally, if you have solar panels already, you may be on a tariff that penalises export or fails to take advantage of Smart Export Guarantee (SEG) rates now available from many suppliers.
✅ WHAT TO DO
Ask your current supplier what tariff type you are on and whether time-of-use or Economy 7-style commercial tariffs are available. For care homes with solar or battery storage, compare SEG export rates across providers — rates currently range from around 5p to 15p per kWh depending on the supplier, so the right choice makes a material difference to your returns.
Unexplained or Duplicate Charges on Your Bill
Commercial energy bills can contain a range of additional line items beyond the unit rate and standing charge — transportation charges, capacity charges, meter operator charges, data collection fees, and more. These should all be consistent with your contract, but errors do occur. Suppliers have also been known to apply charges from a previous period to a current bill, or to apply duplicate standing charges when accounts are restructured.
In 2024, Ofgem forced ten major energy suppliers to refund over £7 million to 34,000 customers after a compliance review found systematic overcharging errors — proof that these issues are not isolated.
✅ WHAT TO DO
Compare this month's bill line by line against the previous month's. Any new charge that has appeared without explanation should be queried immediately in writing. Ask your supplier for a full breakdown of every charge and the contractual basis for it. For persistent disputes, escalate to the Energy Ombudsman, who can make binding decisions on billing disputes.
You've Never Had an Independent Energy Audit HIGH IMPACT
Perhaps the biggest overcharge of all is a silent one — simply never having benchmarked what you're paying against what comparable care homes actually pay. Many operators have been with the same supplier for years, auto-renewing contracts, assuming the bills are correct, and never questioning whether a better deal exists.
Independent energy consultants and brokers can review your bills, verify your tariff, check your VAT classification, identify CCL exemptions, and run a full market comparison — often at no cost to you, as they earn commission from suppliers on successful switches.
✅ WHAT TO DO
Commission an independent energy review. Gather your last 12 months of gas and electricity bills and share them with a specialist. At AI Edge UK, we offer a free, no-obligation energy bill review for care homes — we'll go through every charge, check your VAT status, and tell you exactly what you should be paying. Many care homes we review find savings of £10,000–£40,000 per year.
| # | sue | Potential Annual Loss | Difficulty to Fix |
| 1 | Wrong VAT rate (20% instead of 5%) | £4,000–£20,000 | Easy — one declaration form |
| 2 | Out-of-contract rollover rates | £5,000–£30,000 | Easy — switch supplier |
| 3 | Estimated meter readings | £500–£5,000 | Easy — submit readings |
| 4 | CCL charged incorrectly | £1,000–£8,000 | Easy — linked to VAT declaration |
| 5 | Excessive standing charges | £500–£3,000 | Medium — requires comparison |
| 6 | Wrong meter profile class | £2,000–£15,000 | Medium — specialist needed |
| 7 | Wrong MPAN/MPRN on bill | Varies — can be significant | Hard — requires investigation |
| 8 | Wrong tariff type for usage | £1,000–£10,000 | Medium — tariff switch needed |
| 9 | Duplicate or unknown charges | £200–£3,000 | Easy — query and dispute |
| 10 | No independent audit ever done | £10,000–£40,000 | Easy — get a free review |
If your supplier won't resolve a billing dispute: You can escalate to the Energy Ombudsman (ombudsman-services.org/energy) after 8 weeks of unresolved complaint, or if you receive a deadlock letter. The Ombudsman can make binding decisions and force refunds. For VAT disputes, you can also submit a VAT error correction directly to HMRC — advisable for amounts over £10,000.
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