Yes, a business energy supplier can ask for a security deposit, and in the end it's the supplier who decides whether you need one and how big it is. But as of October 2026, Ofgem expects the amount to be reasonable, clearly explained and refundable. You're also allowed to ask for a smaller deposit, or none at all.
It's a question lots of businesses run into at this time of year, with winter renewals going through and suppliers credit-checking new and returning customers. Here's how deposits work and what you can do if you're asked for one.
Why is my supplier asking for a security deposit?
A security deposit protects the supplier if you don't pay your bills. Ofgem describes deposits as one way suppliers manage their risk when they decide a non-domestic customer carries some credit risk. It also points out that a deposit can mean a business still gets offered a supply contract when it otherwise might not.
The usual triggers are:
- a weak or thin credit file, which is common for start-ups and newly formed companies
- a history of late payment or debt with the same or another supplier
- a large expected bill compared with the size of the business
- getting reconnected after being cut off for non-payment
Ofgem's June 2026 guidance for non-domestic suppliers says it knows suppliers are doing more credit checking, especially with high prices and more credit risk in the market. It accepts that suppliers may ask for a deposit when they take you on as a customer.
Is there a legal limit on how much a supplier can ask for?
There's no fixed cash cap for business customers. As of October 2026, Ofgem's good practice guidance says a deposit shouldn't exceed a reasonable amount. Suppliers can judge what's reasonable based on how much risk they're willing to take. Ofgem notes that some suppliers start from up to three months of future energy use.
Ofgem's best practice guide on deposits says suppliers have told it they often use three months' estimated usage. That figure is linked to how long it would take them to disconnect a customer who stops paying.
A few other points from the guide:
- The size should match your risk. Ofgem's best practice is for the amount to vary with the level of credit risk the supplier has assessed for your business, not to be one flat figure for everyone.
- Billing frequency matters. A business billed monthly would usually face a smaller deposit than one billed quarterly, because an unpaid quarterly bill can grow larger before anyone notices.
- Reconnection deposits. If you're asked for a deposit to get reconnected, Ofgem expects it to be reasonable too. It shouldn't unfairly stop you getting your supply back.
The guidance doesn't create new legal duties for suppliers. But since 1 July 2024, Ofgem's Standards of Conduct have applied to businesses of every size, not just microbusinesses. That means suppliers must treat all non-domestic customers fairly. A deposit that's out of proportion and never explained is worth challenging on that basis.
What should the supplier tell me?
Under Ofgem's best practice guide, a supplier that wants a deposit should write to you clearly and promptly, setting out:
- that it has assessed your creditworthiness, and the reason it wants a deposit
- how it worked out the amount, and what that amount is
- when and how you'll get the money back
- any other options that could lower its credit risk
The guide also expects suppliers to publish a short summary of how they assess creditworthiness on their website. If you've been quoted a deposit with no written explanation, ask for one before you sign.
If you went through a broker, remember that brokers can handle deposit arrangements for suppliers. Ofgem has asked suppliers to make sure the brokers they work with know about the best practice guide.
Can I negotiate or avoid paying a deposit?
Often, yes. The supplier makes the final call, but Ofgem notes the deposit is something you can weigh up when comparing other offers. A large deposit is part of the real cost of a deal.
Things worth asking about:
- Switching to monthly billing and Direct Debit, which can shrink the deposit
- Paying in instalments rather than one lump sum
- Other forms of security. Ofgem notes suppliers also manage risk in other ways, such as credit insurance and bank guarantees. Ask whether any of these would be accepted instead of cash.
- Showing evidence of a good payment record, such as recent bills paid on time or up-to-date accounts
- A shorter contract or a lower estimate of your usage, if the supplier has overestimated what you'll use
Don't ignore the request. Supplier terms often let them act if you don't pay. For example, EDF's small business terms list not paying a requested deposit among the reasons it can end the contract or stop your supply.
Will I get my deposit back, and with interest?
You should get it back, minus anything you still owe. Ofgem's best practice is that suppliers let you ask for a full or partial refund during the contract if your credit position materially improves. They should explain how to ask and what evidence they need, such as better finances or a change to how you pay. They should also deal with refund requests promptly.
Whether you earn interest depends on your supplier's terms, and practice varies. EDF's small business terms say a deposit is returned in full with interest, as long as there's nothing to deduct. SSE Energy Solutions says it doesn't pay interest, and that any money owed is taken from the deposit before it's returned. It also says deposits are outside the scope of VAT. So check the refund and interest clause before you pay.
When you leave, any unpaid invoices will usually be taken out of the deposit first. Pay your final bill promptly so the balance comes back sooner.
What if I think the deposit is unfair?
Start with a formal complaint to the supplier. Say why you think the amount is unreasonable and ask for the calculation in writing.
If it isn't resolved, you may be able to go to the Energy Ombudsman. As of October 2026, the Ombudsman accepts disputes from microbusinesses and small businesses. A small business is one with fewer than 50 employees and a turnover of no more than £6.5 million or a balance sheet of no more than £5 million. Businesses using no more than 200,000 kWh of electricity or 500,000 kWh of gas a year also count. Your supplier has eight weeks to sort out the complaint, unless it sends you a deadlock letter that lets you go to the Ombudsman sooner.
If you're a small business struggling to pay, Ofgem expects suppliers to know about the Citizens Advice Extra Help Unit, which helps small businesses in this situation.
One safety point: only ever pay a deposit to the supplier itself, using contact details you've checked on its official website or a bill. Be wary of any unexpected call or email demanding an urgent deposit, especially one that threatens disconnection.
What to do next
- Get the deposit request, the reason for it and the calculation in writing before you sign.
- Check whether the amount looks like more than three months of your expected usage, and ask why if it does.
- Ask whether monthly billing, instalments or a bank guarantee would reduce or replace the deposit.
- Read the refund and interest clauses in the terms.
- Diary a review date and ask for a refund once you've built up a record of paying on time.
- Keep evidence of on-time payments and up-to-date accounts.
- If you can't agree, complain formally, then go to the Energy Ombudsman after eight weeks or once you get a deadlock letter, if you're eligible.
This is general information, not financial advice.