What makes up a business electricity rate
Every business electricity bill is built from the same parts:
| Part of your bill | How it is charged | What to know |
|---|---|---|
| Unit rate | Pence per kWh | The cost of the electricity you use. Some meters have different day and night rates. |
| Standing charge | Pence per day | A fixed daily cost for your supply and connection. |
| Climate Change Levy | Per kWh | A government environmental tax. Low users and charities are usually exempt. |
| VAT | Percentage of your bill | Usually 20%. The reduced 5% rate applies if you use under 33 kWh a day. |
The unit rate gets the most attention, but for a small shop or office the standing charge can make up a large share of the bill.
Business electricity tariffs explained
Business electricity tariffs describe how your price is set and how long it lasts.
- Fixed rate tariffs lock your unit rate and standing charge for the contract, usually one to five years.
- Flexible tariffs buy energy in stages, so prices can move during the contract. They suit larger users.
- Two rate tariffs such as Economy 7 charge less at night and suit businesses that use power out of hours.
- Half hourly tariffs apply to larger sites with half hourly meters, where costs depend on when you use electricity.
- Out of contract and deemed rates apply when you have no active contract. They are usually the most expensive way to buy.
Why your rate is different from another business
Two businesses on the same street can pay very different business electricity rates. The main reasons are:
- Usage. Suppliers price low, medium and high users differently.
- Meter type. Standard, two rate, half hourly and smart meters each carry different costs.
- Region. Network charges vary by distribution area across Great Britain.
- Contract length. Longer fixes and shorter fixes are priced differently.
- Timing. Your rate reflects the wholesale market on the day it is priced.
- Credit. Some suppliers price differently or ask for a deposit based on business credit checks.
Business electricity prices per kWh: how to work out your annual cost
To compare quotes fairly, work out the total annual cost of each one. The formula is:
(Annual kWh × unit rate) + (365 × standing charge) = annual cost before CCL and VAT
For example, with illustrative figures only: a business using 15,000 kWh a year on a unit rate of 25p per kWh and a standing charge of 60p per day would pay £3,750 for the units plus £219 for the standing charge, giving £3,969 a year before the Climate Change Levy and VAT.
Run the same sum for each quote and you will quickly see which is genuinely cheaper for your business.
Average business electricity rates
Averages published online can be a useful sense check, but they change often and are based on typical usage bands that may not match your business. Treat them as a guide only and judge any offer on a quote priced for your own meter and usage.
How to get a better rate at renewal
- Start comparing several months before your contract end date.
- Have a recent bill ready with your MPAN and annual usage.
- Compare the total annual cost, not just the unit rate.
- Check how the broker is paid and that the fee is shown in your contract.
- Never let your contract roll onto out of contract rates.
Want quotes based on your own usage? Use the form at the top of this page or compare business electricity prices.