Business energy tariffs per kWh

If you’re looking to cut the cost of your business energy bills, switching to a lower tariff could make a big difference. When it comes to comparing deals, it’s important to look at how much you’ll be charged per kWh.

Here’s what you need to know about comparing business energy prices per kWh.

If you’re looking to cut the cost of your business energy bills, switching to a lower tariff could make a big difference. When it comes to comparing deals, it’s important to look at how much you’ll be charged per kWh.

Here’s what you need to know about comparing business energy prices per kWh.

Emily Kindness
From the Business team
8
minute read
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Posted 24 AUGUST 2021

How are business energy tariffs calculated?

There are a number of costs that affect how much you’ll pay for your business electricity and gas usage. But when it comes to comparing new tariffs for both electricity and gas, there are two main costs you should look out for:

  • Unit cost – the amount you’ll pay for each unit of gas or electricity you use. The unit cost is measured in kilowatt hour (kWh).
  • Standing charge – a flat daily rate which covers the cost of transporting electricity or gas directly to your business premises. The standing charge remains the same, no matter how much energy you use.

If you’ve been stuck on the same tariff for some time, or have never switched, you could be paying far more than necessary for your energy. Switching to a deal which offers a lower unit rate and standing charge could make a big difference to your energy bills. Put simply, the less you pay per kWh, the cheaper your energy bills should be.

Once you know what to look out for, it should be easier to compare different energy tariffs. While every business is different and will have its own energy demands, it can also be useful to look at energy usage based on business size.

We’ve used data from our trusted partners Bionic, to give you an idea of how much, on average, UK small-to-medium businesses spend on their gas and electricity.

What is the average gas usage for small and medium businesses?

The table below shows the average business gas usage in kWh per year, based on business size:

Business size

Average gas usage per year in kWh

Microbusiness

10,000

Small business

25,000

Medium business

45,000

What is the average electricity usage for small and medium businesses?

The table below shows on average how much business electricity is used in kWh per year, depending on business size and energy demand:

Business size

Low-demand usage in kWh

High-demand usage in kWh

Microbusiness

5,000

15,000

Small business

15,000

25,000

Medium business

30,000

50,000

 

If your business uses more than 100,000 kWh of electricity per year, it will be classed as a ‘large’ business. In this case, you’ll be on a half-hourly meter and will be billed differently.

What is the average gas price per kWh?

The table below shows average gas prices per kWh and daily standing charges based on business size**. Prices may vary depending on your meter type and where your business is located, but it can give you an idea of how much you should be paying for your business gas.

Business size

Unit price per kWh

Standing charge per day

Average business gas bill per year

Microbusiness

3.9p - 4.5p

25.0p – 37.0p

£530

Small business

3.8p - 4.5p

25.0p – 45.0p

£1,150

Medium business

3.4p – 4.2p

25.0p – 61.0p

£1,860

 

**Prices may vary according to your meter type and business location. Standing charge and unit rates based on businesses that switched through our trusted partners Bionic between January 2021 and March 2021.

What are the average business electricity prices per kWh?

The table below shows the average price of electricity per kWh and daily standing charges based on business size***. Although prices can vary depending on your meter type and your business’s location, it can give you an idea of how much you should be paying for your business electricity.

Business size

Unit price per kWh

Standing charge per day

Average business electricity bill per year

Microbusiness

16.6p – 18.0p

25.0p – 32.5p

£1,834

Small business

16.2p – 17.7p

25.0p – 34.5p

£3,468

Medium business

16.0p – 17.0p

25.0p – 33.8p

£6,705

 

***Prices may vary according to your meter type and business location. Standing charge and unit rates based on businesses that switched through our trusted partners Bionic between January 2021 and March 2021.

Did you know?

Businesses pay a lower unit price per kWh than domestic customers. This is because they typically consume far more energy than the average household. Business customers can also negotiate a kWh rate, while domestic customers are given a fixed rate and will pay the same amount per kWh as the rest of their region.

What affects the price of gas and electricity per kWh?

The unit cost per kWh can vary between business energy suppliers, so it makes sense to shop around and compare tariffs. When working out a business energy quote, suppliers will look at a number of things, including:

  • The industry your business is in
  • The average annual energy consumption of your business
  • The size of your business
  • Your current business energy supplier
  • Where your business is located
  • The length of contract you agree

What else affects the cost of your business energy bills?

As well as the unit price per kWh and the standing charge, there are other charges that make up the total amount you pay. These can include:

VAT
The amount of VAT you’ll pay can depend on the type of business you run and the amount of energy you use.

Most UK businesses are charged 20% VAT. But you might be eligible for a discounted rate of 5% if:

  • You work from home and at least 60% of your energy consumption is for domestic use
  • Your business is a charity or non-profit organisation
  • Your business uses less than 33kWh of electricity per day, or 1,000kWh per month
  • Your business uses less than 145kWh of gas per day, or 4,397kWh per month

Wholesale energy charge
To make sure you don’t run out of gas or electricity during your contract, your energy supplier bulk buys energy from wholesale suppliers. The wholesale price can go up or down depending on the market, and this is ultimately passed on to you as a customer. This price can be affected by a number of things, from natural disasters to political unrest and conflict.

Climate Change Levy (CCL)
If you pay the standard VAT rate of 20%, you’ll also be charged a Climate Change Levy (CCL). This is an environmental tax applied to every unit of non-renewable energy a business uses.

IGT charges
If your business is located in a particularly rural area, it might not be connected to the National Grid. This means you’ll have to bear the costs of getting your gas supplied to your business premises by an Independent Gas Transporter (IGT). If your business gas is supplied by an IGT, your gas bill will probably be higher. This is because suppliers will need to pay the IGTs for using their pipes to get the gas to your property.

Smart meter charges
While smart meters are installed free of charge, there are still maintenance costs to pay. But the advantages of using a smart meter to help reduce your energy consumption far outweigh the extra charge added to your energy bill.

What should I consider when comparing business energy?

If you want to cut the cost of your business energy bills, then start by switching to a tariff with a lower unit rate and standing charge. Even if only one of these charges is lower, it could still make a difference to the overall amount you pay for your energy.

Just be aware that the lowest unit rate doesn’t necessarily mean it’s the cheapest deal for you. While a low unit rate is essential for energy-intensive businesses, lighter users might be better off with a tariff that has a low (or no) standing charge, even if the unit rate per kWh is higher.

The type of deal you choose can also affect the cost of your business energy bills:

  • Fixed rate tariff – the unit price per kWh is fixed and you’ll pay this flat rate for the length of your contract. While it can protect you against price hikes and help you to budget better, your bills will still go up and down according to your energy usage.
  • Variable rate tariff – the unit cost per kWh will go up or down in line with the current market price. If the price goes up, so will your energy bill – even if you consume more or less the same amount each month.

Frequently asked questions

Why else should I switch business energy suppliers?

While paying a lower unit rate is a big incentive, it’s not the only reason to switch business energy suppliers.

If you’ve never switched, it’s most likely you’re on a rolling contract – one which automatically renews even though it may no longer be the best tariff for you. You’re under no obligation to stay on a rollover contract, and your supplier can’t charge you an exit fee, so it should be easy to switch suppliers whenever you’re ready.

If your current contract is coming to an end and you don’t do anything about it, your supplier will move you onto out-of-contract rates, called ‘deemed’ rates, which can be much higher. According to Ofgem, around 10% of microbusinesses are on deemed contracts and are paying an average of 80% more than rates charged on a negotiated contract. It makes no sense to stay on a deemed contract as you could be paying far less for your energy elsewhere.

You might also want to switch suppliers because you’re unhappy with the level of customer service from your current supplier, or you might feel that a green energy supplier is more in line with your company ethos.

When should I switch business energy tariffs?

If you’re under contract, you’ll need to wait until you’re in the ‘switching window’ before you can start seeking a new deal. This is usually between one to six months before the contract’s end date. As soon as you’re in the switching window, start comparing new energy deals. This gives you time to get a new tariff in place ready for when your current one ends. Once you’ve decided on a deal you’re happy with, our trusted partners Bionic will be on hand to sort the finer details and arrange the switch for you.

What else can I do to cut my business energy bills?

Switching to a new tariff with a lower unit rate and/or standing order is one of the quickest ways to cut your business energy bills. But why stop there? There are plenty of things you can do to help cut your business energy costs and reduce your carbon footprint.

Top tips to cut down your business energy usage:

  • Carry out an energy audit to identify the most energy-guzzling areas of your business
  • Invest in energy-efficient lighting and computer equipment
  • Use laptops instead of desktop PCs – they use up a lot less energy
  • Educate staff on ‘thinking’ greener – even simple things like switching off computers instead of leaving them in standby mode can make a difference
  • Turn down the heating – just 1ºC lower could help reduce heating costs by around 8%
  • Solar panels are a big investment, but you might save so much more in the long run – plus, you’ll get paid for the electricity you don’t use per kWh, under the Government’s Smart Export Guarantee scheme

Find out what other energy-saving devices could help reduce your business energy bills.

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