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.

Written by

Dan Tremain

Energy and business energy expert

Last Updated

11 MARCH 2024

8 min read

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 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. You need to also take into account the standing charge. This is a flat fee that’s charged every day – regardless of whether you use any energy – and is used to pay for the cost of infrastructure and getting the power to your premises.

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?

If you’ve never switched business energy suppliers, you’ll most likely be paying out-of-contract rates. These are usually a lot more expensive than fixed rates, but you’re not tied into this type of contract. This means you can switch to a fixed 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 these out-of-contract rates.

You might also want to switch business energy 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.