Business Energy Bills: Tariffs, Rates and Prices

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    Contents

    Guide Author

    James Longley

    Managing Director

    min read

    We understand that choosing a business energy tariff can be confusing. There are a variety of energy tariffs to choose from, different charges on your bill, factors that affect wholesale energy prices and much more to consider. This is why we have put together our all-you-need-to-know guide on how to compare business energy deals.

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    What business gas and electricity tariffs are available?

    When comparing energy contracts, there is a huge variety of energy deals on the market, these include:

    Fixed-rate tariff

    A fixed-rate tariff fixes your unit rate for the period of your contract. The total cost of your energy bill may fluctuate depending on the gas and electricity you use. Fixed tariffs are a great option if you want to track your energy usage and energy efficiency.

    Variable rate tariff

    A variable tariff causes your unit rate to fluctuate based on market changes. If you secure a variable rate contract you may be paying less than a fixed deal or considerably more. The main risk with a variable rate tariff is that if energy costs dramatically increase, your energy bill will also increase.

    Deemed and out-of-contract tariffs

    If you do not secure a business energy contract, you will be placed on out-of-contract rates. Out-of-contract rates are known to be the most expensive business energy contract. If you are in this position, you are free to switch energy suppliers or agree to a new business energy contract at any time.

    Flexible tariff

    Certain sizable enterprises may qualify for a flexible rate tariff. Under this type of tariff, you can manage both the timing and quantity of your energy purchases. This approach enables larger businesses to capitalize on dips in the market, although it also exposes them to shifts in the wholesale energy market.

    What influences business energy prices?  

    Business energy prices are constantly fluctuating which is why it is important to find the best time to secure your business energy deal. Our energy experts are on hand to find the best business energy contract that suits you. Check out our guide to find out if you should fix your energy prices until 2024. There are a variety of factors that have caused energy rates to fluctuate, these include:

    An upsurge in demandEnergy costs reached historic lows during the initial lockdown of 2020 due to a drastic decline in energy usage. However, as the return to normalcy gradually increases energy supply and usage, prices also rebound. Energy expenses have surged by 50% in the last half-year, and gas prices have attained an all-time peak.

    Global occurrences – Global events have an impact on oil prices, and it all boils down to the principles of supply and demand. If conflicts, uncertainties, or natural disasters transpire in oil or gas-producing nations, these factors curtail production and accessibility, subsequently propelling prices upwards.

    Currency – Like other commodities, fluctuations in currency valuation can influence the cost of gas and electricity. Given that the UK imports a substantial portion of its energy from Europe, the strength of the pound relative to the euro contributes to cost variations.

    Weather conditions – Weather patterns can affect energy prices in a couple of ways. With the increasing reliance on renewable energy sources—Britain being a significant offshore wind generator responsible for nearly 40% of global capacity—a drop in wind levels diverts more natural gas to power stations, consequently leading to price spikes.

    Energy price regulation – The energy price cap, established to put an end to exorbitant energy costs, has essentially given suppliers a foundation around which they can structure their energy prices. While the energy price cap directly affects residential energy consumers, prices have climbed across the market. Business energy does not fall under the price cap, and governmental support for businesses is solely related to business energy unit rates.

    How are business energy bills calculated?

    There are a variety of factors that make up your business energy bill. It is important to understand these factors to help inform your decisions when your contract comes to an end. Below we have listed some of the charges that you can find on your energy bills:

    Unit rate

    This is the total you pay per kilowatt hour (kwh) for your business gas and electricity. Most of your energy bill will be made up of your kilowatt-hour usage multiplied by the unit rate.

    Standing charge

    The standing charge is a charge that most energy suppliers include on your energy bill. The standing charge covers the cost of keeping your home or business connected to an energy supply, conducting meter readings and maintenance.

    VAT

    The current UK VAT is set at 20%. However, some products and services are charged at a reduced rate of 5%, and some are completely exempt from VAT. Your business will be eligible for a reduced rate if:

    • Your usage needs to average less than 33kWh a day, or 1,000 kWh a month for business electricity
    • Your usage needs to average less than 145 kWh a day, or 4,397 a month for business gas

    Climate Change Levy (CCL)

    The Climate Change Levy (CCL) is based on the kilowatt hour (kWh) units of usage. This was introduced by the UK government to promote greater energy efficiency and reduce gas emissions. If you are eligible for the reduced 5% VAT rate, you will not pay the Climate Change Levy.

    Network charges

    The cost of maintenance to the gas and electricity supply networks will also be found on your energy bill. These charges can fluctuate and can increase your bill, and may include:

    • Transmission Network Use of System (TNUoS)
    • Balancing Services Use of System (BSUoS)
    • Distribution Use of System (DUoS)

    Your energy suppliers may list these separately on your energy bill.

    Metering costs

    These costs are related to the maintenance of your energy meters, whether you have a traditional or smart meter. Energy suppliers normally include this on your energy bill rather than being an upfront cost. Check out our guide on smart meters to find out more.

    Additional government policy costs and fees

    These additional government policy fees may be passed on from your business energy supplier. These can include:

    • Renewable Obligation Certificates (ROCs)
    • Contracts for Difference (CfDs)
    • Feed in Tariffs (FiTs)
    • Capacity Market (CM)

    Similarly, to network fees, depending on your energy suppliers, these fees may be shown differently on your bills.

    What happens when your business energy contract ends?

    When your energy deal comes to an end, you may be placed on out-of-contract rates. Our energy experts can help compare energy prices and contracts on your behalf to help take the hassle out of sorting your energy renewals.

    Compare Business Gas & Electricity Prices

    No two businesses are the same, so it’s impossible to give an exact figure – factors such as your location, sector and tariff, as well as consumption, will all have an impact.

    However, we’ve put together the chart below detailing how much gas and electricity businesses of a similar size to yours use annually, the average kWh unit price for gas and electricity and the average standing charges to give you a rough idea.

    Average electricity kWh Prices by business size

    Business size Annual usage Unit price (per kWh) Daily standing charge (pence) Annual cost
    Micro business 5,000 to 15,000 kWH 31.2p 79.0p £3,408 (based on annual usage of 10,000 kWh)
    Small business 15,000 to 25,000 kWh 31.4p 115.0p £6,699 (based on annual usage of 20,000 kWh)
    Medium business 25,000 to 55,000 kWh 31.1p 160.0p £13,024 (based on annual usage of 40,000 kWh)
    Large business More than 55,000 kWh 30.6p 178p £17,479 (based on annual usage of 55,000 kWh)

    Disclaimer: Due to volatility within the energy market, prices can change on an hourly basis meaning that the prices you’re quoted are different from the averages shown. Prices may also vary according to your meter type and business location. Updated June 2023.

    Average gas kWh Prices by business size

    Business size Annual usage Unit price (per kWh) Daily standing charge (pence) Annual cost
    Micro business 5,000 to 15,000 kWH 9.8p 53.1p £1,119 (based on annual usage of 10,000kWh)
    Small business 15,000 to 30,000 kWh 9.1p 65.7p £2,286 (based on annual usage of 22,500kWh)
    Medium business 30,000 to 65,000 kWh 8.7p 111.8p £4,540 (based on annual usage of 47,500kWh)
    Large business More than 65,000 kWh 8.5p 111.8p £5,993 (based on annual usage of 65,000kWh)

    Disclaimer: Due to volatility within the energy market, prices can change on an hourly basis meaning that the prices you’re quoted are different from the averages shown. Prices may also vary according to your meter type and business location. Updated June 2023.

    What are out-of-contract rates?

    Did you know that you could end up paying more for your energy if you allow your contract to expire? These rates are known as ‘out of contract’ or ‘deemed’ energy rates and could result in high energy bills. Check out our guide where we reveal the price of ‘out-of-contract rates’ compared to in-contract rates, as well as how many businesses across the UK could be paying more than needed.

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    What is the difference between business energy and home energy?

    There are a variety of reasons why business energy contracts differ from domestic energy contracts, these include:

    1. Bespoke Contracts: Business energy contracts are not available as standard options. Every contract is bespoke to suit the specific needs of your business.
    2. Fixed-Term: Business energy contracts are fixed-term and do not allow for early termination. Unlike residential energy contracts, there is no cooling-off period for business energy.
    3. Contract Renewal: New business energy contracts can be signed up to ten months before the expiration of the current contract. However, the new contract will only become effective once the existing one ends. In comparison, domestic energy users can switch their energy contracts at any time, though they might encounter early exit fees unless their contract is within its final 49 days.
    4. Energy Sources: Businesses have the option to source both gas and electricity from a single supplier. However, there is no provision for a dual fuel option as seen in domestic contracts.

    It’s important to note that the rules slightly vary if you work or operate your business from home, or if you are classified as a micro business. For more details, refer to our guide on micro business energy.

    Are business energy prices cheaper than home energy prices?

    Although business energy bills often exceed domestic energy bills, this is due to business energy consumption being considerably higher than domestic usage. To find out whether business energy deals offer more cost-effective solutions than residential contracts, it’s important to examine the shared costs in both types of bills:

    • Unit Rate: For businesses, the unit rate hinges on factors such as business size, energy consumption, and contract duration. In contrast, residential energy users typically pay a set rate based on the chosen fixed-rate tariff.
    • Standing Charge: This cost is associated with delivering energy to your property and maintaining its connection to the energy grid. Business energy users often face higher standing charges compared to domestic customers.
    • VAT: While homeowners are subject to a 5% VAT rate on energy bills, business energy bills are subject to 20% VAT, though certain businesses may qualify for a discounted VAT rate of 5%.

    What to consider when choosing a business energy deal

    No matter which tariffs you opt for, it’s important to remember that energy suppliers do not provide dual fuel packages. Even if you decide to secure an energy contract with the same supplier, these will be separate contracts.

    The rates you pay for your business energy will be based on several factors including your consumption, location, and financial status. If you have a low credit score, you could be charged more expensive rates as your business is identified as a higher risk.

    How to quickly compare business energy tariffs with Utility Bidder

    Our energy experts are ready to help compare the market to find the best business energy rates to suit your needs. Give us a call on 01858 410000 and we will handle the entire switching process on your behalf.

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    Let’s save time, can we automatically gather meter information?

    ? What does this mean?
    To get your quotes at lightening speed we need several key pieces of information which can all be found on your electricity bill. But by simply ticking this box, we can search ‘industry held data’ to get your meter number, electricity consumption and current energy supplier. This means that we can get you quick quotes without asking you to dig out all of your paperwork. This is personal data therefore we need you to allow us to access this information.
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    Do you know your electric meter number?

    Does your meter number end in any of the following?

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    Enter meter number
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    How much do you spend & how often?

    An estimate is fine if you don't have a bill to hand

    Start date for a new contract?
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    How much do you spend & how often?

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