Locking in the cheapest business electricity prices can increase the bottom line. Not surprisingly, the majority of the businesses in the UK opt for one of the ‘Big Six’ suppliers who have the largest market share.
When it comes to commercial electricity tariffs, there are no one-size-fits-all, company demand profiles differ and it can be difficult to find contracts tailored to your exact requirements. Comparing business electricity rates can save time and all the work of having to call up each company individually.
If you’re looking to get quotes, you can start by filling out the form at the top of the page and someone from our team will get in touch with you.
Business Electricity Prices UK*
The comparison table below shows the average business electricity rates per kWh sorted by the size of the business. These figures do not include Climate Change Levy (CCL) charges and are accurate as of Q3 of 2020.
|Business Size||Price Per kWh (pence)|
|Very Small||16.36 p/kWh|
|Very Large||10.20 p/kWh|
|Extra Large||10.09 p/kWh|
The average price per kWh for the non-domestic market stands at 11.99p per kWh.
The table below shows the MWh consumption of electricity per annum and the size of the business.
|Business Size||Annual Electricity Consumption (MWh)|
|Very Small||0 - 20|
|Small||20 - 499|
|Small/Medium||500 - 1,999|
|Medium||2,000 - 19,999|
|Large||20,000 - 69,999|
|Very Large||70,000 - 150,000|
The graph below displays the trend in commercial electricity pricing (excluding CCL) from Q1 2009 to Q3 2020.
Top 10 Best Business Electricity Rates From Suppliers
|Supplier||Unit Rate (p/kWh)||Standing Charge (p/day)||Annual Cost*|
* Figures are to be used as a rough guideline and are correct as of writing (January 2021). All prices are for 12 month fixed contracts. We contacted each business electricity supplier and received quotes for a premise consuming 12,000 kWh per year in London (inside A406). Rates are exclusive of CCL & VAT charges.
Business electricity bills have multiple components, there are taxes, raw electricity costs, infrastructure expenses and more. Below we’ve outlined how this is split out and what payments contribute to.
The unit rate is the bulk of your payment and is priced in pence per kilowatt-hour. This component consists of:
- Wholesale Electricity Cost – The energy markets are constantly fluctuating to meet supply and demand. For example, during a cold period demand may increase further as businesses need more heating. Suppliers buy ‘raw’ electricity in large bulk known as the ‘wholesale cost’ which have a direct impact on the electricity unit rate paid by the end consumer.
- Network Energy Loss – Naturally, a small fraction of electricity is lost as it travels across the grid. This ‘loss’ never reaches your meter reading but business power companies may add on an ‘unbilled’ amount which equates to around ~1% of the total.
Working it out: If the unit rate quoted is 16p, we can estimate the total by multiplying this by the kWh consumed in a given timeframe. For example, if 15,000 kWh is consumed per year:
15,000 (kWh) x 0.16p = £2,400
A daily standing charge is a payment to a supplier to cover the transportation costs of delivering energy to your premises.
If your business doesn’t utilise energy on weekends/holidays or is seasonal, you may want to opt for a no standing charge tariff. This will stop you from being charged on days where you’re not consuming electricity.
A standing charge is composed of:
- TNUoS Cost – Once wholesale energy is purchased by your supplier, the Transmission Use of System charge applies to energy that is transported to your business.
- DUoS Cost – DUos (distribution Use of System) charges are levied by Distribution Network Operators (DNOs). These are regional bodies who are responsible for the transport of energy to your place of business operation.
Working it out: Let’s say we’re quoted 33p for a daily unit, we can multiply this by 365 days to get to the total yearly payment:
If the standing charge is 33p, we can multiply this by 365 days (year):
0.33 x 365 = £120.45
Tip: Some quotes are given until the end of the month you are in but for the next year.
For example, if quotes are requested on the 21st of January, the supplier may calculate the number of days until the end of January in the next year. In this scenario, the total calculated units would be 375 instead of the usual 365.
Climate Change Levy
CCL (Climate Change Levy) is an energy tax which applies to commercial customers for both electricity and gas tariffs. The aim of the levy is to reduce carbon emissions and increase energy efficiency across the UK.
CCL is chargeable to the unit (kWh) components of your energy bill, this does not include the standing charge.
Moreover, there are separate CCL rates for business electricity and gas. The cost as of writing (January 2021) for business electricity CCL stands at 0.00811 p/kWh. This rate will decrease by ~4.5% to 0.00775 p/kWh from 1 April 2021. Charges are collected by your energy supplier on behalf of the UK Government.
Exemptions apply for organisations such as charities. Smaller businesses that utilise less than 1,000kWh of electricity per month qualify for an exemption. When inquiring for quotes, ask if your business qualifies under these criteria.
VAT is chargeable at the standard rate of 20% on business electricity. If your usage is below 1,000 kWh per month you can qualify for a reduced ‘De minimis‘ rate of 5%.
Moreover, if you believe you have paid more VAT than required, you can apply for a refund and this amount can be backdated for up to 4 years.
Discounts & Charge Reductions
There are some discounts and other charges which companies may qualify for:
- Payment Method – Setting up a direct debit guarantee can reduce your bills. Some suppliers offer discounts of up to 7%.
- New Customer – If you switch or sign up to a new supplier, they sometimes offer reduced rates for new businesses.
- Non-for-profit – Organisations such as charities are eligible for a reduced VAT rate of 5%. They’re also exempt from Climate Change Levy charges.
What are Deemed & Out of Contract Rates?
- Deemed Rates – Deemed rates apply when a business moves into a new premise and they’re tied to the previous occupant’s existing supplier. These rates can be much higher than in-contract variants so it’s recommended that you switch to a new supplier as soon as you can.
- Out of Contract Rates – If a company’s current business electricity contract expires the rates then revert back to a ‘default’. These rates can generally be higher than your agreed ‘in-contract’ rates and it’s recommended you get back into a contract as soon as possible.
Commercial Electricity Contract Tariff Types
Securing a business electricity tariff contract at different price points can have a significant impact on your companies bottom line. Therefore, is it imperative that you select a contract which reduces overhead by taking advantage of the best rates possible. The commercial market for business electricity comes in different forms, unlike their domestic equivalent which incorporates measures such as supply caps. However, below we have outlined the major tariff packages available so you can make an informed decision.
A fixed energy tariff is an agreed set price between your company and your supplier for a set term. The advantage of a fixed contract is that they are usually some of the cheapest on the market. Your fixed price for each unit of business electricity doesn’t change throughout the duration of the agreement. Fixed tariffs come with larger exit fees than other contracts, but the upside is that you are protected from any sudden increase in prices which you may get with a variable rate contract.
Variable Rate Tariffs
A variable-rate tariff is generally more flexible than fixed and doesn’t have exit fees. The unit of electricity is variable at the discretion of your business electricity supplier.
Blend & Extend Tariffs
Businesses can take advantage of falling electricity prices by undergoing what’s known as a ‘blend and extend’ or ‘mid-term review’ on their existing contract. In a scenario where a company has agreed their business electricity rate at a higher or peak price, they can then extend that contract by a further 12 or 24-month period to lock in the current lower rate. This allows the business to take advantage of an average or ‘blended’ pricing structure.
Some suppliers offer this type of contract which can help businesses improve their cash flows and reduce their overheads.
Green Business Tariffs
Green business electricity tariffs offer energy which is sourced from 100% renewables such as wind, solar & hydropower.
Green energy costs slightly more than their standard counterparts as the cost of producing renewable energy is higher. However, eco-friendly contracts have become increasingly prevalent in recent years as businesses become more conscious of their carbon footprint.
There have been some innovative developments in this area such as Octopus Energy’s move to price their energy in accordance with local wind speeds. This comes following their acquisition of wind turbines in south Wales and Yorkshire.
Economy 7 is an electricity-only tariff which reduces your unit rate for off-peak hours (night time). This plan is advantageous for companies that operate in the 7 hours at night when it’s cheaper. However, the pricing per unit rate increases dramatically during normal business hours, often more so than usual fixed or variable tariffs. Not all energy suppliers offer this rate. If you are a business that predominantly has nighttime (CONT)
Industrial electricity rates for customers that consume more than 100,000 kWh per year require what is known as a half-hourly meter. Also known as ’00 meters’, these devices record the use of electricity every 30 minutes known as ‘settlement’ and are compulsory.
Note: As of 1 April 2017, Ofgem introduced changes to the Balancing and Settlement Code (BSC P272). Customers with profile classes 5 to 8 must have their energy consumption recorded every 30 minutes. Your supplier will notify you if you’re affected by this.
Regional Differences In Business Electricity Rates*
Business electricity ranges in price according to your location, in fact, this is one of the largest cost factors. A business which is more remote on the grid will generally pay more as the transport costs more for a DNO.
The table below is a rough guideline as to how electricity is priced in different regions. The cheapest region is London at 12.05 p/kWh, in contrast, the most expensive areas for commercial electricity is North Wales, Mersey & Cheshire at 13.80 p/kWh, closely followed by North Scotland at 13.79 p/kWh.
|Region||Electricity (pence per kWh)|
|South East England||12.53|
|North West England||12.84|
|North East England||12.91|
|South West England||13.64|
|North Wales, Mersey & Cheshire||13.80|
*data source: Bulb
By observing rates across the UK, London may be the cheapest as it’s a large cluster that may contain more energy infrastructure in comparison to places like North Scotland which are a lot more secluded.
How To Compare The Cheapest Business Electricity Prices
Here are some top tips on how to get cheaper business electricity along with why you should consider them.
- MPAN Number – Know your unique identifier number (21 digits) and have it ready for when you’re requesting quotes. This will allow the energy company to look up your exact usage patterns using a centralised database.
- know your consumption level – Do you know roughly how many kWh/MWh of electric your business consumed per year? This will always be asked, it’s optional but can give the supplier a better idea of your usage.
- Location – In the scenario where you are moving your business, you can supply your new postcode. The new area may have lower rates for transportation (DNOs) which could help.
- Know your contract end date – Jot it down in the diary. You want to compare the best possible rate for your business annually to ensure you are not overpaying.
- Longer-term contract – Perhaps you should consider locking in a longer duration contract which is known to reduce rates.
Business Electricity FAQ
Is Electricity Cheaper For Businesses?
Compared to residential customers, businesses pay slightly less for their electricity, but they have higher taxes. However, they can pass on many of the costs to their customers.
According to the Department for Business, Energy and Industrial Strategy, UK average residential electricity prices in 2020 were 17.2p/kWh. In comparison, the average cost of commercial electricity in 2021 is 14.4p/kWh.
On top of this, UK residential electricity users pay a reduced VAT of 5%. In contrast, businesses pay the full 20% VAT rate plus additional environmental taxes, such as the Climate Change Levy for electricity, which is 0.775p per kWh. You can find the current Levy details on this UK Government webpage.
How much electricity does a small business use?
The electricity usage for small businesses varies depending on what the company does. For example, suppose you are a small office-based insurance broker or solicitor’s office. In that case, you will use far less electricity than a small manufacturing or engineering company using power tools all day long, or a micro-brewery using heaters and pumps.
Power usage also depends on the size of the small company. On average small companies like a micro-business use 8,000kWh/year. While a small business uses 20,000kWh/year, and a small-medium business uses 40,000kWh/year.
Finally, how much each company pays for their electricity depends on their contract with the supplier.
How much is a commercial unit of electricity?
The price of a commercial unit of electricity, measured in kWh, depends on which power company supplies your electricity and your contract.
Many different electricity companies are available to choose from, and each has a unique standing charge and tariff.
For example, British Gas Business Tariffs are currently 14.82p/kWh to 15.22p/kWh, while their standing charge varies from 24.69p/kWh to 29.45p/kWh.
In comparison, another leading industrial, commercial and business energy supplier, Total Gas & Power, offers tariffs from 15.19p/kWh with a standing charge of 30.34p/kWh.
Don’t just look at these two companies. There are many more, with their own pros and cons. But, moreover, one of them will suit your business perfectly. Use the form on this page to get professional help in choosing the best energy supplier for your business.
Note: We’ve compiled a list of business energy providers.
What if I’m running my business from home?
The answer to this question depends on the type of business you run. Commercial energy companies generally concentrate on businesses with premises separate from domestic properties. For example, suppose you have a home workshop or another home industry using significant amounts of power, such as a dairy farm. In that case, it is worthwhile asking an electricity supplier to install a separate commercial electricity meter, so you pay a separate bill.
If, however, your business doesn’t use much electricity, you can still benefit by paying less tax. This is because Her Majesty’s Revenue and Customs (HMRC) provides tax relief for home-based businesses. In this case, you can choose to claim for a part of your domestic bills, using receipts as evidence of business use. Alternatively, you can claim a flat rate of £4 per week for using your home as a workplace, but you don’t need to supply receipts as proof.
In all things tax-related, discuss this with the tax accountant who prepares your company books before submission to HMRC. They know your circumstances and can advise accordingly.
What are out of contract rates?
Out of contract energy rates come into play when an energy contract expires, without a new agreement to take its place. In cases such as these, the rates you pay revert to a default charge. These charges will be higher than your agreed contract as it won’t take into account the negotiations you’ve agreed with the supplier. Avoiding ‘out of contract rates’ is probably the best incentive to keep track of when your existing contract comes to an end. And to re-negotiate a new agreement to carry on seamlessly from the old contract.
If you’re considering renewing your contract and would like to compare business electricity quotes, you can do so by filling out the form on the top of this page. We search the market for the best possible rates which are tailored to your business requirements.