Comparing cheap business electricity prices and tariffs for commercial enterprises is generally a little less straightforward than comparing rates for consumers.
The reason is that there are far more business electricity plans out there than there are for home consumers. Which plan is right for you, and how much it will cost, will depend on the type, size and location of your business.
The table below compares the current electricity tariffs and rates UK energy companies are offering on their variable rate deemed contract. We’ve included both the unit price (price per kWh) and the standing charge.
These rates are essentially the worst case scenario. You can almost certainly pay far less just by entering into a formal contract (either fixed term or variable) with a business energy supplier.
Business Electricity Prices*
* Notes about tariff comparison (Updated 02/01/2020): Prices were believed accurate at the time of publication (02 January, 2020) and are based on non-half hourly contracts, (profile classes 01-04) at deemed rates unless these were not available, in which case default and/or out of contract were used. Both standing charges and price per kWh (unit price) are shown. If tariffs differed across regions, the price in London was used. The first 6 companies listed are all the big six energy suppliers. Sources for all data can be found at the bottom of this page. While we attempt to provide the most accurate information possible, we take no responsibility for any inaccurate pricing displayed above. Contracts and prices are the sole prerogative of the energy companies themselves and we have no control over them and are subject to change at any time.
What’s The Difference Between Unit Rate and Standing Charge?
- Unit Rate: The unit rate is the price you pay for the amount of electricity you use and is given in pence per kWh. This is the bulk of what you pay for electricity.
- Standing Charge: The standing charge is the price you pay for your business to have access to electricity and is priced in pence per day.
A word of warning:
Most price comparisons will focus on the unit rate rather than the daily standing charge, because it generally had the biggest impact on your bill. However, you should not ignore the daily standing charge as it can make a big difference it how much you pay.
Here’s an example.
Say you’re a business using 10,000 kWh per year paying 18 p/kWh with a daily standing charge of just 25p per day. You’re offered a new contract for only 14 p/kWh (a 20% savings!) but with an increased daily standing charge of 125p per day.
Under your old contract you’d pay a total of £1,891.25 per year for electricity (£1,8000 for usage plus £91.25 for standing charges).
And while you might expect to pay 20% less under the new contract, you’d actually end-up paying £1,856.25 a mere 2% savings, because the higher daily standing charge ate up all your savings. (£1,400 for usage + £456.25 for standing charges).
How To Get Cheaper Electricity Rates?
For example, E-On offers business customers nighttime rates that are as much as 22% cheaper per kWh than their daytime rates whereas Bulb offers business rates as low as 12.05p per kWh (in London).
However, you may be able to do even better than 12.05p/kWh with a fixed term contract.
Fixed term contracts often offer savings of 40-60% below the rates listed above, with some still offering electricity at prices below 10p/kWh.
Therefore, the single best thing you can do to save money on your business electricity bill is to compare contracts. You can get started now by filling in the form at the top of the page.
What’s the average price per kWh for business electricity?
- Very Small: 16.09 p/kWh
- Small: 13.95 p/kWh
- Small/Medium: 12.44 p/kWh
- Medium: 11.51 p/kWh
- Large: 11.25 p/kWh
- Very Large: 10.01 p/kWh
- Extra Large: 9.68 p/kWh
- Average: 11.66 p/kWh
Therefore, if you’re a small business and paying more than 13.95 p/kWh for your electricity contract, you’re paying more than average.
The government has also reported that: “the average price of electricity, including CCL, has risen by 8.0% in real terms over the past five years and by 4.6% on the previous year.”
Do small businesses pay more for electricity than large ones?
Yes. The chart above shows that that the difference is very large. On average very small businesses pay 6.41 p/kWh more for electricity than very large businesses do. That’s a 66% difference!
There are a few reasons why this happens. The first is that big buyers can get volume discounts and are also more sophisticated energy users.
However, another major factor is the fact that big businesses shop around for their electricity whereas the majority of small businesses don’t.
Should I Switch Electricity Suppliers?
However, price isn’t the only consideration. You should also take into account the reliability of the company and customer service quality. Energy companies are notorious for having poor customer service ratings, so picking a supplier with better overall reviews may be worth paying a slight premium for.
But you should be aware that there is no cooling off when period when switching business electricity suppliers and that your current supplier can refuse the switch if you’re still under contract with them and/or you have outstanding debt.
How Much Can I Save If Switch Suppliers?
The answer of course is that depends on your current tariff rate, your usage and the availability of deals in your area.
As an example, a very small business using 10,000 kWh per year that switched form paying the average rate of 16.09 p/kWh to a rate of 12.05p/kWh would save £404 per year (assuming the same daily standing charge; see above).
Obviously, the savings could be lot bigger if you use more energy, you’re current tariff rates are higher and/or you can get a lower price for a new tariff.
What Types of Business Electricity Tariffs Are Available?
- Fixed Rate Contracts: The name really says it all. These contracts fix the price you pay for a set period of time. Typical contacts last between 1 and 3 years, although some suppliers offer them as long as 5 years. These are recommended for most small business customers as they tend to offer the best value.
- Variable/Flexible Rate Contracts: Again the name says it all. The price you pay will depend on the wholesale price of electricity, which means it can go up or down. The main advantage these types of plans offer over fixed rate ones is that they usually allow you to switch suppliers at any point.
Bigger customers who use more than 100,000 kWh of electricity each year will require a Half-Hourly meter and will generally be able to get a bespoke tariff depending on when they use their electricity.
Finally, you should be aware that dual fuel contracts do not exist for business customers. You can of course get your electricity and gas from the same supplier but it will be two separate contracts and may not be the cheapest option.
Are There Regional Variations In Business Electricity Rates?
Some UK suppliers charge different rates depending on which part of the country your business is located in. This can be due to the location of their power plants, transmission costs, demand and/or the availability of energy infrastructure.
The more it costs them, the more they’ll charge your business.
For example, the map below compares how Bulb’s business electricity rates for small businesses vary by UK region in Q1 2020. The regions are based on which Distribution Network Operator runs the electricity network.
In the example above, prices vary between a low of 12.05 p/kWh in London to a high of 13.80 p/kWh in North Wales, Mersey & Cheshire a difference of 15%!
Large customers would never generally pay that much, as they generally try to buy as close to the wholesale electricity price as possible, which over the lat year has never gone above 8.2 p/kWh, even at peak times.
However, the example does show why it’s important to compare prices. Just because a given energy company offers the cheapest electricity prices in one region, does not mean it will offer the best deal in all regions.
Are UK Business Electricity Rates Cheap?
The chart above shows that the UK businesses pay more for electricity than almost any other country in western Europe, expect Italy based on data from the Eurostat.
UK electricity prices including taxes for medium consumers were 48% above the EU15 median of 8.3 pence per kWh. Moreover, UK rates are 39% above the IEA median price and twice those of the United States.
Therefore, in comparison to both European and global standards UK commercial electricity rates not cheap, but very expensive.
What Are Other Important Things To Understand About Commercial Electricity Pricing?
Fixed term contracts will save you the most money on your electricity bills, but they are by no mans the only thing that affect your rates. The single biggest factor is the wholesale price of electricity.
The following will all also have a major impact on how much you pay and which contract will ultimately be best for you and your business:
- Energy usage
- Electricity Supply Type/Meter Type
- Half-Hourly Metered (HH) & P272 Plans
- Company Credit Rating
- Renewable Energy
- Rollover contracts
- Contract Length
These are discussed in greater detail below.
The amount of electricity you use will have a big impact on the tariff you end up paying. While the more you use the more you’ll pay overall, you may qualify for a lower price per kwh.
Moreover, if your business uses less than than 100,000 kWh of electricity per year, you may be considered a micro-businesses.
Electricity Supply Type/Meter Type
What type of meter you use and what type of energy profile your business has will affect how much you pay. Business with profiles 03 or 04 generally will pay less than those with profiles 05-08. However, this is in part because of when electricity is expected to be used.
Half-Hourly Metered (HH) & P272 Plans
If your business falls under profiles 05-08, then P272 makes it mandatory to be use advanced half-hourly metering. Using this type of metering may have an impact on the tariff you end up paying and should be something you ask about when getting your quotes (see example above).
Company Credit Rating
Some UK energy suppliers will look at your credit rating before offering you a contract. Generally speaking the better your business’s financial health, the lower prices should be.
Some energy companies, such as Bulb, NPower, Ecotricity and Good Energy are now offering plans that only include electricity from renewable sources. While these plans are much better for the environment, they may cost more than plans offered by other companies.
You can generally save money by shopping around just before your current contract ends. If you don’t sign a new fixed term contract, you may be rolled over into a deemed rate or default contract and end up paying the prices listed above.
Most commercial and business electricity contracts are on fixed 1 year terms. However, most energy companies are now offering 2 and 3 year contracts. While these contracts can save you money, just be sure to read the fine print as you may face steep cancellation fees if you try to get out of your contract early.
How To Get The Cheapest Business Electricity Quote? 5 Things You Need To Know
- Know how much electricity you’re using each year
- Know at what time(s) of day you use the most electricity
- Known your MPAN (Meter Point Administration Number)
- Know your business profile and metering type
- Know when you’re contract is up for renewal
What to do next?
Sources for prices listed above: