Comparing business electricity prices has not always been the easiest thing in the world, until now. We’ve collected the latest data on how much UK businesses are currently paying for their electricity and make it easy to compare prices online.
You can start your comparison here.
Business Electricity Price Comparison By Business Size
|Business Size||Average Business Electricity Unit Price (excluding CCL)|
|Average Business Electricity Unit Price (including CCL)
The business electricity prices above above are the most recent figures (Q3 2018) available from GOV.UK.
They reflect the average price paid per kWh by businesses of various sizes (based on consumption levels). It includes the prices with and without Climate Change Levy (CCL) of 0.583 p/kWh, but excludes VAT.
Businesses were grouped based on their annual electricity consumption as follows:
- Very Small – Under 20,000 kWh per year
- Small – 20,000 – 500,000 kWh per year
- Small/Medium – 500,000 – 2,000,000 kWh per year
- Medium – 2,000,000 – 20,000,000 kWh
- Large – 20,000,000 – 70,000,000 kWh
- Very Large – 70,000,000 – 150,000,000 kWh
- Extra Large – Over 150,000,000 kWh
To put those numbers in some perspective: an ‘Extra Large’ business using 150,000,000 kWh of electricity per year would end up paying £8 million more for electricity if it paid the price paid by the average very small business (15.515 p/kWh) vs the average extra large business (10.152 p/kWh).
Finally, it is important to keep in mind these prices are averages and do not represent the best business energy deals on the market at any given time. For example, very small businesses are actually paying more on average compared to electricity prices paid by home consumers. This means many very small businesses are on very poor tariffs.
Business Electricity Price Trends
Below you can see how electricity rates with and without CCL have changed over the past decade.
Business Electricity Prices Without CCL
Business Electricity Prices With CCL
Source for both charts is GOV.UK.
How Much Do Small Businesses Spend On Electricity? Prices & Bills Compared
The pricing information above shows how much businesses of various sizes pay per unit of electricity but doesn’t show how much the average small business actually spends.
Ofgem’s most recent Micro and Small Business Engagement Survey 2018 revealed some interesting information about how much small businesses (defined by Ofgem as having 50 or fewer employees) paid for their electricity per year.
- 10% paid less than £500 per year for electricity.
- 18% paid between £500 and £1,000
- 23% paid between £1,001 and £2,500
- 14% paid between £2,501 and £5,000
- 3% paid between £5,001 and £6,400
- 6% paid between £6,401 and £10,000
- 5% paid between £10,001 and £15,000
- 4% paid between £15,001 and £25,000
- 2% paid between £25,001 and £50,000
- 1% paid more than £50,000
- 14% didn’t know how much they spent.
Small Business vs Micro Business
According to Ofgem a non-domestic consumer is defined as a micro business if they meet one of the following criteria:
- employs fewer than 10 employees (or their full time equivalent) and has an annual turnover or balance sheet no greater than €2 million; or
- uses no more than 100,000 kWh of electricity per year; or
- uses no more than 293,000 kWh of gas per year.
The main benefit of being defined as a micro business rather than a small business is that you can give a termination notice at any time during your contract which means you can always shop for the best deal.
Unit Cost vs Standing Charge
Business electricity rates are made up of two things: the unit price and standing charge. It’s important to understand the difference when comparing suppliers.
Unit Price: This is how much you pay for the electricity you use. It is charged in terms of pence per kWh. It is a variable charge, so the more you use, the more you pay. To get an idea how much you should be paying, please see the tables at the top of this article.
Standing Charge: The standing charge is a fixed cost. Normally it’s charged as a fixed price per day (although sometimes per month or quarter). The difference with the unit price, is that you pay the same amount regardless of how much or little electricity you use.
And unlike unit prices, standing charges vary widely from supplier to supplier sometimes as low as 20p per day all the way up to £22+ per day.
Generally speaking, most price comparisons should focus on the unit price rather than the standing charge as this will determine the bulk of what you’ll pay. However, if you do see an abnormally low unit rate it’s worth your while to double check the standing charge.
Business Electricity Prices By UK Region
The map above shows just how widely electricity prices can vary by region. It shows British Gas‘ deemed unit rates for Low Voltage, Half-Hourly business customers. You can see the a full comparison below:
|DNO||Unit rate (p/kWh)||Standing charge (p/day)||Availability charge (p/kVA/day)|
|Merseyside & North Wales||18.37||49.3||2.52|
As you can see even deemed rates can vary by up to 30% within a supplier depending on region. Once again this shows the importance of making a comparison.
Tariffs For Different Electricity Meters
Broadly speaking there are two main types of electricity meters: Standard Meters for most business customers and Half Hourly meters for larger customers. You can tell what type of meter you’re on based on your MPAN (Meter Point Administration Number).
- If your supply number starts with a 00 you have a Half Hourly meter.
- If your supply number starts with 03 you have Standard Meter.
- If your supply number starts with 04 you have an Economy 7 Meter
- If your supply number starts with 05-08 you are Maximum Demand (MD) customer
P272 was implemented on 1 April 2017 which means all 05-08 customers are now billed on a Half Hourly basis.
Knowing what your meter type is makes comparing electricity prices much easier as not all suppliers are set-up to handle Half Hourly customers. Conversely, some niche suppliers only deal with Half Hourly customers and won’t deal with SMEs on 03-04 profile classes.
Finally, it’s worth noting that there is a push to move all business customers to smart meters by the end of 2020. In theory they can save you time because you no longer have to send in meter reading.
However, many smaller suppliers are still not set-up to deal with smart meters, which means switching to one may mean you won’t be able to use the smart functions if you switch.
Deemed & Out-of-Contract Rates Explained
Unlike domestic electricity, there are no price caps on business customers. This makes it vital to always have a business energy contract in place. Normally, energy companies will just roll you over onto a new contract when your old one ends, unless you take action.
While often poor value, these can still sometimes be better than paying deemed or out-of-contract rates.
Deemed rates: are what businesses taking over a new premises will pay until they enter into an electricity supply contract. The amount is paid to the existing energy supplier of the premises until a contract can be arranged with them or another supplier.
The prices are very high, but are never meant to be paid for long. Just be aware the deemed unit prices can easily be 150% more than in-contract rates, so there’s a big incentive to switch quickly.
Out-of-contract rates: The amount charged is usually very similar to deemed rates but usually arises when a contract ends and a new contract has not been put in place. The problem with out-of-contract rates is that you may not realise you’re on them unless you’re checking your bill regularly.
Once again if you find yourself paying out-of-contract rates, you should either contact your supplier to be placed under contract or better yet compare prices to get a much better deal. You can sometimes save up to 60% off the rates you’re paying.
Business Electricity Contracts: Fixed vs Variable
Broadly speaking there are two types of business electricity contracts: fixed and variable. Some suppliers offer more complex blended contracts, but all of them will basically consist of either fixed or variable elements.
Here are the key things you need to know about both types:
Fixed Tariff Business Electricity Contracts:
- Can be for as long as 5 years, although 1-3 years remains the norm
- Usually fixes your unit price per kWh and standing charge for the duration of the contract (but usually does not fix CCL charge)
- The price you pay per unit generally increases with contract length because of the risk of price increases
- Fixed price often only applies to estimated usage, which means you could pay more if you start using more energy
- Very difficult to get out of the contract early
Variable Tariff Business Electricity Contracts:
- Price you pay varies based on wholesale electricity prices and can go up or down
- Cheaper than deemed or out-of-contract rates
- Not usually locked into a long term contract, so can switch suppliers at anytime
- Offers far less certainty than a fixed term contract in terms of rates
- Prices can sometimes be higher than fixed term contracts
Which type of contract you choose will probably come down to your sophistication as an energy buyer. Most small businesses are better off with a 1-3 year fixed term contract rather than a variable rate contract as it is much easier to manage.
Larger businesses can sometimes save money using variable rate contracts if they can manage their energy usage throughout the day, but this takes quite a bit of effort and should only really be considered if your business has a Half-Hourly meter installed.
Wholesale Electricity Prices & Your Rates
The chart above shows how much wholesale electricity prices have varied over the course of the last 8 years. It shows prices in £/MWh which we’ve converted to an annual average in p/kWh below:
It’s also important to note that while wholesale electricity prices are the most significant portion of your energy bill, it still only makes up around a third of the p/kWh price you’d pay as small business rising to 60% if you’re an extra large consumer.
Here’s a breakdown of a typical electricity bill:
Other Key Costs: VAT, CCL, DUoS & TNUoS Charges
As you can see above, besides the wholesale price of electricity you also face a whole range of other costs here are a few of them explained:
- VAT: Most businesses will pay the standard VAT rate of 20% for their commercial electricity. However, if at least 60% of your business’ energy is used for domestic purposes, you are a charity or non-profit, and/or you use less than 33kWh of electricity per day (1,000kWh per month) you may be able to pay only 5%.
- CCL: From 1 April 2019 the Climate Change Levy is 0.847 p/kWh for electricity. Although if you generate electricity via renewable sources you may be able to a CCL Exemption.
- DUoS: Distribution Use of System charge covers the cost of maintaining the local electricity distribution network infrastructure including the cables, substations, poles, and transformers. It varies based on usage and should be clearly shown on your bill.
- TNUoS: The Transmission Network Use of System charge pays for the cost of maintaining the electricity transmission network in England, Wales, Scotland, and offshore and prices are based on usage and time of year.
Who is the cheapest business electricity supplier?
The unfortunate truth is that this no single “cheapest” business electricity supplier.
Prices vary for all sorts of reasons from location to size, to type to credit score to usage and many more reasons. Therefore, the cheapest supplier for one business might not be the cheapest for another.
The key is to use a service such as Love Energy Savings that not only compares 20+ suppliers, but can help find one that’s suitable for your business type.
Role of Energy Brokers & Business Electricity Prices
Energy Brokers remain one of the most popular ways for businesses to engage in the business energy market. And while they are free to use and can often help you get a better rate it’s important to understand how they make money. Basically, they will work with a range of suppliers who offer them a special rate.
They then make money by offering you an uplift price per kWh above that rate. For example, British Gas may offer a broker a rate of 9 p/kWh and then turnaround and tell you that they can get you a British Gas contract for 10 p/kWh. They make their money on that 1 p/kWh difference.
However, there is no limit on what that uplift can be and some unscrupulous brokers will try to make it as high as possible.
That’s why we recommend Love Energy Savings since they’re focus is on recurring business (86% of businesses use them again). Moreover, they don’t just focus on finding you the cheapest supplier, but also one that’s not going to be a pain to deal with.
Moreover, you can also contact energy companies directly. Just be aware the rates they offer direct can sometimes be higher than brokers depending on how their business is set-up.
How to get cheaper commercial electricity rates
Getting the lowest tariff on electricity is not the easiest thing in the world but the following 10 tips can hopefully help:
- The single best way to get the lowest price is to compare suppliers. Services such as Love Energy Savings make this process easy and they even allow you to buy online.
- Know how much electricity you use each year as this make comparisons easier and may make it easier to negotiate a discount.
- Have your MPAN (Meter Point Administration Number) ready as this can also help you make a better comparison.
- Consider how you pay your bill. For example, suppliers like EON and EDF will offer up to a 7% discount if you pay by monthly direct debit.
- Check your company credit rating. Bad credit can mean you’ll pay more for your business energy.
- Look into when you use your electricity. For example, if you run a late night business you may be able to benefit from off-peak rates for your electricity.
- Look into installing renewable energy options such as solar panels or wind turbines. While not an option for many businesses, you may be able to benefit from various government schemes. Moreover, you may be able to offset future price increases.
- If you have multiple business locations you may be able to negotiate a lower unit price by buying in bulk.
- Look at ways to lower your overall electricity usage such as using LED light bulbs or more energy efficient appliances. This can significantly reduce your total bills going forward.
- Energy suppliers don’t offer dual fuel contracts or discounts like they do for domestic customers. This means you may find it cheaper to buy your electricity and gas from separate suppliers.