How to compare business energy tariff prices per kWh

In this guide you’ll find answers to the following questions:

  • How does business energy differ from domestic energy?

  • What’s the average kWh cost for businesses?

  • How do I compare business energy plans per kWh?

  • What impacts unit cost of business energy?

  • How can I get the best business electricity rates?

How does business energy differ from domestic energy?

Both domestic and commercial energy plans will use the kilowatt-hour (kWh) unit of measurement. These measure how much gas or electricity your business consumes over a set period – specifically each kWh equals 1,000 watts per hour. All electrical appliances or systems in your business require a level of power to operate, measured in kilowatts. The kWh represents how much of this energy is used. The higher the kWh measurement, the higher your energy bill.

Because business energy demands are usually greater than individual domestic households, businesses can find they’re charged for their energy in a different way. The size of your business matters too: small business electricity prices are less competitive than those for larger businesses, simply because they consume less energy.

Another difference can be found when examining how larger businesses with huge electricity demands pay for their business electricity consumption. Here, they’re charged for electricity in 30-minute slots, requiring the installation of a half hourly meter.

Businesses should also factor in additional costs that make business energy more expensive than domestic gas and electricity: VAT is charged at the full 20% rather than 5% (as is the case with domestic energy), plus you’re liable for the Climate Change Levy (CCL) charge, which commercial electricity suppliers should add automatically to their clients’ bills. 

What's the average kWh cost for businesses?

The answer very much depends on business size and type.  

Business sizeGas consumption (kWh) Gas unit cost (pence)Gas annual costElectricity consumption (kWh)Electricity unit cost (pence)Electricity annual cost
Small15,000-30,0004.5-5p£820-£1,458 15,000-25,00014.3-15.1p£2,637-£3,660

Large and industrial businesses are metered and billed using different standards than micro, small and medium businesses. Across all sectors, the average unit price per kWh is 14.36p, and the average business electricity bill is £3,061.

When looking at business energy plans, it’s helpful to break down the price per kWh to be sure that you’re choosing a tariff suitable for a business of your size and region. It’s estimated that regional pricing could account for up to a 20% difference in costs. Rural areas of Wales have the highest charges, while the lowest tariffs per kWh are found in the East and West Midlands as well as Scotland. 

How do I compare business electricity prices per kWh?

To switch business energy suppliers, you need to obtain separate quotes for your gas and electricity plans. This is beneficial in that it gives you more personalised services tailored to the consumption needs of your business, but it does mean you’ll need to compare two sets of figures. Use the average kWh usage figures and per unit prices listed above as a guide when you’re comparing plans. This gives you some idea of what you might expect to pay for a business like your own. 

According to Ofgem regulations, energy suppliers must post renewal letters to micro businesses at the end of a contract. However, this rule doesn’t apply to larger businesses, which is why it’s important to verify that you’re on the correct tariff. Most new contracts will be taken out for more than one year, offering fixed per kWh prices for an extended period. This helps assist with financial planning and projections.

When comparing business energy rates, you also might want to consider whether you wish to generate your own power using renewable sources. Not only will you reduce your own bills by doing so, but you may be able to sell any excess back to the National Grid to further offset commercial charges. Returns are far less generous now the Feed-In Tariff (FIT) scheme has ended, but it’s still worth exploring as a long-term investment. 

What impacts business electricity and gas rates?

There’s a wide range of factors used to determine the amount your business will pay per unit or kWh. Suppliers will assess your business location, your history of energy consumption, and any other relevant pieces of information to formulate the cost per kWh. Here are a few of these factors:

  • Business type

While office-based businesses usually operate under the traditional 9-5 hours, other types of businesses might use more energy during the evenings and weekends. These are charged different rates because they use energy when there’s less network demand. 

  • Business size

You can expect to pay different prices per kWh if you’re a small business compared to larger businesses. Larger or industrial sized businesses have greater buying power, while micro businesses might be limited to standard tariffs. 

  • Business location

The region has a major impact on available quotes, with Midlands-based businesses enjoying lower rates than those in Wales, for example. 

  • Energy used per year

Energy suppliers will look at your current energy usage to offer a quote. If your business consumes a high volume of energy during the year, this usually leads to a lower per-unit price, like buying in bulk. 

  • Length and type of contract

Rates will vary depending on the type and length of contract. Dual-fuel bills are usually lower, but this won’t always be possible with commercial contracts. Be sure to compare all options. The length of your contract will also impact the quote. You can expect to have a percentage taken off your standing charge for each year you extend the contract. 

The cost per kWh will also be impacted by additional factors like the wholesale cost of gas and electricity. These might be entirely out of your hands, as energy supplies can fluctuate due to political situations, natural disasters, or global drops in demand. You can avoid uncertainty by signing up for a fixed-price agreement. 

How can I get the best business electricity rates?

There are several factors to consider when you compare business electricity prices (as well as gas). The first – and most obvious – priority when comparing business electricity rates and gas tariffs – is cost. This is divided into two sections: the rate you pay for each unit (in kWh) of energy you consume, plus the standing charge. While you have a measure of control over your consumption, the daily charge is fixed to cover the cost of National Grid maintenance, distribution, and connection to your business. 

The basic unit rate/daily charge is only one factor – don’t forget to look out for these additional features:

  • Bundled discounts

Some suppliers will give you a discount if you bundle your gas and electricity contracts. 

  • Rollover rates

Are you considering a fixed-price tariff? Be aware that some suppliers will automatically switch you over to a more expensive rate at the end of your fixed term. Be sure that you keep on top of these rollover contracts, so that you always remain on a competitively priced tariff. 

  • Maintenance and care costs

For commercial energy plans, some suppliers will take care of maintenance and repair as part of the contract. Be sure that the costs offer the best value for money. In many cases, it’s better to hire your own maintenance professionals. 

Compare business energy plans, keeping these features in mind. The next step is to switch to the supplier with the best deal. 

Business electricity rates are subject to market fluctuations, so it’s a good idea to stay abreast of what’s happening when you’re thinking about switching suppliers. One obvious example is when increases in economic activity boost global demand for energy – if this exceeds supply, then expect tariff prices to rise.

There’s also a strong focus on climate change. Businesses can benefit from investing in alternative energy sources, so it may be worth seeking out green-friendly suppliers or considering generating your own power to feed back to the National Grid. 

To avoid these common market fluctuations on a day-to-day basis, your best option is to sign up for a fixed-term contract. All small businesses can choose fixed-rate agreements stretching between one and five years. 

How can I make my business more energy-efficient? 

One guaranteed way to save money is to simply improve your organisation’s efficiency, thus reducing consumption and cutting your bills as a result. Here’s some ideas to get you started:

  • Swap your standard meters for smart meters

  • Use smart apps and management software to analyse your business use

  • Install appliances with a minimum A+ rating when replacing old models

  • Use a smart thermostat to control energy use when the premises are vacant at the weekend 

By simply tracking your energy use more closely, you’ll find ways to shave money off your bills and boost efficiency at the same time. 

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Published on Thu 31 Oct 2019 11.32 GMT