Comparing business energy prices per kWh

How does business energy differ from domestic energy?

Comparing business energy tariffs can be a bit more complicated than domestic plans. Business energy costs can be broken down into the cost per unit of energy, as well as standing charges. These cover the cost of distribution and maintenance. To accurately weigh your options, it’s helpful to look at the average kWh rates. 

What is kWh?

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 breaking it down into the use of 1,000 watts over one 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. 

What is the average kWh cost for businesses?

So, how many kWh are standard for UK businesses? 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.  

Here’s a closer look at the average prices of gas and electricity per kWh for businesses of different sizes. 

Micro business

The smallest businesses will use between 5,000 and 15,000 kWh of gas each year, at a standard unit price of 5p to 5.1p (£400 to £820 annually). They consume between 5,000 and 15,000 kWh of electricity as well, at a unit price of 14.4p to 15.9p on average (£900 to £2,244 annually).  

Small business

A standard small business will use between 15,000 to 30,000 kWh of gas at a unit price ranging between 4.5p and 5p (£820 to £1458 annually). The same business will consume between 15,000 and 25,000 kWh of electricity, at an average per unit rate of 14.3p to 15.1p (£2,367 to £3,660 in annual costs). 

Medium business

Medium businesses jump up to an average annual gas usage of 30,000 to 65,000 kWh, at a rate between 4.3p and 4.5p (£1458 to £2239 annually). When it comes to electricity, they’ll use 25,000 to 50,000 kWh at an average rate of 14.3p to 14.7p (£3,774 to £7,234 annually).

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. 

How to compare energy plans 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 plans, you also might want to consider whether you wish to generate your own power and sell it back to the National Grid. Many suppliers participate in the Feed-In Tariffs (FIT) incentive programme, offering a way to offset commercial charges. 

What impacts unit costs of business energy?

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 mitigate these fluctuations by signing up for a fixed-price agreement. 

How to get the best business electricity rates

As you compare business energy tariffs, the cheapest rates will likely be a high priority. Yet there are several other factors to keep in mind as you compare these business electricity rates and gas tariffs. The first step is to switch to a tariff with a lower unit rate. Be aware that quotes will consist of both the kWh per unit rate, as well as the standing charge. This daily charge covers the cost of National Grid maintenance, distribution, and connection to your business. Beyond these charges, look at the following 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 get the best 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 keep on top of these when you’re thinking about switching suppliers. For example, an increase in economy activity can boost global demand. If this exceeds supply, you can expect your tariff prices to rise. At the moment, there’s a strong government 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, the 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 to make your business more energy-efficient 

In addition to comparing business energy suppliers and keeping track of average kWh rates, you can reduce bills by improving your organisation’s efficiency. 

  • 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. 

Ben GallizziEnergy Expert - Oct 31st 2019