Keeping an eye on business electricity rates

Posted on 11 Mar 2019 and read 502 times
Keeping an eye on business electricity ratesEvery business needs electricity to run, so it won’t come as a surprise that electricity is one of the biggest operating costs. With so many other things to consider when running a business it is easy to neglect the price that is being paid.

But keeping tabs on what businessses are being charged is crucial – they could find out that they are paying over the odds and squandering a lot of money that could be invested elsewhere. Consequently, getting a good deal on business electricity is essential.

The following comprehensive guide has everything you need to know about business electricity prices, including how they are computed, how to get the best deals, and what the energy suppliers charge.

Business Electricity Suppliers

Almost 80% of electricity in the UK is supplied by six companies. Here are the Big Six energy providers Big Six energy providers and their respective market share:

EDF (11%)
British Gas (20%)
Npower (10%)
Southern Electric (14%)
E.ON (13%)
ScottishPower (10%)

How Are Business Electricity Prices Computed?

An electricity bill is mostly comprised of two main charges: the standing charge and the unit cost. The unit cost is the total amount paid per kWh of electricity. The standing charge is a fixed daily fee paid to the provider for supplying a business premises with power.

While there are other costs on the bill, the standing charge and the unit cost have the biggest effect on the total amount paid for business electricity. They make up more than 50% of the total bill — so the lower these charges are, the cheaper the electricity bill will be.

Business Electricity Rates Comparison

Generally, there are two main variables to business electricity pricing: Standing Charge and Unit Price.

The price per unit or unit price is the cost of electricity usage. It’s charged in kilowatts per hour (kWh).

The standing charges can be thought of as daily rental fees, accounting for using the providers’ business electricity service. It’s a fixed amount and is set by suppliers.

Business electricity suppliers offer three types of rates: deemed, variable and fixed rates.

Variable and fixed rates are lower than deemed rates and are applicable when a customer enters into a contract with their provider.

A deemed rate is the price charged when there isn't a signed contract, but there is a need to have a supply available in the short-term. These are more costly because they are often asked for with a short notice by the provider and no guarantee of any contract.

So what do the UK’s electrical energy providers charge for business electricity? The table below compares business electricity prices per kWh:


How to get Low-cost Business Energy Prices

There are four key things that need to be taken into consideration to get a better deal on business energy:

Price Fluctuations

Business electricity prices are unpredictable, so good quotes should be agreed to quickly as there is no guarantee the same price will still be available the next day.

Long-term Contracts

By signing up for a long-term contract, electricity users will certainly see savings over the period of the contract compared to short-term contracts over the period.

Out-of-Contract and Deemed Rates

Electricity users will pay out of contract rates if their contract expires and they don’t have a new contract ready to shift to, and deemed rates are payable when a business initially moves into a new business premises and hasn't sorted out a new contract.

Unit Rates and Standing Charges

The two most important elements in any business electricity tariff are the unit rate and standing charge. Companies that consume a lot of energy, a low unit rate is better, but if they consume a low amount of energy, they may be happier with a higher unit rate and a low standing charge.

5 Important Things To Understand About Business Electricity Prices

A fixed term contract will save companies the most money on their energy bills, but it's by no means the only thing that affects their rates. The single biggest aspect is the wholesale price of business electricity.

The following will all also greatly affect how much they pay and which contract is best for their business:

Energy Usage

The amount of electricity used affects the tariff they pay. While the more they use, the more they will pay overall, the company might qualify for a lower price per kWh.

Electricity Supply Type

The type of electricity profile a business has, and the meter it uses will determine how much it pays. Businesses with profiles 05 or 08 will pay less than those with profiles 03-04.

P272 and Half-Hourly Metered Plans

P272 makes it compulsory for businesses falling under profiles 05-08 to use half-hourly metering. Using this type of metering might affect the tariff they end up paying.

Business Credit Rating

Some UK electricity providers will look at credit rating before agreeing a contract. The better a business’s financial situation, the lower the electricity prices.

Renewable Energy

Some energy companies, like Good Energy, Ecotricity, Npower and Bulb are now introducing plans that only include power from renewable sources. Although these plans are environmental friendly, they cost more.

Rollover Contracts

If a company doesn't enter into a new fixed term contract, it might be rolled over into a default contract or deemed rate.

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