Keeping your business’s electricity bills as low as possible is an important part of cutting your company’s overheads and using more of your profits to grow your business. While there are several charges that combine to make your electricity bill, the two that have the most impact on the amount you pay each month are the unit rate and the standing charge.
The unit rate is the amount your business pays for each kWh of electricity that it uses. Variable-rate electricity contracts tie the unit rate to the market, meaning that it can go up and down. If you opt for a fixed-rate contract, your unit rate will remain set for the duration of your contract (although how much you ultimately pay will still depend on how much you use).
The standing charge is a daily amount that your company pays to cover the cost of maintaining and connecting to the national grid and transporting electricity directly to your business’s premises. The standing charge is a fixed price that remains the same.
The standing charge that your company pays should be easily identifiable on your electricity bill, regardless of the tariff you’ve agreed. It will be itemised as a separate amount under the section that breaks down your charges for that billing period. This is a mandatory stipulation by Ofgem - the energy regulator - who have ruled that all tariffs must follow the same pricing structure, so energy customers can see exactly how much their supplier is charging. This transparency also makes it much easier for business electricity customers to compare prices.
Business electricity standing charges usually range between 23-27p per day and it’s important to factor them into your overall cost when comparing electricity tariffs.
You may also find a statement summary showing the balance to pay taking into account payments already received.
Keep your bill safe because you’ll need your account number if you speak to your supplier - you’ll also need it for VAT purposes. Plus, the details on your most recent statement will be handy if you decide to switch to a better deal once you reach your renewal period.
Energy suppliers take the location of your business, its size, the number of employees, its electricity usage pattern and its electricity efficiency into consideration when calculating your company’s unit cost and standing charge. This makes it hard to estimate how much your business can expect to pay for its standing charge without first assessing its individual situation. Nevertheless, you can get a rough idea by taking a look at average prices:
|Business size||Average annual usage (kWh)||Average price (per kWh)||Standing charge (daily)||Average annual price|
|Microbusiness||5,000 - 15,000 kWh||13.2p - 14.5p||23p - 27p||£650 - £1,800|
|Small business||15,000 - 30,000 kWh||12.4p - 14.1p||23p - 27p||£1,900 - £2,900|
|Medium business||30,000 - 50,000 kWh||12.2p - 13.3p||23p - 27p||£3,300 - £5,000|
The figures above are based on industry averages and are only intended as a guide. There are many factors that impact the amount you pay for your business electricity including consumption habits and the location of your business premises.
Although it’s the norm to do so, not all electricity companies apply a standing charge and you’ll find a small number of zero standing charge tariffs available on the market. This can be a beneficial arrangement if you don’t use your business premises constantly, for example if your business only operates seasonally.
As with all tariff types, it’s important to weigh up the pros and cons to make sure a zero standing charge deal is right for you:
✔ There’s no standing charge so electricity users only pay for what they use
✔ After a certain level of electricity has been used, the higher cost on the rate per unit will go down
✘ The prices for the rate per unit are typically much higher than average standing charge tariffs
✘ It’s not a suitable tariff for businesses that use their premises on a regular basis
Whether a no standing charge tariff benefits your business or not will all depend on the amount of time that you spend in your company’s property. If your business operates continually from its premises, then a no standing charge tariff could see you paying more than you need to for your electricity due to the substantially higher rate per unit. In this circumstance, the inflated unit rate will usually outweigh the savings you make from not paying a standing charge.
If you only use your business premises seasonally or you have a second business premises that you don’t use regularly, then a no standing charge tariff could see you save money as you won’t amass bills comprised of solely standing charges when your premises isn’t in use. In this case, you’ll only pay for the electricity that you actually use which may work out cheaper for you in the long run even when you take into account an inflated unit rate. Zero standing charge tariffs also usually use a ‘two tier’ pricing system by which a user will pay a higher rate up until a certain threshold of electricity usage is reached and then enjoy a reduction on any additional usage.
To find out more about standing charges and whether a no standing charge business electricity tariff could work for your company, us today on 0800 156 0871.
Get a free Quote