Table of Contents
- What are the Average Business Electricity Prices?
- What are the Average Prices by Business Type?
- What Does kWh Mean?
- What are the Other Costs Involved In My Electricity Bill?
- What are the Wholesale Electricity Prices per kWh?
- What Affects Business Electricity Prices?
- Finding the Cheapest Business Electricity Quotes
- Switching Your Energy Supplier with Business Electricity Prices
- kWh FAQ Section
If you’re aiming to reduce your business electricity but are unsure what your electricity prices per kilowatt hour (kWh) should be, Business Electricity Prices are here to help. In this guide, you can find the current unit rates are and how your business can lower energy costs.
What are the average business electricity prices per kWh in 2020?
In 2020, the average unit price for business electricity is 13.93 pence per kWh.
Business energy users will also pay VAT at the current rate of 20%, whereas residential customers pay a reduced rate of 5%. A business is also subject to additional green taxes such as the Climate Change Levy (CCL).
Here, Business Electricity Prices have provided the average electricity prices per kWh in 2020 by business size:
|Business Size||Usage/ Year||Unit Price/ kWh||Standing Charge||Cost per Year|
|Micro Business||8,000 kWh||16.74p||27.40p||£1,439|
|Small Business||20,000 kWh||14.83p||26.83p||£3,064|
|Medium Business||40,000 kWh||13.68p||26.41p||£5,568|
|Large Business||80,000 kWh||12.93p||26.20p||£10,439|
The kilowatt hour rate varies from business to business as well as by each power company. An example of how unit prices and standing charges vary by contract length is shown below from one of the “big six” energy suppliers.
It’s best to compare your annual bill rather than the absolute rates from any quote you receive. Use your past year’s consumption data as a guide when comparing prices from one supplier to the next.
Business gas unit prices are much lower. On average, SMEs pay between 2.9p/kWh to 3.4p/kWh but a higher standing charge of approximately 70p/day. Lower prices as mentioned before are only available to companies consuming 100,000 kWh per year or more.
What are the typical kWh prices by business type?
For a small business using between 15,000 and 25,000 kWh of electricity per year here are typical quotes you might receive depending on your business type.
|Business Type||kWh Unit Price||Standing Charge||Cost per Year|
As you can see the daily standing charge increases as the unit price reduces and vice versa. Overall the total estimated invoice for a year is about the same.
What does ‘kWh’ mean?
A kilowatt hour (kWh) is the name given to a unit of energy and is the standard unit used by energy suppliers to calculate gas and electricity bills.
The kWh lets you know how much electricity your business is using and how much you’re paying for it. This is calculated on a price per kWh basis. 1 kWh would approximately equate to using a desktop computer for 3 hours or boiling a kettle 10 times.
What are the other costs involved in my electricity bill?
On top of your kWh per hour price, most energy contracts will have a standing charge which is paid at a daily rate. Businesses will pay the standing charge regardless of how much energy they have used that day.
There are also taxation costs to factor in when calculating your overall business electricity bills. Businesses pay VAT at the current rate of 20%, whereas residential customers pay a reduced rate of 5%. A business is also subject to additional green taxes such as the Climate Change Levy (CCL).
If you’re thinking of switching business energy supplier, it’s best to compare your annual bill rather than the absolute rates from any quote you receive.
Even if you find an energy tariff with a cheaper electricity price per kWh, there may be a higher standing charge to pay. Use your past year’s consumption data as a guide when comparing prices from one supplier to the next.
Small Business Pricing Example
To understand how your bill comes together from the various charges, here’s an example for an average business.
- Annual consumption 20,000 kWh
- Unit price per kWh 15p
- Daily standing charge 27p per day
In the example above, the business gets charged £98.55 for the standing charge (365 days * 0.27) plus £2,560 for the electricity used (16,000 * 0.16) giving a total bill of £2,658.55 plus VAT and CCL (Climate Change Levy).
What are the wholesale electricity prices per kWh?
The wholesale price of electricity varies each week, or even daily. The wholesale electricity prices per kWh have reduced in recent years from around 6p per kWh in 2018 to around 3p per kWh in 2020. These are the absolute lowest prices available if your company could purchase electricity directly from the generating companies.
For most of us, we have to purchase via a retail organisation such as one of the electricity suppliers. General retailing principles dictate that retail prices are double the wholesale price. And this is the case in point with energy.
Rates we have seen over the past 12 months for SMEs vary from 13.2p to 16.7p plus VAT for unit prices per kWh. There is also a standing charge to be added. You may be offered a low unit rate, but if the daily charge is higher, then your annual bill will average out the same.
For a small business using between 15,000 and 25,000 kWh of electricity per year here are typical quotes you might receive. The second chart shows prices by business size.
What Affects Business Electricity Prices?
As you will notice in the table above, not all businesses will pay the same unit price for the electricity they use.
Larger users of business energy, such as manufacturing organisations, pay a lower rate due to the higher consumption. However, the energy companies increase the daily standing charge to compensate for the lower rates. The following guides you through what could affect the unit price you pay:
- The type of business you own dictates the consumption usage patterns during the week. Not all businesses work Monday to Friday from 9.00am to 6.00pm. Those that consume high energy during the evenings and weekends will have different rates than during the day. These are usually lower as the demand is lower from the network.
- How much overall energy you use in one year generally dictates the pricing. Normally higher volume equates to a lower price. However, if unit rates decrease sometimes the daily standing charge increases. It’s always best to check your overall offer in terms of the cost incurred for a full year rather than unit prices.
- Whether you run a small business or large corporation depends on your buying power. There are some “group buying” organisations that work on behalf of SME companies, but they’re rare. A micro business just has to take the standard tariffs that are on offer.
- If you have both electricity and gas under a dual fuel contract you may find that business gas and electricity fuels have slightly lower rates. This isn’t the case for every power company so check single and dual fuel contracts together.
- Your current energy provider could be the most or least expensive in the marketplace. You won’t know until you undertake a business electricity comparison to check if you really are on the best deal available.
- The region your business is located within the UK affects quotes because prices vary around the country. Scotland has some of the highest prices in the UK, whereas the Midlands some of the lowest.
- The length of your contract has an impact on both unit rates and daily charges. On average each year you extend your contract adds an additional 6% to the unit cost whilst 2%-6% is deducted from the standing charge.
Finding the Cheapest Business Electricity Quotes
The easiest method is to compare all prices with our 60-second quote system where we’ll find you the lowest prices in the market. If you’re approaching the renewal window of your business electricity contract, it’s important to compare energy suppliers to find the cheapest quotes.
You should never simply accept the prices you’re presented in your renewal letter as these will be far higher than the best rates available.
Although some of the energy companies, such as British Gas, guarantee to beat your renewal letter quote by 10% it’s still best to compare the whole market.
You may find one of the smaller independent companies provides lower pricing and improved customer service. In any case, you should get the latest available pricing if your contract is near the renewal stage.
Never take the kWh prices you’re presented with as these will be far higher than those tabled above. Anything above 10p for your unit prices is too much. And anything below your renewal quote will save on your business expenses for the next 12 months.
Switching Your Energy Supplier with Business Electricity Prices
With Business Electricity Prices, comparing energy suppliers to find the best tariffs available is simple. There’s no need to invest time going from supplier to supplier comparing quotes, simply complete our quick energy quote form to view all available tariffs from the whole energy market.
All we need from you is your business address and a few contact details. Our leading comparison engine will then provide you with a wide range of electricity tariffs from leading energy suppliers. We’ve built strong relationships with energy suppliers, from the ‘big 6’ to small independent suppliers, to ensure your business can receive the best electricity prices per kWh.
Firstly, to change your contract and the terms and conditions contained within it, you’ll need to terminate it. Check your current contract carefully and see if you qualify.
Micro and small business owners now have their own set of rules. Ofgem changed these so that new contracts taken out after 18th January 2010 must be written to when a renewal is close. Your provider must inform you that your contract is coming to an end, 60 to 120 days before it does. They then must provide you with at least 30 days to switch tariffs or renew at new rates.
This change came about because of rollover contracts. Providers would let your existing contract expire and then put you on a new one without notice at much higher rates. This practice is slowly changing, but a majority of businesses still elect to have their prices increased by as much as 140% each year!
We have seen renewal contracts with rates higher than 19p/kWh and a daily standing charge of 37p. The energy companies want you to roll over as this is how much of their profits are generated.
kWh FAQ Section
What is a good price for electricity per kWh?
The average price businesses and residential customers pay in the UK is 13.26p per kilowatt-hour and 27p per day. A 3-bedroom house consumes 4,750kWh per month and a small business 20,000kWh per year.
Who has the cheapest electricity per kWh?
Your unit cost per kWh depends on your region, consumption and meter type. Most commercial electricity suppliers offer prices between 14p per kWh to 18p per kWh. Compare prices to check the cheapest in your area.
Are business electricity rates cheaper than domestic?
The unit price and standing charges are broadly the same for business and domestic (or residential) customers. Businesses pay additional green taxes, including the Climate Change Levy at 0.847p/ kWh from 1st April 2019, which could add an additional 31% to their bills.
How much is 1 kw of electricity in the UK?
A 1 kw appliance uses 1,000 watts of power in one hour or 1 kilowatt-hour. The average price is 14p per kilowatt-hour so that is the cost for using a 1 kw appliance for one hour.