Paying too much for electricity? As a business, you may be. The good news? You can lower your costs. Let’s find out how Business electricity Rates work and how to pay less.
What are business electricity rates and how do they work?
Business electricity rates are simply the prices businesses pay for their power. These rates are not the same as what regular homes pay. In fact, companies often pay more — but not always.
Here’s why:
- Businesses use more electricity than homes.
- They use it during the day when energy is more expensive.
- Their contracts are longer and more complex.
But the upside? Businesses can shop around for better prices.
Many companies save hundreds (or thousands) a year just by switching suppliers. According to Ofgem in the UK, over 40% of small and medium businesses could cut their energy bill by switching.
Why business electricity rates vary so much
Not all businesses pay the same. Prices can change based on:
- Your company’s size
- How much electricity you use
- The type of contract you sign
- Where your business is located
For example, a bakery that runs ovens all day will pay more than a small office that only uses lights and laptops.
Also, regions matter. Energy prices can be higher in big cities. That’s because of higher demand and network fees.
Types of business electricity contracts
Here are the common types of business electricity deals:
1. Fixed rate
You pay the same set price for each unit of electricity. This contract usually lasts 1 to 5 years. It’s safe and you know what to expect.
Example: A coffee shop signs a 3-year fixed-rate contract. Even if market prices go up, their rates won’t change.
2. Variable rate
Your price goes up and down with the market. It’s riskier but can save money during low-demand times.
Example: A startup chooses a variable rate plan. It takes advantage of low energy prices during winter months.
3. Deemed rates
Don’t choose this. These rates apply when you move locations or your contract ends. Prices are much higher.
Businesses on deemed rates often pay 50-100% more than they should.
Real world case study: How a bakery saved over £2,000 a year
Amy runs a small bakery in Manchester. Her ovens use a lot of power, especially during morning baking hours.
She was on a deemed rate of 45p per kWh. After comparing business electricity rates, she switched to a fixed rate of 24p per kWh.
Savings: £2,040 per year, or £170 every month.
Her tip: “It took me 30 minutes to switch. Worth every second.”
How to compare business electricity rates
It’s easier than you think. Here’s what you can do:
1. Know your usage
Check old electricity bills. Look for your annual usage in kilowatt-hours (kWh).
2. Compare prices online
Use trusted comparison tools. Some even call you with quotes — free.
Tips:
- Compare kWh unit rates
- Look at standing charges (a daily fee you pay no matter what)
- Watch out for hidden fees
Example of standing charge:
- Plan A: 24p per kWh + 35p/day
- Plan B: 22p per kWh + 51p/day
Depending on your usage, cheaper isn’t always better.
3. Ask the right questions
Before you agree, ask:
- Is this a fixed or variable rate?
- Are there early exit fees?
- Can I upgrade the plan later?
Be smart. Read the fine print. Ask twice if it’s unclear.
Common mistakes to avoid
Don’t fall for these traps:
Not switching providers when the contract ends
This puts you back on deemed rates — which, again, can cost double.
Set a reminder for your contract end date.
Ignoring standing charges
Some plans look cheap but add big charges daily.
Check total costs, not just unit prices.
Thinking all suppliers are the same
Some offer better customer service.
Others have green energy plans that help the environment.
Take time to see what matters to you.
The big benefit: Huge savings
How much can you save?
- Small businesses: Save £300 to £1,500/year
- Medium businesses: Save £1,000 to £5,000/year
Data from Cornwall Insight shows energy prices rose 80% in 2022 but then dropped in late 2023. That’s why timing matters. Lock in a rate when prices are low.
Bonus: Go green and gain more perks
More businesses now want green electricity. It’s clean and good for the planet.
Suppliers offer 100% renewable plans. These may cost a little more but attract eco-friendly customers.
One study says 57% of shoppers prefer businesses that care for the Earth.
A green plan is good for business and the world.
What drives electricity rates?
Wondering why prices rise and fall? Main reasons include:
- Fuel costs (like gas and oil)
- Government taxes
- Demand (summer and winter spikes)
- Global events (war, supply chain issues)
In 2022, energy prices soared due to political tensions and supply drops. Knowing this helps you choose a better time to buy.