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Business electricity prices can vary greatly, this is down to many different factors, but you have the power to drive down the price of your bills by addressing how much you are paying on the standing charge and price per kWh. Understanding the meaning of these terms and what is a good price for both is essential to saving your business money on its electricity costs.
A standing charge is the cost of having the electricity supply, much like when you pay a line rental on your home phone. It is a rate you pay to your supplier simply for having access to electricity and does not change no matter how much or little electricity you use.
The standing charge may cover the cost of the power lines, maintenance of your meter and meter readings. Standing charges are charged on a daily basis in pence. The average standing charge for businesses in the UK is 20p per a day, but this can vary from 10p to 33p a day on average.
It all depends on how much, or little, electricity you use. Generally speaking if you pay a low standing charge you will be paying more per kWh of electricity and if you pay a high standing charge you will be paying less per kWh of electricity. So, if you have very low usage of electricity in your business, it is worth paying a lower standing rate and you will be charged a higher rate for the small amount of electricity you use, which should work out more cost effective.
Zero charges and no standing charges are different words for the same thing – you don’t pay anything for having the electricity delivered to you, you just pay for the electricity you use (referred to as the unit rate or kWh).
Those type of contracts are available with some suppliers, but unless your electricity use is low, a zero charge probably won't be of much benefit to you. Sometimes there is an exception to this, for instance if your business operates only seasonally and is closed for over half the year, it might be worth looking into a zero-standing charge so you are not paying out when you are not operating.
Be mindful though that having a zero-standing charge will mean you pay more per kWh for your electricity.
A kWh is a measurement of energy. For example, a 1000 watt drill needs 1000 watts (1 kWh) of power to make it work and uses 1 kWh of energy in an hour. The kWh is sometime referred to as the unit rate, electricity is charged per a kWh and will fluctuate depending on how much electricity you use.
The price of a kWh (unit) can vary depending on how much the supplier wants to charge, it can be anything from 10p and 30p.
There a number of factors, location for one. Some suppliers will charge different rates depending on where your business is located, this is due to the location of their power plants, demand and/or the availability of energy infrastructure. Other factors that determine the kWh (unit) charge are payment method and the tariff you are on.
To highlight the variation between standing charges and kWh prices between different business Quote My Energy interviewed 17 businesses between September 2017 and October 2017. The businesses ranged from newsagents to an engineering firm, the average consumption for the businesses was 34,438 kWh of electricity per annum.
First of all, let's look at the standing charge, of the businesses we interviewed this varied from 21p to 33p a day, a difference of 12p a day; which is quite remarkable! The average standing charge was 26.61p a day, which is still high, possibly showing the need for businesses to shop around for a better deal.
Next, we looked at the variance in kWh, the lowest was 11.49p and the highest 15.45p per a unit, a difference of 2.96p per a unit. The average worked out at 13.42p per unit, based on these figures an average business would pay £4,716 a year but could be paying as much as £5,441 or lower than £4,033. When you compare the figures like that you can see the potential savings there are to be made.
Here are our findings:
As you can see the standing charges don’t vary too much, however on a general basis the businesses using the most kWh had the best renewal price by bar. Having said that it wasn’t essential to getting a good renewal price, many other companies were offered an equally good rate. It just shows shopping around is worthwhile!
What was most interesting and encouraging about interviewing the 17 businesses, was finding out the renewal prices they had managed to obtain. In most instances the renewal quote was far more than the price they were currently paying and shows that nearly every business can save money on their electricity bills.
It is essential for businesses to shop around for a better deal as the savings they could be making are impressive and not to be missed out on. Plus, if businesses do not shop around for a better deal, electricity suppliers could carry on charging what they want for electricity as there would be no competition to help keep the prices down.