How to Save on Your Business Energy Bills

When you run a business premises, paying for energy to light it, cool and heat it, and power its various equipment and appliances is unavoidable.

But what is avoidable is paying over the odds on a plan that doesn’t suit your needs and budget. It’s simply a case of making sure that you’re on the best rates and tariff for your business – and that you’re making the right savings.

The first step? Understanding how much energy rates actually cost, the fees you could be subject to, and the different tariff types you may have to choose between.

We understand that there are a lot of considerations to make and plenty of jargon to sift through. That’s why we’ve put everything you need to know about business energy rates, costs, and savings on this page, and explained it all in plain terms. Let’s dive in.

Which companies supply business energy in Britain, and how much do their plans cost?

We’ve done some research and collected fixed contract quotes for electricity and gas quotes from the major UK energy suppliers. We’ve made the following assumptions:

Small restaurant based in Leeds town centre
Electricity use per year: 20,000 kWh
Gas use per year: 30,000 kWh
Standard electricity meter (not a top-up one)
New one-year contract to start in March 2023
Paying by monthly direct debit

And we’ve collected Trustpilot scores too (listed as “Consumer Rating”) so you can easily compare suppliers. Here are the results:

Swipe right to see more

Octopus Energy	E.ON Next	British Gas Lite	ScottishPower	EDF Energy	SSE Energy Solutions

4.6	4.1	3.7	3.5	3.0	2.6
Sample fixed rate electricity quote £6,844.69/year	Sample fixed rate electricity quote £6,781.93/year (variable)	Sample fixed rate electricity quote £6,456.00/year	Sample fixed rate electricity quote £7,153.08/year	Sample fixed rate electricity quote £7,411.25/year	Sample fixed rate electricity quote £7,293.84/year
Sample fixed rate gas quote £2,820.10/year	Sample fixed rate gas quote £3,177.07/year (variable)	Sample fixed rate gas quote £3,026.25/year	Sample fixed rate gas quote Unavailable	Sample fixed rate gas quote £3,301.25/year	Sample fixed rate gas quote £3,303.84/year
Green energy as standard?	Green energy as standard?	Green energy as standard?	Green energy as standard?	Green energy as standard?	Green energy as standard?
Webchat support?	Webchat support?	Webchat support?	Webchat support?	Webchat support?	Webchat support?
Phone support?	Phone support?	Phone support? Premium plans only	Phone support?	Phone support? Premium plans only	Phone support?

How is your business energy bill calculated?

Okay, let’s get down to the important stuff: money. If you want to save your business money, you need to know which parts of your energy bill are fixed, and which are down to your energy use.

Let’s explore the main types of charges:

1. Standing charge

This a fixed daily rate. It covers the cost of the cables, pipes, and networks that physically deliver energy to you.

You cannot affect this charge at all. You’ll have to pay it just the same even if you don’t use any energy on some days.

2. Unit rate

This is the charge for every drop of energy you use. Energy is measured in kilowatt-hours, written as kWh. Every energy provider sets their own rate, in pence per kWh.

The less energy you use, the lower this part of your overall energy bill will be.

The average standard rate of electricity across the UK was 34p per kWh as of the last update of this article.

3. VAT (value-added tax)

The VAT you’ll pay on your energy bill varies depending on what type of business you are. Most will pay 20%. But if you meet certain criteria (such as being a charity) or you use only tiny amounts of energy, you’ll pay a reduced rate of 5%.

By the way, energy companies don’t tend to include VAT in their published pricing. So this will be added to your bill.

4. Climate Change Levy

Often written as “CCL”, the Climate Change Levy is a government tax that’s added on per kWh of energy used. The rate for electricity is 0.0000775p and that will stay the same until 1 April 2024. The CCL for gas is 0.0000672p per kWh and that will increase to the same rate as electricity from 1 April 2024.

You can pay less by using less energy, or you may not have to pay it at all if you’re buying renewable energy.

5. The Feed-In Tariff (FIT)

The Feed-In Tariff was designed to pay businesses and households to generate their own renewable energy. The hope was that this would ease pressure from the National Grid, as well as moving the UK towards its sustainability goals.

Electricity suppliers have to pay Ofgem, the energy regulator, every quarter to cover the costs of this. The process is called Levelisation, but all you really need to know is that electricity costs a little bit more because of it.

Energy suppliers include these costs automatically, so you don’t need to worry about calculating it. And no, you can’t affect it.

Business energy tariffs and contracts explained

1. Fixed tariffs

With a fixed tariff, businesses pay an agreed rate for their energy over a fixed period of time. Contracts with fixed tariffs are typically a year or more, and are often the cheapest option. Agreeing to a fixed tariff, however, does mean that you will run into difficulties if you decide to cut your contract short. At best, you will pay a hefty termination fee, and at worst you simply won’t be allowed an early exit.

In fact, most business energy contracts will only let you give notice of termination within a very specific period – usually 3-6 months. If you don’t terminate your existing contract or negotiate a new one, you will often be automatically rolled over to a new contract with the same provider. If this happens, you’ll likely be landed with an unfavourable rate, too.

2. Variable tariffs

With a variable tariff, you pay for exactly what you’ve used each month. Sounds perfect, right? Wrong!

As the saying goes, if it sounds too good to be true then it probably is, and variable tariffs are no exception. Yes, you will only pay for exactly what you use, but the rate you pay is typically much higher. What’s more, you are not protected from market fluctuations in price.

The only reason to consider a variable tariff is if you’re unsure of how long you’ll will need the supply for, and so don’t want to commit to a fixed contract.

3. Flexible tariffs

While the majority of businesses have fixed tariffs, flexible tariffs are another valuable option.

So, how do they work?

Traditionally used by larger businesses, flexible tariffs require your energy usage to be ‘profiled’. Your usage will be split into two categories:

The baseload – your predictable energy usage
Peak usage – any random spikes in demand outside of typical usage

Your business can then purchase ‘blocks’ of each type of energy in bulk, and you can sell any you don’t use back to the grid. While this can work really well for some, smaller businesses may find that the benefits are less than the effort involved in planning and buying the energy they need.

4. Green tariffs

Some business energy suppliers, such as Bulb and Ecotricity, only supply electricity that is generated with renewable methods. Supplying renewable energy is definitely a trend among new, independent suppliers. The majority of providers still rely heavily on electricity produced using coal, gas and nuclear power.

Some of these suppliers do, however, offer the chance for customers to upgrade to a ‘green tariff’. This means the electricity they receive is generated either completely or mostly by renewable means. Though, of course, this comes at an extra cost.

If sustainability is important to your business, we’ve written about reducing costs through eco-friendly business practices.

5. Deemed and default tariffs

If you’ve moved into a new business premises and have started to use energy without first agreeing a contract with a supplier, you will be paying the supplier’s ‘deemed contract’ rates. This is also the case if you terminate your contract but continue to use energy (although in this case it is sometimes called a ‘default tariff’).

Deemed contract rates are significantly higher than all other contracts. This is why it is so important that you compare quotes and arrange a contract as soon as you move into a property, and don’t terminate your contract without making other arrangements first.

How to reduce energy costs in your business

We understand how important it is for you to keep things lean, and in business, there’s always room for cost cutting! Here are our five best tips for shaving pounds and pennies off those energy bills:

1. Use energy saving light bulbs

See, we told you these would be quick wins! CFL and LED bulbs can reduce energy consumption by 75% and last up to three times as long. In times gone by, energy saving bulbs were synonymous with a harsh, clinical white light, but they’ve come a long way since then.

2. Shut down appliances at night

Again, this is really basic but highly effective. Reminding staff to shut down computers, turn off coffee and vending machines, and switch off lights and aircon is a quick way to minimise waste.

3. Find the right supplier

It may sound obvious, but it bears repeating over and over until you’ve made it your mission to seek out the supplier that’ll charge you the best rates. If that sounds a bit time consuming, don’t worry: you can save yourself hours of research by delegating this mission to a business energy broker.

And the fastest, easiest way to do that? Using our free quote-matching service. Simply answer a handful of questions about your business and its energy use, and our trusted broker will find the cheapest quote for you.

Remember, this isn’t a one-time process. We advise shopping around and being open to switching at least every 12 months. After all, the cheapest supplier this time last year may no longer be the cheapest supplier today.

4. Fit energy efficient equipment

Better energy efficiency equals cheaper bills. There are a number of things you can install in order to boost your business’ energy efficiency, including energy efficient lighting, automated cool room doors, and insulation for any hot or cool pipework.

If you use motors, whether for fans, irrigation, or refrigeration, you should upgrade to energy efficient models. You can also implement head pressure reduction or variable head pressure on your refrigeration system.

5. Offer flexible working

Calling this a ‘quick’ win may be a bit of a stretch, but allowing employees to work from home for a day or two per week will reduce your overheads dramatically. What’s more, there are a wealth of case studies indicating that working from home can have a positive uplift on productivity. And with instant messaging services such as Slack, there’s really no reason that someone working from home should be any more difficult to contact.

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Next steps

On this page, we’ve covered the specific electricity rates charged by different suppliers, and the average rates in the UK as a whole. We’ve also explored the different kinds of rates and fees that suppliers charge, and explained how different tariffs and contract plans work. Plus, we’ve talked about energy brokers and environmental schemes, and imparted some tips for trimming down your energy bills.

Now that you’ve got a clearer understanding of all that, we hope you’re feeling prepped and ready to dive into your search for the best energy prices and deals you can find. But our contribution to your journey doesn’t have to end here.

Let us help you to zero in on the best energy rates quickly and easily with our free quote-matching service. Simply answer a few questions about your business and its energy needs, and our trusted broker will find the best quote for you. Our service is fast and free, and it saves you from having to find and connect with a broker yourself.

▶ Read more: Discover how becoming greener makes your business more profitable.

FAQs

How much is business electricity per kWh UK?

The average business electricity rate is 34.023p/kWh, according to our March 2023 research. This aligns with October 2022 data from the Energy Savings Trust, which put the average at 34p.

Is there a cap on business energy prices?

No, the energy price cap – now known as the Energy Price Guarantee – limits the rates energy suppliers can charge domestic customers. If anything, energy companies are likely to charge business customers more on their bills to recover lost revenue from household energy.

Instead of a price cap, businesses will benefit from Energy Bill Relief Scheme (EBRS) running from 1 October 2022 to 31 March 2023. After that, the less generous Energy Bills Discount Scheme (EBDS) running between April 2023 and April 2023 will save UK businesses money on their energy bills. It works by the government giving a discount on wholesale electricity and gas unit prices.

The government discounts will automatically be applied to your business energy bill, and you don’t need to do anything to make this happen.

Is business energy more expensive than domestic?

No, business energy rates are often more competitive than domestic energy per unit. The reason is businesses use a lot more energy than households, so energy companies want to compete to win big contracts from business customers.

However, the picture is complicated by taxes and charges on businesses which regular households don’t have to pay. For instance, most businesses are charged 20% VAT on business energy bills, while domestic bills are taxed 5%. Businesses customers also have to pay the Climate Change Levy, and Feed In Tariff to support climate change initiatives.

Domestic customers are somewhat shielded by the energy price cap, while businesses currently benefit from the Energy Bills Discount Scheme. These reduce domestic and non-domestic bills by different amounts. So there’s no simple way to state whether business energy ends up being more expensive than domestic.