Unit rates are prices that energy companies charge businesses for gas and electricity use. When you read your business electricity bill, you will see a number with the abbreviation ‘kWh’ next to it. This is the amount of electricity you consumed in ‘kilowatt-hours’ for the billing period specified on your bill.
The prices per kWh for business electricity tariffs are not dissimilar to domestic tariffs, with a few notable differences:
- The VAT rate on business tariffs is 20% (domestic tariffs are 5%)
- There are additional climate levies placed on business electricity
Despite this, business prices per kWh are often cheaper than domestic tariffs. The reason is supply and demand. Businesses consume more energy so they are able to access lower rates – this is a perfect example of economies of scale.
Basically, the more you use, the less you pay for what you use.
Wholesale Market kWh Prices
The wholesale market for electricity has levelled out over the last few years. On any given day it hovers at 5p to 6p per kWh. This means if you could buy electricity directly from the wholesale market, you’d pay 5p to 6p to power your business.
Sadly, it doesn’t work like that.
You get your electricity from an energy supplier. Energy suppliers buy their electricity at wholesale prices, but the price is inflated before you get it. This is the natural process of retail – to sell a commodity and earn a profit on it.
What Are Typical kWh Rates?
As a general rule of thumb, for a medium-sized business consuming 25,000 kWh per annum, the price per kWh will be around double the wholesale price plus 25%. This means if the wholesale price is 6p, your price would be 15.0p per kWh.
However, better deals are usually available if you switch at the end of your contract or simply shop around. It would not be unreasonable to achieve double the 6p wholesale price plus 15%, which would come to 13.8p per kWh.
There’s also a standing charge – this is the fee you pay to your energy supplier for giving you your energy (not what you consume, which is covered per kWh). Standing charges hover at 15p to 25p per day and are built into your bill.
Top tip – when you shop for electricity, always factor in the kWh rate AND the standing charge. You may get a cheaper kWh rate from one supplier, but if their standing charge is higher, your bill will even out and you won’t save.
What Factors Can Affect Prices?
The main factor that affects kWh prices is volume. The more energy you are expected to consume, the cheaper your rate.
For example, here are some average prices per business type:
- Coffee shop – 13.42p per kWh
- Dentists – 13.11p per kWh
- Newsagent – 15.1p per kWh
Can you tell the difference?
Coffee shops and dentists consume A LOT more energy than the average newsagent, and so, their prices are lower. Economies of scale, baby!
These factors also affect prices:
- The hours you consume electricity – electricity prices are different for day and night due to differences in demand on the network. If your business operates at night, you will pay less per kWh so long as you have the right tariff.
- Your region and location – energy companies don’t like to admit it but where your business is based in the United Kingdom can affect your kWh prices. The Midlands is cheaper than London, for example.
- Out of contract and deemed rates – deemed rates per kWh can be outrageously higher than contracted rates. If you find yourself on deemed or out of contract rates, you could pay up to 40% more per kWh. Switch as soon as possible.
- The length of your contract – if you can fix your electricity tariff for more than 12-months you may get a discount per kWh. However, it is more common to receive a discount on the standing charge. Either way, you should save.
- The type of energy you buy – surprisingly, renewable energy can work out cheaper than traditional energy. The difference isn’t enormous, but for a business consuming 20,000 kWh+ a year, the savings could be £100 or more.
How Can I Get the Best Deal On My Energy?
The short answer is you should switch with EnergyBillKill.
EnergyBillKill has deals in place with the biggest and smallest energy suppliers to save you more money when you switch. We focus exclusively on business energy and non-domestic tariffs and help businesses of all sizes get the best deal.
The prices you see on energy supplier websites are not necessarily the prices you will get when you switch with us. Our prices are cheaper in 99% of cases. Our service really is a no-brainer if you want a better deal on your electricity!
Whether you are a small, medium, or large business, and whether you consume 20,000 kWh a year or 200,000 kWh a year, we’ll get you a great deal.
Switching is also incredibly easy. Here’s how it works:
We get you a great deal > you approve it > we initiate your switch with your new supplier > your supplier does the rest. Easy.
Get started here or download our free mobile app. Using our mobile app, you can get the best prices on business electricity on the move on your smartphone and tablet.