Business Energy Savings, Rates and Costs

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?

The big six energy suppliers

These are the most popular energy suppliers (the ‘big six'):

  1. British Gas
  2. EDF Energy
  3. E.ON
  4. nPower
  5. Scottish Power
  6. SSE
NB: in 2019, nPower was acquired by E.ON. nPower's existing customers are currently being moved over to subsidiary E.ON Next.

Chances are you’ll have heard of most of these suppliers. That’s because the Big Six account for around 70% of the UK energy market. We compared the Big Six on the criteria that we know matter to customers:

  • Their prices (‘out of contract’ rates and a sample quote)
  • How they are rated by other customers
  • How quickly they pick up the phone
  • How their electricity is generated

It’s worth mentioning that the ‘out of contract’ rates are effectively the worst possible, and should be a last resort. You will get the best rates if you commit to a fixed rate contract with a provider, usually for a year or more. It’s therefore really important to get quotes tailored to your business, to ensure you’re getting the best possible deal. Fill in this form to get yours.

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British Gas

EDF Energy

E.ON

nPower

Scottish Power

SSE

Consumer Rating

63%

Consumer Rating

72.5%

Consumer Rating

66%

Consumer Rating

39%

Consumer Rating

62.5%

Consumer Rating

74%

Sample small business electricity quote

£2339.19/year

Sample small business electricity quote

£2487.98/year

Sample small business electricity quote

2559.87/year

Sample small business electricity quote

£2465.92/year

Sample small business electricity quote

£2544.87/year

Sample small business electricity quote

£2492.54/year

Out of contract electricity rate (in pence)

21.69/kwh

57.44/day

Out of contract electricity rate (in pence)

20.20/kwh

50.00/day

Out of contract electricity rate (in pence)

17.70/kwh

83.00/day

Out of contract electricity rate (in pence)

25.46/kwh

57.79/day

Out of contract electricity rate (in pence)

17.50/kwh

46.00/day

Out of contract electricity rate (in pence)

17.17/kwh

16.57/day

Out of contract gas rate (in pence)

6.41/kwh

96.07/day

Out of contract gas rate (in pence)

5.90/kwh

35.00/day

Out of contract gas rate (in pence)

4.29/kwh

102.00/day

Out of contract gas rate (in pence)

7.578/kwh

129.00/day

Out of contract gas rate (in pence)

5.50/kwh

25.00/day

Out of contract gas rate (in pence)

3.24/kwh

128.00/day

Time taken to speak to customer services

1 min 42 sec

Time taken to speak to customer services

6 min 31 sec

Time taken to speak to customer services

1 min 25 sec

Time taken to speak to customer services

2 min 20 sec

Time taken to speak to customer services

2 min 25 sec

Time taken to speak to customer services

7 min 35 sec

Sample business energy quote: for an example small business using 20,000 kwh and based in north-west London

Consumer rating: calculated by combining the Which? consumer rating and Trustpilot score as of May 2021

Time taken to speak to customer services: phone calls carried out at around 2pm on Wednesday 14th February 2018


How much do business energy rates cost?

Okay, let’s get down to the important stuff: money.

When comparing business energy rates, you will see two different types of charge:

1. Standing charge

This is the amount you pay to have gas or electricity supplied to your commercial property. It’s normally given as a daily rate.

2. Per kWh

One kWh is a relatively small ‘amount’ of energy – the amount required to sustain 1KW of energy for one hour. In real terms, that’s about the energy needed to power a laptop for two and a half hours.

The ‘per kWh’ rate shows you how much you will pay for every unit you use. That’s why you should have an idea of how much energy your business uses in a year or a month. It’s much easier to compare prices if you know this.

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:

  1. The baseload – your predictable energy usage
  2. 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.

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.


Environmental schemes for businesses

Business environmental schemes might not sound particularly glamorous, but these schemes might help you save thousands – we bet you’re interested now!

Renewable Heat Incentive (RHI)

The Renewable Heat Incentive incentivises businesses to generate their own gas to make and save money. Using this scheme, businesses are encouraged to find renewable ways to generate their heat in exchange for financial rewards.

Options include: biomass boilers, ground to water heat pumps and solar thermal panels. The amount you can earn depends on your usage and the technology installed. You can find more information and check your eligibility on the Ofgem website.

A note on the Feed-In Tariff (FIT)

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

In short, the Feed-In Tariff enabled businesses that use solar panels, wind turbines, etc. to generate their own power for free and earn money by selling any excess back to the grid.

On 1 April 2019, the Feed-In Tariff closed to new applications.

Importantly, though, this won't affect businesses that are already taking part in the scheme. So don't worry if you are – you'll continue to benefit from it (FIT support is payable for 20 years – or 25, in some cases – and tariffs are adjusted annually by RPI).


Levies and additional business energy charges

The government’s aim is to have reduced CO2 emissions by 80% by the year 2050 (compared to the levels from the 1990s). Businesses willing to invest in generating their own energy can really profit from this (as we’ve seen above). There are, however, some costs that businesses have to bear in order for the country to meet its targets:

The Climate Change Levy (CCL)

The Climate Change Levy is effectively a tax imposed on non-domestic energy users with the aim of minimising inefficiency in businesses and cutting carbon emissions. The current and future CCL rates are as follows:

Taxable commodityRate from 1st April 2018Rate from 1st April 2019Rate from 1st April 2020Rate from 1st April 2021
Electricity (per kWh)0.583p0.847p0.811p0.775p
Natural gas (per kWh)0.203p0.339p0.406p0.465p
LPG (per kWh)1.304p2.175p2.175p2.175p

As with VAT, some companies are exempt from paying some or all of this cost. This includes:

  • Businesses that use small amounts of energy
  • Charities

Electricity, gas and solid fuel are also typically exempt from the full CCL rates if any of the following apply:

  • They will be used outside of the UK
  • The electricity was generated by renewable methods before 1st August 2015
  • They won’t be used for fuel
  • They’re used for certain forms of transport

If your business is energy intensive and you have entered into a Climate Change Agreement (CCA) with the Environment Agency, then you can pay a reduced CCL rate.

There are other circumstances under which your business may be eligible for exemption or a reduced CCL rate. It’s worth reading up on the full government guidelines on this.

You will automatically be charged for CCL, and the charges will be listed on your bill.


Renewables Obligation (RO)

Schemes like the Feed-In Tariff and the Renewable Heat Incentive have provided great support systems for small-scale renewable energy generation. However, larger-scale projects need financial support too, and that’s where the Renewables Obligation comes in.

It basically places an obligation on suppliers to get a certain amount of their energy from renewable sources. The scheme is in the process of being phased out, and is being replaced by the levy known as Contracts for Difference (CfDs) – see below.


Contracts for Difference (CfDs)

Contracts for Difference is a levy that is paid by business electricity consumers. It basically ensures that renewable sources of energy remain financially viable.

First, a ‘floor price’ is set. This is the cheapest price that renewable electricity can be sold at without making a loss. If the market price falls below this, a compensatory payment is made to the equivalent of the difference between the market price and the floor price. This ensures energy companies are still able to use these greener methods, rather than resorting to cheaper generation alternatives, such as coal and gas.

This cost is passed to business customers through the rate they pay for their electricity, so there is no additional cost to worry about. It’s just a good thing to be aware of!


Carbon Reduction Commitment (CRC Efficiency Scheme)

The CRC Efficiency Scheme was introduced by the government to try to reduce inefficiency and carbon dioxide emissions. Businesses that qualify for the scheme are required to register for it, or they could face a hefty fine.

Those that qualify are large businesses (using 60,000+ MWh) which are not energy intensive. For example:

  • Supermarkets
  • Hotels
  • Banks
  • All central government departments

Once registered, businesses are required to monitor and report on their CO2 emissions from gas and electricity use. The Environment Agency then calculates how much carbon they have effectively produced. The organisations then have to buy ‘allowances’ for each tonne they produce. It’s worth reading up about the scheme and it’s qualifying factors if you think you should be registered.

How to save money on energy bills 

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. 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. Get 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. Get flexible

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.

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.

Zara is a law grad with a penchant for wordsmithing. As Expert Market’s CRM and payroll expert, she relishes researching and writing expert content.