The ultimate guide to small businesses electricity prices

For any small business, it’s important to control costs. If your energy bills are becoming a drain, it could be time to switch energy suppliers.

Reducing your energy bills is a simple way to make real savings. Despite this, many small businesses are continuing to overpay for their gas and electricity.

In this guide, we’ll explain what you can expect from your small business electricity bills. We’ll also provide advice on how you can switch to a better deal.

Contents

1. How small business electricity prices are calculated
2. Average electricity prices by business size
3. Does my business qualify as a micro business
4. Examples of electricity usage by business type
5. Types of small business electricity tariffs
6. How to find the best small business energy prices
7. How to read your meter
8. How to reduce your business’s electricity bill

 

How small business electricity prices are calculated

It's important to understand how your bills are calculated. This can help you find the best deals when switching.

Your small business’ electricity bills will be calculated based on the following factors:

• Energy consumption — the amount of electricity you have used during a given period.
• Unit rate — The price you’ve agreed to pay per kilowatt-hour (kWh).
• Postcode — Businesses pay different rates depending on their geographic area. Each region’s Distribution Network Operator (DNO) charges differently. 
• Standing charge — The fixed daily amount you agree to pay your supplier. This covers the costs of transporting electricity and maintenance. Standing charges can vary depending on the supplier. The UK average standing charge for small businesses is around 23p per day.
• Period of billing — Businesses are billed monthly or quarterly. This depends on what is agreed in the contract.
• VAT — Small businesses pay 20% VAT. Charities and not-for-profits can pay as little as 5% VAT.
• Discounts — Suppliers offer discounts as a reward for paying via Direct Debit.

Here’s an example of what a typical SME bill might look like:

Billing period	1st-31st January
Standing charge	26.83p per day
Subtotal	£8.32

 

Energy consumption	1,000 kWh
Unit rate (price per kWh)	14.83p
Subtotal	£148.30

 

Pre-tax charge (both subtotals)	£156.62
VAT (20%)	£31.32
Direct Debit discount	-£4.00
Grand total	£183.94

 

Average electricity prices by business size

Here are the prices you can expect to pay by size of the business:

Business size	Number of employees	Average yearly usage (kWh)	Unit rate (price per kWh)	Daily standing charge	Yearly total (before VAT)
Micro business	0-9	8,000	16.74p	27.40p	£1,439
Small business	10-49	20,000	14.83p	26.83p	£3,064
Medium business	50-250	40,000	13.68p	26.41p	£5,568

Does my business qualify as a micro business?

A micro business is defined as any business with less than ten employees or a turnover of less than £1.8 million.

The rules surrounding micro business energy are slightly different from larger businesses. If you run a micro business, your energy supplier must inform you when your contract is approaching renewal. You should receive a letter containing:

• Your current prices
• Your new prices after renewal
• Your annual energy consumption

Micro businesses can use this information when comparing energy prices. You can then quickly discover how much you can save on your renewal prices by switching.

With Love Energy Savings, you can compare the latest energy prices online in seconds. To find out how much you could save, simply complete our quick energy comparison calculator.

Examples of electricity usage by business type

Your business electricity usage isn’t simply determined by the size. The industry and working environment have a far bigger impact.

We have put together some price’s examples of some common small businesses.

1. Office

A lot of small businesses today operate online. This means their main expenditure comes from the use of office space.

The Chartered Institution of Building Services Engineers (CIBSE) ran some calculations. A small office pays between £5.00 and £6.50 in energy costs per square meter.  An SME will need around 500m² to house their staff. Offices energy usage is 85% electricity with gas only used for heating and hot water.

Here’s an example of what an office will pay based on that information:

 

Energy cost per square meter of office space	£6.50
Office size	500m²
% energy used that’s electricity	85%
Total yearly bill	£2,762.50

2. Retail store

According to the Carbon Trust, the average UK retailer uses 27,350 kWh of energy per year.

The majority of energy used in shops goes towards customer comfort. This means warmth and lighting. About a third of all a shop’s energy usage goes towards heating alone.

Modern retailers use electric heating. This drives higher costs in comparison to other industries. There are cooling costs for open fridges and any back-office IT costs to consider.

Retailers operate during peak hours when unit rates are higher. This makes it difficult to get discounts from suppliers. 

Here’s what a typical retail store might expect to pay for their electricity each year.

Typical annual electricity usage	27,350 kWh
Price per kWh	14.83p
Daily standing charge	26.83p
Total yearly bill	£4,154
Including VAT	£4,985

3. Restaurant

When it comes to small businesses, the industry that uses by far the most energy is hospitality. Restaurants can spend over ten hours a day with ovens, hobs, dishwashers and microwaves constantly on the go. This racks up staggering electricity bills.

Gazprom estimates that this industry uses around 20,600 million kWh of energy each year. With 88,846 businesses registered in this category last year, that’s an average usage of 231,861 kWh per year.

About 60% of a restaurant’s total energy usage comes from electricity. This stems from a having electrical appliances running for 14 hours a day. 

Gas is used in cooking and heating. This means a restaurant can expect to use 139,117 kWh of electricity annually.

Restaurants usually get a better price on their energy costs. They get discounts by operating outside peak hours on Economy 7 and Economy 10 meters.

Here’s an example of what a UK restaurant might expect to pay:

Typical annual electricity usage	139,117 kWh
Price per kWh	13.68p
Daily standing charge	26.41p
Total yearly bill	£19,127
Including VAT	£22,856

Types of Small Business Electricity Tariffs

Before comparing small business electricity prices, it’s important to consider how you use energy. Getting the right tariff for your business can help you maximise your savings.

When you compare business electricity, the following tariff types will be available:

Fixed rate tariff

When you switch to a fixed rate tariff, your unit rate will remain the same throughout your contract. This is great for businesses requiring certainty from their energy prices. You should bear in mind that your monthly bills will still change depending on how much energy you use.

Variable rate tariff

With a variable rate tariff, your unit rate can change during your contract. If your supplier reduces its prices, you will benefit from this. However, your unit rate may increase if the cost of gas and electricity goes up.

No standing charge tariff

Under a no standing charge tariff, you won’t be required to pay a daily fee to your supplier. This means that you will only pay for the energy you use.

This can be beneficial for businesses who operate seasonally or part-time. When you aren’t using your gas or electricity, you’ll have nothing to pay. It’s worth bearing in mind that unit rates can be more expensive on no standing charge tariffs.

Multi rate tariff

A multi rate tariff allows you to pay different unit rates and different times of the day. These are broken down into on and off-peak hours. During off-peak hours, your unit rates will be lower. However, you will pay more expensive unit rates during peak hours.

If your business operates at night or outside of peak hours, a multi rate tariff could help you reduce your bills.

Green energy tariff

If your business is seeking to go green, a renewable energy tariff could be for you. Green business energy tariffs have become much more affordable in recent years. At Love Energy Savings, we can help you find green energy tariffs that offer your business great value.

How to find great small business electricity prices

It’s vital for small businesses to compare energy prices regularly to ensure they’re on the best deal. By simply allowing your energy contract to roll over, you could find yourself overpaying for your electricity.

At Love Energy Savings, we’d always recommend comparing energy prices before accepting renewal prices. As there is very little loyalty in the energy market, renewal prices are often much higher than negotiated rates.

With Love Energy Savings, you can quickly compare a huge range of suppliers to find great small business energy prices. All you need to do is enter your postcode to complete our quick energy comparison calculator.

How to read your electricity meter

Keeping track of the amount of energy you use is one of the best ways to keep your usage to a minimum. You will need to know how to read your small business’s electricity meter.

Reading a digital meter

If you have a digital electricity meter, you should read the numbers left to right. There are six numbers, but you only need the first five. You should ignore the numbers in red furthest to the right.

Some businesses may have a ‘two-rate’ digital electricity meter. This means you’ll see two sets of numbers rather than just one. A two-rate meter will show a low (or ‘off-peak’) number and a normal (or ‘peak’) number. These are two different rates you will pay for different times of the day.

 

Reading a dial meter

Dial meters are more complicated to read, but they work in the same way. Read the numbers from left to right, ignoring the one on the furthest right.

If any of the dials fall between two numbers, use the lowest number in your reading. If a pointer is exactly on a number, check the next dial along. If this falls on a 9, subtract one from the number on the previous dial.

If the first dial reads 5 and the second dial reads 9, the reading for these first two dials would be ‘4’ and ‘9’.

 

 

Reading an electronic meter

Electronic meters are read in a similar way to digital meters. The difference is electronic meters include a decimal place after the first five numbers.

When taking your reading, read from left to right and only use the first five numbers.

Some electronic meters work on two rates. You will need to press a button to switch between the two rates. Make note of both readings.

 

How to reduce your small business’s electricity bill

Regardless of your business type or sector, there are ways you can save money.

Here are some quick and easy measures you can perform to reduce your business electricity bills.

1. Submit regular meter readings

One of two issues can occur if your supplier is estimating your bills.

• You get overcharged. This means you're losing out on savings and hurting your cash flow.
• You get undercharged. This will come back to bite you when your supplier catches up. They will send you a large bill to pay and you won't be expecting it.

This impacts your cash flow and is not ideal for a small business.

Submitting regular meter readings reduces your chances of being overcharged or back billed.

You can make things easier by installing half-hourly meters. These send readings to your supplier on your behalf every 30 minutes. Your supplier may cover the installation costs.

2. Invest in energy-efficient equipment

The two key areas to target to reduce your electricity bill are:

• Heating — Restaurants and retail stores often use electric heaters. Consider switching to a gas-powered alternative. Gas heating is a lot cheaper to operate. This includes factoring in installation costs.
• Lighting — You can save a large amount every year by investing in LED bulbs. You may even consider installing motion-activated light sensors. 

3. Switch your business electricity provider

Cutting back on your electricity usage will keep your bills down. This will only save you a little if you are paying more than you should. You can compare business electricity prices online. This will make sure your on the correct tariff and not overpaying.

When switching with Love Energy Savings, you get a dedicated account manager.  We will handle the entire switching process on your behalf.

Once you’ve found a supplier, you can start saving on your business electricity.  We’ve helped UK businesses save over £90m on their energy bills.

To find out how much you could save, use our comparison tool.