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The ultimate guide to small businesses electricity prices

According to MerchantSavvy, 99.9% of UK businesses are classed as small or medium enterprises (SMEs) — that is, businesses with up to 250 employees. More than 94% of those are ‘micro-businesses’, which means that the vast majority of companies in the UK don’t have the luxury of employing a facilities manager to handle their energy costs.

That’s where we can help. We’ve put together an easy-to-use guide that explains what you can expect from your electricity bills if you run a small business — and how you can get a better deal.

 

Contents

  1. How small business electricity prices are calculated
  2. Average electricity prices by business size
    1. Micro-business
    2. Small business
    3. SME
  3. Examples of electricity usage by business type
    1. Office
    2. Retail store
    3. Restaurant
  4. How to read your meter
  5. How to reduce your business’s electricity bill

 

How small business electricity prices are calculated

Electricity bills are made up of a number of factors which influence how much you are charged for your business electricity. It’s important for you to be aware of these factors so that you fully understand your bills and are able to identify any issues or anomalies.

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

  • Energy consumption — Relating to the amount of electricity you've used during a given period.
  • Unit rate — The price you’ve agreed to pay per kilowatt-hour (kWh) of electricity that your business consumes
  • Postcode — Businesses pay different rates depending on their geographic area. This is because each region’s Distribution Network Operator (DNO) charges a different amount to suppliers for delivering their electricity.
  • Standing charge — This is a fixed daily amount you agree to pay your supplier for providing your electricity, covering the costs they incur (e.g. transportation of electricity). Standing charges can vary significantly depending on the supplier you're with, but the current UK average for small businesses is around 23p per day.
  • Period of billing — Businesses can be billed monthly or quarterly, depending on what is agreed in their contract
  • VAT — Small businesses typically pay 20% VAT, but certain businesses like charities and not-for-profits can pay as little as 5% VAT.
  • Discounts — Suppliers occasionally offer discounts as a reward for paying via Direct Debit.

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

 

Billing period

1st-31st January

Standing charge

23p per day

Subtotal

£7.13

 

Energy consumption

1,000 kWh

Unit rate (price per kWh)

16.74p 

Subtotal

£167.40

 

Pre-tax charge (both subtotals)

£174.53

VAT (20%)

£34.90

Direct Debit discount

-£5.00

Grand total

£204.43

As you can see, all of the factors that make up an electricity bill are displayed in this example. You can see the date range that this bill covers, and you can identify how the total charge is calculated.

Average electricity prices by business size

Here’s a breakdown of the prices you can expect to pay depending on the size of your 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

10,000

16.74p

23.33p

£1,759.15

Small business

10-49

20,000

14.83p

23.33p

£3,051.15

Medium business

50-250

40,000

13.68p

23.09p

£5,556.28

 

Examples of electricity usage by business type

Your electricity usage isn’t simply determined by the size of your business. In fact, the type of business you run can have a far bigger impact on your monthly energy bill than the number of people you employ.

Below we outline some examples of different small business types and go through how their electricity usage may differ.

1. Office

A lot of small businesses today operate online, so their main energy expenditure comes from the use of office space.

According to the Chartered Institution of Building Services Engineers (CIBSE), a typical small office pays between £5.00 and £6.50 in energy costs per square meter of office space each year. An SME will need around 500m² to house all their staff.  About 85% of an office’s energy usage is electricity, with gas only being used for things like heating and hot water. 

Here’s an example of what a typical office might expect to pay for their electricity each year.

 

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 keeping things comfortable for the customer — that is, keeping it well-lit and warm. In fact, about a third of all a shop’s energy usage goes towards heating alone. 

With the majority of shops today using electric heating, though, most of your usage will be electrical, increasing your electricity bill compared to other business types. There are also things like cooling costs for open fridges and any back-office IT costs to consider, too.

Another key factor to keep in mind is that most retailers operate during peak hours throughout the day, when unit rates may be slightly higher (or, at the very least, it’s difficult to get discounts from suppliers).

Here’s an example of 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

23.33p

Total yearly bill

£3,670.74 

Including VAT

£4,969.38 

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; racking up some hefty electricity bills in the process.

Gazprom estimates that the UK catering industry in its entirety uses around 20,600 million kWh of energy each year. With 88,846 businesses registered in the food and catering 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 a host of electrical appliances running for 14 hours or more each day for purposes such as oven cooking, refrigeration, ventilation, lighting and air conditioning.

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

Restaurants may be able to get a better unit price on their electricity costs because of the amount of energy they regularly use and the fact they often operate outside of peak hours (in the evening rather than the day).

Here’s an example of what a typical UK restaurant might expect to pay for their electricity annually.

 

Typical annual electricity usage

139,117 kWh

Price per kWh

13.68p

Daily standing charge

23.09p

Total yearly bill

£18,322.52

Including VAT

£22,938.58 

How to read your business electricity meter

Keeping track of the amount of energy you use is one of the best ways to keep your usage to a minimum. To do so, you’ll 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 will be a total of six numbers, but you only need the first five — ignore the one that is furthest to the right, it may also be shown in the colour red.

Some businesses may have a ‘two-rate’ digital electricity meter. This means you’ll see two sets of numbers rather than just one. Typically, a two-rate meter will show a low (or ‘off-peak’) number and a normal (or ‘peak’) number. If you have a two-rate meter, it’s likely that you’ll pay different rates for the electricity you use at different times of the day. 

A graphic showing how to read a Digital Electricity Meter

 

Reading a dial meter

Dial meters are slightly more complicated to read than digital meters, but they essentially 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.

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

An image showing how to read a dial electricity meter 

 

Reading an electronic meter

Electronic meters can be read in a similar way to digital meters. The only difference is that electronic meters include a decimal place after the first five numbers, with a few numbers following it.

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

Some electronic meters work on two rates. Whilst manual and some digital meters will display both these rates at once, many electronic meters come with a button that you’ll need to press in order to switch between rates. 

If you are on a two-rate meter, make sure you take both readings by switching between the two using the button provided.

Image showing how to read an electronic meter

 

How to reduce your small business’s electricity bill

Regardless of your business type or sector, there are ways in which you can save money and reduce costs on your small business’ electricity supply. This is particularly necessary if you run an energy-intensive small business like a restaurant.

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

 

1. Submit regular meter readings

If your supplier is regularly estimating your energy usage without recent readings, one of two issues can occur. Firstly, you could be overcharged, even if you’re taking measures to reduce your electricity usage. 

Alternatively, you could be undercharged, which will come back to bite you in the form of a ‘back bill’.

Back billing is when a supplier needs to close the gap between the energy you’ve been charged for and the energy you’ve actually used. This can take the form of a one-off payment or an increase to your ongoing charges.

Either way, it can seriously impact your cash flow — which is not ideal for a small business.

By submitting regular meter readings, you reduce your chances of being overcharged or back-billed.

You can also make things easier for yourself by installing half-hourly meters, which automatically send readings to your supplier on your behalf. Speak to your supplier about the possibility of getting a half-hourly meter; they may even foot the cost of the installation!

 

2. Invest in energy-efficient equipment

For most small businesses, the two key areas to target when seeking to reduce your electricity bill are: 

  • Heating — Restaurants and retail stores are often heated via electric convector heaters. Consider switching to a gas-powered alternative, as gas heating is typically a lot cheaper to run, even when factoring in installation costs.
  • Lighting — You can save a substantial sum every year by investing in LED bulbs to light your store or office. You might even consider installing motion-activated light sensors to automatically switch off lights when a room is absent.

 

3. Switch your business electricity provider

Cutting back on your electricity usage is a great way to keep your bills down, but you’ll always be limited if you’re paying more than you need to for the energy you use. 

Thankfully, you can quickly compare business electricity quotes online with our free comparison tool.

When you switch business energy suppliers with Love Energy Savings, you will be provided with a dedicated account manager to handle the entire switching process on your behalf.

Once you’ve found a supplier that best suits your needs, you can start saving on your energy bills in no time. We’ve already helped UK businesses save over £90m on their energy bills.

To find out how much you could save, simply complete our quick business energy comparison tool.