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The ultimate guide to small businesses electricity prices

This guide that explains what you can expect from your business electricity bills if you run a small business. We will let you in on all the secrets to getting a better deal. 

Contents

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

 

How small business electricity prices are calculated

Electricity bills are made up of several factors. It’s important you understand your bills. This will help you identify any issues or anomalies.

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 costs of transporting the 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

23p per day

Subtotal

£7.13

 

Energy consumption

1,000 kWh

Unit rate (price per kWh)

12.39p 

Subtotal

£123.90

 

Pre-tax charge (both subtotals)

£131.03

VAT (20%)

£26.21

Direct Debit discount

-£4.00

Grand total

£153.24

 

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

10,000

13.21p

23.33p

£1,406.15

Small business

10-49

20,000

13.11p

23.33p

£2,707.15

Medium business

50-250

40,000

13.11p

23.09p

£5,328.28

 

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

13.11p

Daily standing charge

23.33p

Total yearly bill

£3,670.74 

Including VAT

£4,404.89 

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

13.11p

Daily standing charge

23.09p

Total yearly bill

£18,322.52

Including VAT

£21,987.02 

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.

A graphic showing how to read a Digital Electricity Meter

 

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’.

An image showing how to read a dial electricity meter 

 

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.

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 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.