What are standing charges?
The standing charge is the fixed daily cost of your energy supply. It's an independent charge that remains the same no matter how much electricity you use on a given day.
The unit rate is what you pay for each unit of energy—for example, £0.0818 per kilowatt hour (kWh). The more electricity you use, the higher your total bill will be; however, if you have a low unit rate and high standing charges, then your total bill could still end up being lower than someone with a high unit rate and low standing charges.
For most businesses in the UK, power companies offer two types of electricity plans: fixed rate or variable rate plans.
Fixed-rate plans typically have higher monthly costs but lower daily costs over time because they include a set amount per kWh rather than an estimated figure based on historical usage patterns.
However, unlike variable-rate plans, which can fluctuate wildly depending on market conditions at any given time but which also tend to save money over time thanks to their low overall rates which offset any fluctuations from month-to-month (or even week-to-week).
Why do electricity providers have standing charges?
Electricity providers need to cover their costs.
When you sign up for an electricity plan, there are two types of charges: usage and standing. The usage charge is what you pay for each kilowatt-hour (kWh) of electricity you use. In some areas, this may be called the "energy charge" or "usage fee."
The second type of fee—the standing charge—covers the costs that don't go down when your usage goes down, like paying staff and maintaining infrastructure.
How can I compare business electricity standing charges?
Looking at the standing charge is a good place to start, but it's important to make sure you're comparing like-for-like. For example, if you're comparing tariffs that only apply to small businesses or large businesses, they may not be comparable as they would have different conditions.
Use an independent comparison service like Compare Business Electricity and look for a business tariff that has a zero or low standing charge. If you're a small business, you may also find one with a discount on the standing charge (e.g., up to 30%).
What else am I paying for with the standing charge?
The electricity standing charge is a fixed amount you pay each month. It covers the cost of providing your electricity supply and maintaining the network. It also covers other costs such as:
- The cost of supplying energy to your home or business
- The cost of supplying energy to the grid (the National Grid) so that it can be transported around the country for use by others
- The cost of supplying energy to your local distribution network (the Electricity Network Operator)
Standing charges are a fixed daily cost you pay to your supplier, in addition to the unit rate and VAT, for maintaining the network and pipework.
They're sometimes referred to as connection fee/unit rate etc.
The amount may vary from region to region, but it's usually around £10-£20 per day. This means that if you use 100 units of electricity on a day when no one is at home (or using it), then you'll still be charged for standing charges for that day.
You might assume that this means that larger organisations, with more electrical appliances and higher consumption will be charged more. But standing charges provide a valuable way for smaller businesses to save money on their bills. This is because the standing charge is independent of your electricity consumption.
If you're spending under £25/day on electricity, then you don't need to worry about it! In fact, if you're spending less than £25/day on your energy bill, it could be cheaper to buy some units from another supplier rather than pay the total cost upfront!
Businesses that consume more electricity generally benefit from lower unit rates (the amount charged per kWh of energy).
Their electricity tariffs are often designed with a variety of discounts on offer for larger consumption. However, this doesn't cancel out the additional cost of their higher standing charge. And many small businesses don't use enough electricity to qualify for these discounts. So their unit rate remains high, without any additional savings on the standing charge.
In contrast, smaller businesses' lower consumption often means they are eligible for deals with reduced or no standing charges. These might also be capped at a certain level, even if they go over their agreed usage amount.
Ensure your business isn't being charged too much just because it uses less energy than others! Compare business tariffs available near you today to see how much you could save.
One of the most important things you can do to save money on your electricity bills is getting a better tariff deal. This means comparing business tariffs from different suppliers and choosing the one that best suits your business.
You can use our comparison service to find the best tariff for you, or if you prefer, simply contact us. We have access to all types of business tariffs for both small and large companies, so if there's anything else we can help with please don't hesitate to get in touch.
As we've seen, comparing business electricity tariffs is an essential way of discovering whether or not your business is paying too much for its energy. But there are other factors you should consider when choosing a tariff: the length of contract, any exit fees if you want to switch suppliers, and if there are special offers available from suppliers in your area.
If you're looking to save money on your business electricity bills, then make sure you check out Compare Business Electricity. We are a specialist energy comparison, helping businesses of all sizes save money on their energy bills. We have access to all types of business tariffs, so if there's anything else we can help with please don't hesitate to get in touch.