The cost of electricity can easily sink your business if it isn’t kept under control. That’s why we’ve created this guide to small business electricity prices.
To start here are the average electricity rates paid by businesses size in 2021, according to gov.uk.
|Business Size||Pence per kWh (ex CCL)||Pence per kWh (inc CCL)|
The categories above don’t relate directly to business size, but to energy usage in the following way.
Band Name: Annual consumption MWh
- Very Small: 0 – 20
- Small: 20 – 499
- Small/Medium: 500 – 1,999
- Medium: 2,000 – 19,999
- Large: 20,000 – 69,999
- Very Large: 70,000 – 150,000
- Extra Large: >150,000
Most energy suppliers still don’t publish a full price list of all their tariffs. However, they do publish their deemed and out-of-contract rates. Therefore, we’ve compare these from the UK’s largest business electricity suppliers below:
However, keep in mind the prices below are the worst case scenarios. You can easily get a cheaper tariff simply by signing a new contract.
Small Business Electricity Prices (Deemed Rates)
|Energy Supplier||Unit Price|
(Price per kWh)
|Total Gas and Power||20.66p||268.00p|
Out-of-Contract Rates (Extended Supply)
|Energy Supplier||Unit Price|
(Price per kWh)
|Total Gas and Power||20.66p||268.00p|
Disclaimer about tables above: The prices listed above were believed to be accurate at the time of publication (May 2022). They reflect each company’s deemed or out-of-contract tariff rates for non-domestic customers with a profile class of 01-04. If tariff rates varied by region, we picked the highest price per kWh along with the corresponding standing charge for that region. The first six companies in bold are the Big 6 Energy suppliers and are ranked on market size. The remaining companies are ranked based on search popularity at the time of writing. Rates are subject to change at any time at the sole discretion of the energy supplier.
Also you should be aware that the prices above exclude VAT (normally 20%) and Climate Change Levy (CCL).
Deemed vs Out-of-Contract Rates Explained
At first glance the prices listed above probably seem very high. And that’s because they are. They reflect what are known as deemed or out-of-contract rates. So what’s the difference and how can you get better business electricity deal?
Deemed rates occur when you have no active contract to supply your business with power. This most commonly happens when you move into a new business premises. The current energy supplier assumes that you want to have an uninterpreted supply of power and so will continue supplying the property with power but at their much higher deemed rates.
You are in effect ‘deemed’ to agree to be supplied by the previous occupant’s energy supplier until you sign a contract with them or switch to a new supplier.
Out-of-contract rates (sometimes also called extended supply rates) are very similar, expect they occur when your existing contract with a supplier ends before a new one is put in place or sometimes if you repeatedly fail to pay your energy bills.
You’ll still get power, but again at the much higher price. Unlike deemed rates, you should in theory almost never actually be in a situation where you have to pay these rates.
Your supplier should send you a renewal letter well before your contract ends, giving you time to shop for new deals and/or just accept the new pricing plan. Some suppliers will even auto-renew and/or place you onto a new plan (usually a variable rate tariff), which prevents out-of-contract rates.
These are generally a fair bit more expensive than the cheapest alternative tariffs in the marketplace, but much less than the out-of-contract rates.
Obviously, energy companies want to move you onto a proper signed contract as quickly as possible, which is why they set their deemed and out-of-contract rates so high. It’s an incentive to get you to sign a contract ASAP. But what should you do if you want the best deal?
Fixed Rate vs Variable Rate Electricity Tariff Contracts
When it comes to sign a new small business energy contract you’ll generally be presented with two different types of tariffs.
Fixed Rate Tariffs
- Fixes the price you pay per kWh for a fixed period of time (usually 1-3 years, but some suppliers will fix rates for up to 5 years)
- Generally prices are not the absolute lowest on offer, but gives your business certainty around how much you’ll pay for electricity. However, can mean you’re locked into higher rates if prices fall.
- May exclude pass-through costs (e.g. Distribution Use of System (DUoS) and Transmission Use of System charges (TUoS) charges).
Variable Rate Tariffs
- Can offer better rates than a fixed term contract in the short term.
- Greater risk if prices rise in the future, but you also benefit from any price decreases.
- Can often switch suppliers more quickly, because you’re not a fixed term agreement.
There is no single “best” tariff for all small businesses. What it comes down to is how much risk you want to tolerate. Basically, if you can’t afford a large increase in the price of electricity, you should at least consider a fixed rate tariff.
How To Get Cheaper Electricity Rates
Just looking at the deemed rates above, you could in theory save just over 50% per kWh just by switching between npower (31.91 p/kWh) to SSE (15.74 p/kWh). When looking at the standing charges the difference is even more pronounced, you could save up to 90% if you switched from Total Gas and Power (268.00 p/day) to SSE (23.98 p/day).
And remember, these rates are the worst case scenario for each supplier, you could save even more with the right contract. Fixed rate electricity tariffs for small businesses can easily be a further 20-30% less than the best deemed or variable rate plans.
Therefore, comparing prices and switching your business energy supplies is probably the best way to get the cheapest electricity tariff.
Yet, according to Ofgem only 21% of micro and small businesses switcher suppliers in 2016.
This means 79% of small businesses in the UK may be paying too much for their electricity.
However, it’s never been easier to compare small business electricity prices online. For example, you can can started by requesting free quotes here.
And remember never sign or agree to a new contract before comparing tariffs and suppliers. Just by getting a few quotes, you may be able to reduce your bills by as much 60%.
Who is the cheapest electricity supplier for small businesses?
With over 50 business energy suppliers now operating in the UK there has never been more choice.
Unfortunately, not one of them is the single cheapest supplier for all small businesses. The rate you pay is based on your usage, profile class, business type and location. And that’s why you need to get and compare quotes if you’re looking for the best deal.
Electricity Prices By UK Region
Like many things in the electricity market, who does what is not always immediately clear. The business electricity suppliers mentioned above are the companies that actually sell your business electricity.
However, they do not own and operate the distribution network of towers and cables that bring electricity to your business.
That’s done by the Distribution Network Operator (DNO) Companies. You can see how they’re broken down by region in the map below:
These are the companies you’d phone if you there’s a power cut in your region. They are:
|Area ID||Area Name||DNO Company|
|10||Eastern England||UK Power Networks|
|11||East Midlands||Western Power Distribution|
|12||London||UK Power Networks|
|13||Merseyside, Cheshire, North Wales and North Shropshire||SP Energy Networks|
|14||West Midlands||Western Power Distribution|
|15||North East England||Northern Powergrid|
|16||North West England||Electricity North West|
|17||North Scotland||Scottish & Southern Electricity Networks|
|18||South Scotland||SP Energy Networks|
|19||South East England||UK Power Networks|
|20||Southern England||Scottish & Southern Electricity Networks|
|21||South Wales||Western Power Distribution|
|22||South West England||Western Power Distribution|
Some energy suppliers also use the regions above to set different prices. For example, E.ON’s deemed rates vary from 17.66 p/kWh in London to 20.55 p/kWh in North Scotland; a 14% difference.
As a result the cheapest electricity supplier in one region may not be the cheapest in the next, and that’s why there’s really no real way around getting quotes if you want to get the cheapest tariff. For more this you may also want to visit our sister site British Business Energy which goes into greater details on business electricity rates by region.
Small Business or Micro Business?
Most UK small businesses are actually considered micro businesses based on Ofgem’s definition.
From 31 March 2014, a non-domestic consumer is defined as a micro business if they meet one of the following criteria:
- Employs fewer than 10 employees (or their full time equivalent) and has an annual turnover or balance sheet no greater than €2 million [approx £1.8 million], or
- Consumes not more than 100,000 kWh of electricity per year, or
- Consumer not more than 293,000 kWh of gas per year.
They then further break this down as follows based on number of employees in the business:
- No Employees: businesses with no employees
- Small Micros: businesses with 1 to 4 employees
- Larger Micros: businesses with 5 to 9 employees
- Small: businesses with 10 to 49 employees
The good news is that so long as your business is considered a micro business you should have an easier time terminating your contract and/or switching suppliers compared to larger businesses. According to Ofgem:
We have put in place changes that enable micro business customers to give termination notice at any time during their contract, in order to stop suppliers requiring termination notice only during a narrow time period (typically 30 days).
Suppliers must also clearly state the contract end date and notice period on bills and statements of account for micro business consumers on fixed term contracts.
10 Ofgem Small Business Electricity Facts
The 10 facts below come from Ofgem’s 2016 Micro and small business customer engagement in the energy market report.
- Fewer businesses switched energy supplier in 2016, declining to 21% from 25% in 2015.
- 85% of small businesses reported switching because they were offered or found a cheaper deal from another supplier.
- 52% stated they switched supplier because of price increases from their previous supplier.
- 82% of small businesses that did not switch because they were broadly satisfied with their existing supplier.
- Only 21% of small businesses read their contract in detail.
- 50% of businesses either used or approached by a broker in 2016.
- Of those who were approached, 22% recalled 50+ calls!
- Businesses were more likely to be on renegotiated contracts with their current supplier (39%) than hold a first-time contract with a new supplier (31%).
- The average savings business were willing to switch supplier for was £208.
- 19% of businesses took no action in the previous 12 months and has not switched in the previous 5 years.
5 Common Questions About Electricity For Small Businesses?
Below are a few common questions people have about electricity and their businesses.
Which is cheaper business or domestic Electricity?
Business electricity does not have any price caps in place so can be more expensive, and often is for small businesses. Big businesses on the other hand almost always pay less than the domestic rates, because of their high usage. Therefore, small businesses in particular should shop around for the best deal.
Do I need a business electricity contract if I work from home?
Be aware, you’ll pay 20% VAT on business energy vs 5% VAT on home energy and will also have to pay the Climate Change Levy (CCL). If you’re worried about your usage and whether you’ll need a business energy contract, the best course of action is to speak to your supplier.
What is the VAT rate on business electricity bills?
All of these businesses only pay 5% VAT rather than 20%.
How much electricity do small businesses use?
However, the government does have ranges. Very small businesses use under 20,000 kWh per year, Small businesses use 20,000 – 500,000 kWh per year, and Small/Medium businesses use 500,000 – 2,000,000 kWh per year.
How much does electricity cost for a small business?
Using the example above, a small business using 20,000 kWh per year, paying the typical 14 p/kWh with a daily standing charge of 50 p/day would end up paying 20,000(£0.14) + £0.50(365) = £2,982.50 for electricity (excluding VAT & CCL) per year or £248.54 per month.
Summary: 3 Keys To Cheap Small Business Electricity Prices
- Never sign or agree to a new energy contract before surveying the current energy market landscape.
- Look at your current supplier’s various tariff options, especially the price difference between fixed rate and variable rate contracts.
- Then, get quotes from comparison sites and/or speak to an energy broker to see what other suppliers are offering.
Financial Disclosure: We may be paid a fee if you get a quote for business electricity from Bionic or Love Energy Savings using the links on this page. This comes at no cost to you and helps to pay for us running this website.