How Much Does Electricity Cost for a Small Business?
Understanding your electricity costs helps you keep control of your budget. Prices vary across suppliers and regions, so the question “how much does electricity cost for a small business?” does not have one set answer. Every business is unique, and the way you use electricity will depend on the work you do, your opening hours and the equipment you rely on each day.
In this blog, the team at Business Utility Hub explains the factors that influence what a business pays for electricity usage, the additional charges that form part of a commercial bill and the steps small businesses can take to find a suitable contract. We will also provide a clear overview of how costs are structured and what you should consider when comparing business electricity tariffs.
How business electricity costs are structured
Business electricity bills have two main parts: the unit rate and the standing charge. These costs are set by suppliers, which means prices differ across the market.
Unit rate
This is the amount you pay per kilowatt-hour (kWh) of electricity used. Unit rates vary based on your business size, consumption profile, contract length and the region you operate in. Suppliers also consider wholesale market conditions when setting their business electricity rates. Ofgem does not place a cap on non-domestic unit rates, so charges can vary widely between providers. This makes comparing quotes from across the market essential when it comes to finding the best deal.
Standing charge
This is a fixed daily cost that covers the expense of supplying electricity to your premises. It includes network operation, maintenance and metering. Standing charges vary between suppliers and regions, reflecting local distribution costs overseen within Ofgem’s regulatory framework.
What affects business electricity prices?
Several factors influence the tariff you receive when requesting quotes. Understanding these will help you choose a contract that works for your business.
Business size and consumption
Higher consumption can lead suppliers to offer lower unit rates because usage is more predictable. Smaller businesses usually pay higher rates per kWh due to lower overall consumption and less consistent demand.
Your business location
Business electricity prices vary across the UK. These costs are part of the regulated network charging system overseen by Ofgem, and they influence the final price set by suppliers.
Contract type
Your tariff structure determines how your electricity costs change over time:
- Fixed-rate contracts keep your unit rate and standing charge the same throughout the agreement, offering stability and simple budgeting.
- Variable contracts move with wholesale market prices and may increase or decrease during the contract term.
- Deemed or out-of-contract rates apply when a contract expires without renewal. Ofgem’s guidance confirms these are usually higher than agreed contract rates.
Additional charges
Several government-set charges apply to business electricity bills:
- VAT: most businesses pay VAT at 20%. Some charities and organisations with low usage may qualify for 5% (set by HMRC).
- Climate Change Levy (CCL): this environmental tax is charged on business electricity use unless an exemption applies. The government has announced that the Climate Change Levy (CCL) rates for electricity and gas will be set at £8.27 per MWh (or £0.00827 per kWh) from 1 April 2027. The discount for holders of a climate change agreement remains at up to 92%.
- Network charges: these reflect the cost of running and maintaining the electricity networks. Ofgem regulates the charging framework, and suppliers include these costs within their tariffs.
Meter type
High-usage businesses often have half-hourly meters, which automatically send readings throughout the day. This allows for more accurate billing and can open up access to tariffs suited to firms with more complex or time-sensitive energy needs, such as manufacturers running machinery at set times, hospitality venues with evening peaks, or food producers operating overnight.
Is business electricity cheaper than domestic energy?
Business unit rates can be lower than domestic rates because suppliers may offer stronger pricing to organisations with higher usage. However, this does not mean business customers pay less overall.
There are three main factors behind higher total bills:
- Higher consumption: businesses use far more electricity than households.
- Taxes and levies: businesses pay 20% VAT and the Climate Change Levy (CCL), while domestic customers pay 5% VAT and no environmental levy.
- No price cap: the Ofgem energy price cap applies only to domestic customers. Business electricity prices are unregulated, and suppliers set their own tariffs.
Because of these differences, businesses often face larger annual energy bills even when their unit rate is lower.
How to find the best business electricity deals
The commercial electricity market moves quickly, and prices vary across every business electricity supplier. Comparing tariffs is the most reliable way to understand what the market is offering and to find a contract that reflects how your business uses energy. Working with specialists who review business electricity quotes daily can make this process more accurate and easier to manage.
Compare business electricity prices
Because business energy is not protected by a price cap, suppliers set their own tariffs. Regular comparisons help you see where business electricity rates are cheaper and avoid contracts that do not match your usage. Access to a broad supplier panel gives you a clearer view of the options available before you switch business electricity.
Know your energy contract end date
When a contract ends without renewal, suppliers move customers onto deemed rates, which are usually higher. Tracking your end date allows you to review business electricity quotes in advance and avoid unnecessary costs. This gives you the time to switch business electricity on terms that suit your operations.
Choose the right energy tariff
Your operations determine the type of contract that works for you. Businesses with consistent overnight use may benefit from time-of-use tariffs, while many prefer fixed-rate agreements for predictable budgeting. Understanding your usage pattern helps you identify where business electricity rates are cheaper for your type of operation and which tariff structure is most suitable.
Let Business Utility Hub manage the process
We monitor energy prices every day, compare the full range of suppliers and take the time to look at your specific business energy needs so we can find you the best business energy deal. Our services are free of upfront cost, our prices are often more competitive than your direct supplier renewal quotes. It takes just a few minutes on the phone, and once you are happy to move forward, your dedicated account manager will handle the full switchover, including managing your current contract, leaving you free to focus on running your business.
Compare and switch your business electricity today
To start the process, call us today, email or complete our online form.
