How Do Business Energy Tariffs Work In The UK 

Energy tariffs are pretty much always the main factor in businesses choosing an energy supplier.

What Is An Energy Tariff?

Energy suppliers charge customers using an energy tariff based on their energy use. These tariffs depend upon several factors, including unit price, source of energy, supplier and location.

Types of Tariffs

Fixed Energy Tariff

A fixed tariff is a predetermined cost of gas or electricity done per unit, that is charged for a definite period, usually one to three years. For instance, if the unit price is 7p and the business consumes 1000 kWh in a month and 2000 kWh in another, you’ll be charged £70 for the first month and £140 for the second. These figures do not include standing charges or any other applicable charges.

Fixed rates are always cheaper than variable tariffs. However variable tariffs allow more flexibility as you cannot switch supplier whilst in a fixed tariff.

Standard Variable Tariffs

Standard variable tariffs are the most common type of tariffs in the UK. Many businesses in the UK are on standard variable tariffs; some due to neglect whilst others are stuck on them due to debt. Standard tariffs vary with the rise and fall in the electricity and gas market. Which means a business can be charged 7p for one month while 8p for another. Also, there is no contract or any exit fee.

Online Energy Tariffs

Online energy tariffs are for people who prefer to manage their accounts online and enjoy cheap deals in return. This type of tariff can be applied to fixed and variable charges for both electric & gas customers.

Currently this option is not widespread as not many suppliers have online-only deals. British Gas Lite is the most famous of suppliers with online only deals.

Green Energy Tariffs

Green energy tariffs are applied to gas and electricity supplied from renewable energy resources like wind, hydro, or solar power. The electricity sources are 100% renewable while gas sources are usually around 10% but some are now 100%. This type of tariff can be fixed or variable depending upon the supplier. The green energy tariff rates are getting cheaper every year but are still quite expensive.

How Does Your Tariff Affect Your Energy Bills?

Your total monthly energy bill can be portioned out into two parts;

Standing Charge

Standing charge is the preset cost paid to the supplier for providing a business premise with gas and electricity, regardless of the consumption. It includes the prices of maintenance, meter reading, engineer visits and account management. Almost every supplier includes a standing charge, but they vary from one to another.

Unit Rate

Unit rate is the price you pay for each unit of energy consumed. It is calculated in kilowatt-hours or kWh.

Calculating Total Charge

To calculate the total price of your energy bill, the energy supplier monitors your energy usage over the month and multiplies it by the unit rate. That’s usually the main part of the bill.

For the second part of the bill, the supplier moves on to multiplying the billing days by the standing charge cost on the tariff. The two parts are then totalled, forming the bill.

Why Do Energy Companies Offer Different Tariffs?

When it comes to energy suppliers the first thing that comes to mind is the Big Six. The name dedicated to six major energy suppliers, including

  • British Gas
  • Npower
  • Scottish Power
  • Scottish and Southern Energy
  • EDF
  • EON

There are tons of other medium and small suppliers.

The three main factors based on which your supplier set the tariffs are;

  1. The number of consumers they have in your area
  2. The cost of electricity or gas they have to pay in your locality
  3. Other operating charges that the company has to pay in your locality

Therefore, based on your location, the tariffs can vary significantly. For instance, you’ll find the cheapest energy tariffs in North of Scotland while the highest-priced in the South of Wales.

You should compare the tariffs offered by different companies in your area to find the cheapest one.

How Can You Manage Your Tariffs?

To ensure a business pays the cheapest tariff it can, it should;

  • Record meter readings regularly
  • Be punctual with renewing or switching tariffs
  • Inform supplier when moving in or out of a property asap

If you are moving in or out of location, you should cancel your current contract or out of contact energy supply to set up an updated energy supply plan at your new address.

A number of factors affect the energy tariff a supplier offers in an area.

If you need any help, feel free to contact me via email (hamed@hamed.energy) and I’ll be happy to help.