How to compare business energy costs per kWh

·4-min read
 (Pixabay)
(Pixabay)

Kilowatt hours? Unit rates? Contract end dates? Consumers are becoming increasingly savvy about shopping for the best household energy deals. Despite being busy people, there’s no reason why business owners shouldn’t get to grips with the jargon and be equally on the ball as well.

Thanks to the pandemic, small and medium-sized enterprises (SMEs) are having a tough enough time as it is without wasting money by paying too much for the energy they use.

Keep expenses down

Businesses that understand their energy usage, as well as the way their costs are broken down, are in the best position to keep a lid on outgoings thus helping to boost that all-important bottom line.

As the Federation of Small Businesses points out “whether business models are heavily energy intensive or less so, even marginal savings by negotiating a slightly cheaper tariff can make an important difference to the overall costs of small businesses”.

Use our business energy comparison service to compare tariffs from different suppliers in minutes and make annual savings worth hundreds of pounds for your organisation.

Unlike household bills, there are no ‘dual fuel’ arrangements for SMEs. Some suppliers may offer a discount if a business bundles together its gas and electricity needs. But even where a company receives its gas and electricity from the same supplier, the business owner still has to agree to a separate contract per fuel type - and that means two lots of bills each time.

Three of a kind

To better understand a business energy bill, it’s necessary to look out for three important components in the paperwork, namely: the standing charge; the unit rate; and the contract end date.

The standing charge is the fixed amount that’s paid daily for the ongoing supply of gas, or electricity, to the business. This is regardless of the amount of energy that’s actually used.

Meanwhile, the unit rate is the amount you pay for each kilowatt hour (kWh) of gas or electricity that your business consumes. This is an all-important measure of usage that’s found on every bill – both business and domestic

A business has less of a say over its standing charge, but it does have a measure of control over the unit rate.

Smart meters, apps and management software can help analyse a business’s overall use, improve an organisation’s efficiency, reduce consumption and ultimately cut bills as a result.

Power up

A kilowatt hour equals 1,000 watts of power per hour and is the measure that’s commonly quoted by the vast majority of electrical appliances when describing their typical power consumption.

For example, say a kettle uses 1,200 watts per boil and takes 125 seconds to do so. That works out to 0.04 kWh (1.2 kW x 125/3600 seconds).

The average kWh cost for businesses varies according to a number of factors, including the sector in which the business operates, the size of the business, and also its location(s) around the UK.

When drawing up a tariff, a supplier will also look to assess a business’s energy consumption history, and also take into account factors such as the time of day a business typically operates.

Out of hours

For example, an office-based business is more likely to be open during the hours of 8am to 6pm, Monday to Friday, while other companies might need to use more energy during evenings or the weekend. Because the latter operate at a time when there’s less network demand, they may be eligible for cheaper energy rates.

When it comes to SMEs, suppliers tend to apply three sizes to companies, namely: micro, small and medium. The breakdown relates to a business’s typical annual gas or electricity usage with graduated prices applied both to the price per kWh as well as the standing charge.

Here are some typical examples.

Average electricity price per kWh and usage figures

Business size

Annual usage

Price per kWh

Standing charge

Average Annual Cost

Micro

5,000 - 15,000

14.4p - 15.9p

23p - 29p

£900 - £2,244

Small

15,000 - 25,000

14.3p - 15.1p

23p - 28p

£2,367 - £3,660

Medium

25,000 - 50,000

14.3p - 14.7p

23p - 27p

£3,744 - £7,234

Average gas rate per kWh and usage figures

Business size

Annual usage

Price per kWh

Standing charge

Average annual cost

Micro

5,000 - 15,000

5p - 5.1p

19p - 25p

£400 - £820

Small

15,000 - 30,000

4.5p - 5p

19p - 25p

£820 - £1,458

Medium

30,000 - 65,000

4.3p - 4.5p

24p - 25p

£1,458 - £2,239

The third important component of a business bill is the contract end date. This is where a current fixed price period comes to an end.

It’s important, because business energy customers who do not explicitly notify a supplier of their intention to leave at the end of a fixed deal are often rolled over on to variable rates which can be significantly more expensive than the original deal.

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