When comparing business electricity prices, it is easy to focus on the unit rate and overlook another important part of your energy bill: the standing charge.
A business electricity standing charge is a fixed amount you pay each day for your electricity supply, regardless of how much electricity your business uses. Even if your premises use very little electricity on a particular day, the standing charge can still apply.
For businesses, understanding standing charges is important because a seemingly cheap electricity unit rate does not necessarily mean you have the cheapest overall deal. A supplier offering a lower pence-per-kWh rate could have a higher daily standing charge, which may increase your total annual cost.
In this guide, we explain what business electricity standing charges are, what they pay for, how they affect your bill and how to compare them when choosing a business electricity contract.
What Is a Business Electricity Standing Charge?
A business electricity standing charge is a fixed daily charge applied to your electricity account.
It is generally charged regardless of how much electricity your business consumes.
For example, if your electricity contract has a standing charge of 50p per day, you could pay:
£0.50 × 365 days = £182.50 per year
This amount is separate from the electricity you actually consume.
Your electricity usage is normally charged according to a unit rate, measured in pence per kilowatt-hour (p/kWh).
A simplified business electricity bill can therefore be thought of as:
Electricity usage cost + standing charges + applicable taxes and other charges
The exact structure of a business electricity bill depends on the supplier and contract.
Why Do Businesses Pay a Standing Charge?
Electricity suppliers have costs associated with maintaining a customer’s electricity supply, regardless of the amount of electricity consumed.
Standing charges can contribute towards some of the fixed costs associated with supplying energy and maintaining the wider electricity system.
Business energy bills can include a variety of costs, including wholesale electricity costs, network costs, environmental costs, supplier operating costs and other charges. Ofgem explains that these different components contribute to the overall cost of supplying energy to businesses.
The standing charge therefore should not be viewed simply as a fee for the electricity you use.
It is a fixed component of your energy contract, while the unit rate is linked directly to your electricity consumption.
How Is a Business Electricity Standing Charge Calculated?
Standing charges are normally quoted as a daily amount.
For example:
Standing charge: 60p per day
If the charge remained unchanged for a 365-day year:
£0.60 × 365 = £219
So the business would pay approximately £219 per year in standing charges before considering any applicable taxes or other charges.
If the standing charge were £1 per day:
£1 × 365 = £365 per year
This demonstrates why businesses should not ignore the standing charge when comparing electricity contracts.
Even a difference of 20p per day represents:
£0.20 × 365 = £73 per year
For a business with multiple meters or premises, the difference can become considerably larger.
What Is a Typical Business Electricity Standing Charge?
There is no single standard standing charge for all UK businesses.
The amount can vary depending on factors such as:
- Electricity supplier
- Business location
- Meter type
- Consumption
- Contract type
- Contract length
- Business size
- Market conditions
- Network-related charges
- Supplier pricing strategy
This means you should be cautious about articles or advertisements claiming that there is one “average” business electricity standing charge that applies across the UK.
The standing charge offered to your business is part of the specific commercial quotation you receive.
Business Electricity Standing Charge vs Unit Rate
When comparing business electricity rates, you should look at both the unit rate and the daily standing charge.
The easiest way to understand the difference is:
Standing charge = fixed daily cost
Unit rate = cost of the electricity you consume
For example, imagine a business electricity contract has:
- Unit rate: 25p/kWh
- Standing charge: 60p/day
If the business consumes 1,000 kWh:
1,000 × £0.25 = £250
Standing charge:
365 × £0.60 = £219
The simplified annual cost would therefore be:
£250 + £219 = £469
This example excludes other potential charges and taxes and is intended only to demonstrate how the two components work.
Why the Cheapest Unit Rate Isn’t Always the Cheapest Deal
This is one of the most important things to understand when comparing business electricity prices.
Consider two hypothetical contracts.
Supplier A
- Unit rate: 24p/kWh
- Standing charge: 80p/day
Supplier B
- Unit rate: 25p/kWh
- Standing charge: 40p/day
At first glance, Supplier A looks cheaper because its unit rate is lower.
But the total cost depends on how much electricity the business uses.
Suppose the business consumes 10,000 kWh per year.
Supplier A:
10,000 × £0.24 = £2,400
Standing charge:
365 × £0.80 = £292
Total:
£2,692
Supplier B:
10,000 × £0.25 = £2,500
Standing charge:
365 × £0.40 = £146
Total:
£2,646
In this simplified example, Supplier B is cheaper overall despite having the higher unit rate.
This is why businesses should compare the total estimated annual cost, rather than choosing an electricity contract based solely on the pence-per-kWh figure.
Does Electricity Consumption Affect the Standing Charge?
Not necessarily.
The defining characteristic of a standing charge is that it is generally a fixed daily charge rather than a charge based directly on how many kWh you consume.
However, the standing charge offered to a business can vary based on the characteristics of its electricity supply and contract.
For example, a business with a different meter type, consumption profile or network arrangement may receive a different quotation from another business.
The key distinction is:
Your commercial electricity consumption determines your usage cost, while the standing charge is normally applied independently of daily consumption.
Does a Higher Standing Charge Mean a Worse Electricity Deal?
Not necessarily.
A high standing charge does not automatically mean an electricity contract is poor.
You need to consider it alongside:
- Unit rate
- Annual consumption
- Contract length
- Payment terms
- Exit fees
- Other charges
- Contract flexibility
- Supplier service
For example, a contract with a higher standing charge might offer a significantly lower unit rate.
For a business with high electricity consumption, that lower unit rate could potentially outweigh the additional standing charge.
On the other hand, a business with relatively low electricity consumption may be more sensitive to the standing charge.
The right deal depends on the individual business.
How Standing Charges Affect Small Businesses
Standing charges can be particularly noticeable for businesses with low electricity consumption.
Imagine two businesses with the same standing charge of 70p per day.
Business A uses 50,000 kWh per year.
Business B uses 5,000 kWh per year.
Both businesses pay approximately:
£0.70 × 365 = £255.50
in annual standing charges.
However, the standing charge represents a much larger proportion of Business B’s overall electricity cost.
This means smaller businesses should pay particular attention to both the unit rate and standing charge when comparing electricity contracts.
How Standing Charges Affect Businesses With Multiple Meters
Businesses operating from large premises or multiple locations may have more than one commercial electricity meter.
Each meter or supply arrangement can have its own charges depending on the contract.
For example, a business operating three premises could potentially have three separate standing charges.
If each meter had a standing charge of £1 per day:
£1 × 365 × 3 = £1,095 per year
This simplified example shows why businesses with multiple sites should consider the combined cost of all electricity supplies.
When comparing energy contracts, check whether the quotation covers one meter, several meters or a multi-site arrangement.
Are Business Electricity Standing Charges the Same Across the UK?
No.
Business electricity standing charges can vary between suppliers and locations.
Electricity distribution charges differ across Great Britain, and network costs can form part of the overall price businesses pay for electricity. Ofgem provides information on the costs associated with business energy, including network-related costs.
Your supplier also determines how its costs are reflected in the commercial tariff it offers.
Therefore, a business in one part of Great Britain may receive a different standing charge from a similar business elsewhere.
What Is Included in a Business Electricity Standing Charge?
There is no universal rule that means every supplier uses the standing charge to recover exactly the same costs.
Depending on the contract structure, the overall electricity price can reflect costs associated with:
- Electricity networks
- Metering
- Supplier operations
- Customer service
- Billing
- Industry charges
- Other fixed supply costs
Some costs may instead appear separately on a business electricity bill.
For this reason, businesses should examine the complete tariff information rather than assuming that every cost is contained within the standing charge.
Can You Negotiate a Business Electricity Standing Charge?
Business electricity contracts are commercial agreements, and the price offered can depend on your circumstances and the supplier.
When obtaining quotations, it is reasonable to compare:
- Unit rates
- Standing charges
- Contract lengths
- Payment terms
- Additional charges
- Exit fees
- Other contractual conditions
An energy broker may also obtain quotations from suppliers and help a business compare different commercial energy options.
However, businesses should understand how a broker is paid and whether any commission or fee is included in the overall deal.
Ofgem advises businesses to understand the terms of their energy contract and the role of third parties when arranging business energy.
How to Compare Business Electricity Standing Charges
If you’re comparing electricity contracts, follow these steps.
Step 1: Find Your Current Standing Charge
Check your latest electricity bill or contract.
The standing charge is usually expressed as a daily amount.
Step 2: Check Your Unit Rate
Don’t look at the standing charge in isolation.
Record the price you’re currently paying per kWh.
Step 3: Check Your Annual Consumption
Find out how many kWh your business uses each year.
This is essential because consumption determines how heavily the unit rate affects your total cost.
Step 4: Compare Total Annual Costs
Calculate:
Annual electricity usage × unit rate
Then add:
Annual standing charges
You can then consider other applicable charges.
Step 5: Check the Contract Terms
A low standing charge doesn’t necessarily make a contract better.
Check:
- Contract length
- Renewal terms
- Exit fees
- Payment requirements
- Additional charges
- Meter requirements
- Supplier terms and conditions
Step 6: Compare Like for Like
Make sure you’re comparing quotations based on similar assumptions.
A quote with a lower standing charge may have a higher unit rate or different contractual conditions.
Can You Avoid Paying a Business Electricity Standing Charge?
In most standard business electricity contracts, a standing charge forms part of the electricity tariff.
However, the exact way charges are structured depends on the supplier and contract.
If your business stops operating from a property but remains responsible for an electricity supply, simply using no electricity does not necessarily mean that all charges stop.
If a premises is vacant, businesses should contact the supplier and understand their contractual obligations rather than assuming that switching off equipment eliminates the electricity account.
What Happens to Standing Charges When a Business Moves Premises?
Moving premises can affect your electricity arrangements.
Your new property may have:
- A different electricity meter
- A different supplier
- A different network area
- Different consumption requirements
- Different contractual arrangements
Businesses should arrange their electricity supply as part of the moving process.
If you move into a property and start using electricity without agreeing a contract with the supplier, you may be placed on a deemed energy contract. Ofgem provides guidance for businesses on setting up energy contracts when moving into premises.
This is particularly important because electricity deemed rates can differ from negotiated contract rates.
Are Standing Charges Included in Business Electricity Price Comparisons?
It depends on the comparison service and quotation.
Some comparisons may highlight the unit rate prominently, while others provide an estimated total cost.
Always check whether the quoted price includes:
- Unit rate
- Standing charge
- VAT
- Climate Change Levy where applicable
- Other charges
- Broker fees or commissions, where applicable
The safest approach is to ask for the full pricing information and compare the estimated annual cost.
How to Reduce the Impact of Business Electricity Standing Charges
Unlike electricity consumption, you cannot generally reduce a fixed standing charge simply by using less electricity.
However, businesses can manage the overall impact by:
Comparing Different Contracts
A different supplier may offer a lower standing charge, although this could be accompanied by a higher unit rate.
Comparing the Total Cost
Don’t focus exclusively on the standing charge. Calculate the expected annual cost using your actual consumption.
Reviewing Multiple Meters
If you operate several premises or meters, review your entire electricity portfolio.
Reviewing Your Contract Before Renewal
Your existing contract may no longer be the most competitive option when it reaches its end date.
Reducing Electricity Consumption
Although reducing consumption does not normally reduce the fixed standing charge itself, it can reduce the much larger variable portion of your electricity bill.
Business Electricity Standing Charge FAQs
What is a business electricity standing charge?
A business electricity standing charge is a fixed daily charge associated with your electricity supply. It generally applies regardless of how much electricity your business consumes.
How much is a business electricity standing charge?
There is no standard UK-wide amount. The standing charge depends on factors including the supplier, location, meter, contract and business circumstances.
Is a standing charge charged every day?
A standing charge is normally expressed as a daily charge, so it can apply for each day covered by the electricity contract.
Can I negotiate my business electricity standing charge?
The price offered depends on the supplier and commercial contract. Businesses can compare quotations and contractual terms to find an arrangement that suits their circumstances.
Is a lower standing charge always better?
No. A lower standing charge can be offset by a higher unit rate. You should compare the estimated total annual cost.
Why is my business electricity standing charge so high?
Standing charges can vary because of supplier pricing, location, meter type, network costs and other characteristics of your electricity supply.
Do businesses pay standing charges when they use no electricity?
In a standard electricity contract, the standing charge can continue even when electricity consumption is zero.
Does the Ofgem price cap apply to business electricity standing charges?
The domestic energy price cap does not generally apply to business energy contracts. Business customers typically arrange commercial energy contracts with suppliers.
Final Thoughts
Business electricity standing charges are an important part of the total cost of running an electricity supply.
While the unit rate tells you how much you pay for each kWh of electricity, the standing charge is a fixed daily cost that can apply regardless of your consumption.
The most important lesson is not to compare electricity contracts based on the unit rate or standing charge alone.
Instead, use your actual annual electricity consumption to calculate the potential total cost of each deal. Then consider the standing charge alongside the unit rate, contract length, payment terms, exit fees and other applicable charges.
For small businesses and businesses with multiple meters, standing charges can have an especially noticeable impact on overall energy expenditure.
By understanding how standing charges work and comparing complete electricity deals before renewing your contract, you can make a more informed decision about your business energy costs.
Is Your Business Electricity Deal Still Competitive?
Your standing charge is only one part of your overall electricity costs. Compare your current unit rate and standing charge with alternative business electricity deals to see whether you could find a more competitive option for your business.