How much should I be paying for business electricity?

Have you ever stared at your electricity bill and wondered if you’re paying too much? You’re not alone. Many business owners worry about rising business electricity prices UK and want to know how much they should be paying for business electricity. 

With average business electricity cost climbing again in 2025, it helps to break down what you’re actually being charged. 

Understanding Business Electricity Costs

What Makes Up Your Electricity Bill?

Your electricity bill has a few key parts. First is the unit rate, which tells you the pence you pay per kWh of power you use. Then there’s the standing charge—a daily fee that covers maintaining the grid. 

On top of that, you’ll see things like the Climate Change Levy (CCL), VAT, and some smaller non-commodity costs. 

Together, these add up to your final total. If you know your unit rate and standing charge, you can roughly work out your average business electricity cost before all the extra bits roll in.

How Costs Vary by Business Size

Not all businesses use the same amount of power. A tiny shop might use 5,000–15,000 kWh per year, while a mid-sized office could be in the 25,000–50,000 kWh range. Big factories often go above 50,000 kWh. 

The more you use, the lower your unit rate might be, but your standing charges usually stay flat. If you run a small café or salon (15,000–25,000 kWh per year), you’ll often pay slightly more per kWh than a large warehouse. 

That said, micro businesses tend to face extra fees because suppliers bundle more costs into their rates.

Regional Price Variations

Location matters. Businesses in London often pay higher distribution charges than those in Northern Ireland or Scotland. That affects your business electricity per kWh. You might pay 27 p/kWh in the southeast, but closer to 26 p/kWh up north. 

Likewise, standing charges can range from 39.5 p/day in one region to over 100 p/day in another. When you compare business electricity, make sure you’re looking at rates for your postcode, not just the national average.

Average Business Electricity Rates in 2025

Current Market Rates

In April 2025, UK businesses were paying between 25.7 p/kWh to 27.5p /kWh for their unit rates. The standing charges were between 39.5 p per day to 114.2 p per day. Your location and the type of meter will influence your specific charges. 

Now if you are a medium user - you using between 25,000 - 50,000 kWh/year - your annual costs will be between £6,425 - £13,750 before taxes. Micro and small businesses that consume lots less will see bills in the range of £1,850 - £6,250.

Historical Trends

Electricity costs jumped in 2022 when global gas prices spiked. Since then, we’ve seen rates ease slightly, but they remain well above pre-2022 levels. 

In 2022, the average unit rate was around 23 p/kWh; by 2025 it’s closer to 26.5 p/kWh. This swing reflects wholesale market ups and downs and changing green levies.

Fixed vs. Variable Tariffs

Fixed-rate tariffs lock in your unit rate and standing charge for a set term. That makes budgeting easier and shields you from sudden spikes. 

Variable rates can drop if wholesale costs fall, but they can also climb without warning. If you value certainty, a fixed deal might suit you. If you and your team keep a close eye on prices, you could risk a variable plan to chase lower rates.

Factors Influencing Electricity Prices

Wholesale Market Dynamics

Behind every pence-per-kWh charge is the wholesale market. When demand outstrips supply or gas prices climb, your unit rate can rise. Geopolitical events—anything from natural disasters to international conflicts—can send prices up overnight.

Business-Specific Factors

Your annual consumption level influences your rate. Businesses that run 24/7 or hit high-demand hours pay more. If you have a half-hourly smart meter, you get billed for peak and off-peak use separately. That can help you shift some power use to cheaper times.

Location and Distribution Costs

Your regional Distribution Network Operator (DNO) sets charges for moving power along local lines. Transmission Network Use of System (TNUoS) and Distribution Use of System (DUoS) fees appear on your bill. These vary by geography, so your business electricity prices UK won’t match every postcode.

Strategies to Optimise Electricity Costs

Compare Suppliers and Tariffs

Don’t let your contract auto-renew. When it ends, use comparison services to compare business electricity rates 2025 across dozens of suppliers. Get bespoke quotes for your usage level. Avoid deemed rates—they’re often the most expensive option when you miss a renewal window.

Improve Energy Efficiency

Simple fixes add up fast. Switch to LED lighting. Turn off equipment when you’re not using it. Consider an energy audit to pinpoint waste. Over time, these steps lower your kWh use and your average business electricity cost.

Explore Off-Peak Tariffs

If your business can run some processes after hours, ask for a multi-rate meter. Off-peak power can be up to 30% cheaper. It takes upfront metering costs, but you could see payback in months if you shift enough load.

Leverage Tax Incentives

Some small businesses qualify for a reduced VAT rate of 5% on energy. You may also get Climate Change Levy exemptions if you generate renewable electricity on-site. Check with your accountant or energy broker to see what applies.

Conclusion

Electricity costs have many moving parts—from wholesale swings to regional fees. By understanding your bill, comparing business electricity comparison tools, and taking simple efficiency steps, you can keep control of your spend. A little planning today can lead to big savings tomorrow.

Ready to cut your electricity costs? Start reviewing your bills and explore the best tariffs with Utility4Business now.