What is business electricity?
Technically, any electricity used towards your business would be classed as business electricity.
This is clear if your business has specific premises separate to your household. Any electricity used on those premises would fall under this category.
However, if you run your business from home, it may not be as obvious.
Most suppliers will require you to prove that around 50% or more of your electricity used is for business purposes at home before allowing you to switch to a business electricity contract. Different suppliers may have higher or lower thresholds.
Types of business electricity tariffs
There are two main tariff options when it comes to business electricity: fixed rate and variable rate.
This is where your contract will state a fixed unit rate in kilowatts per hour for the length of your contract.
Instead of a fixed unit rate, a flexible or variable tariff will see your rate rise and fall with market activity. This means your business would assume the risk of your unit rate rising, but also could benefit if it fell.
Fixed rate vs flexible rate
There are advantages and drawbacks to both fixed and flexible business energy tariffs. The main question is whether you are comfortable taking the risks associated with a flexible rate. While you could find yourself benefiting from falling energy prices, you could just as easily be left with no protection from rising wholesale costs.
If you move into new business premises, you will be on what is called a ‘deemed’ contract. You will easily be able to switch suppliers as this contract doesn’t have an end date. Deemed rates tend to be among the more expensive business energy tariffs available.
If you don’t arrange a new tariff before the end of your contract, but have signalled you will not be renewing your current contract, you may be moved on to an out-of-contract tariff. If this happens, you will also be able to freely change suppliers, since your contract will no longer have an expiry date. You may, however, still need to give notice.
If you do not renew or renegotiate your current contract, or fail to give your supplier notice that you will not be staying with them, you may be put on to a rollover contract. These are typically more expensive than a standard fixed or flexible tariff.
You should be aware that if you are a micro business, your rollover contract cannot last longer than 12 months.
How much electricity does a business use?
There will be huge variations in electricity usage between businesses, largely based on size and industry. An office, for example, has wildly different needs than a restaurant, and the same again when compared to a shop.
However, there is broad guidance for annual electricity usage in kilowatts per hour (kWh). As a benchmark, UK Power has the following figures:
- Micro business: 5,000-15,000
- Small business: 15,000-30,000
- Medium business: 30,000-50,000
Average business electricity rates
Many factors can have an impact on daily wholesale electricity prices, and therefore your business electricity quote – from the weather or supply and demand issues to fluctuations in currency.
These same factors will also inform the maintenance and network charges that come as part of your electricity bill.
How much one kWh costs will depend on the size of your business when it comes to annual electricity usage. The table below can act as guidance for when comparing quotes.
Average business electricity prices per kWh (including CCL)
|Business size||Annual usage (kWh)||Price per kWh|
|Micro business||5,000 - 15,000||25.27p|
|Small business||15,000 - 30,000||25p|
|Medium business||30,000 - 65,000||20.94p|
Sources: Price per kWh based on BEIS Q3 2022 figures. Annual usage based on Business Energy and UK Power.
Which businesses use the most electricity?
According to the figures published by the Department for Business, Energy & Industrial Strategy (BEIS), this is how total electricity demand in the UK in 2021 was split by usage:
|Purpose||Percentage of total demand|
|Energy industry losses||8%|
|Used for generation||4%|
|Other energy industry||2%|
|Iron and steel||1%|