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Business electricity is one of the easiest overheads to overpay on, largely because the pricing is deliberately hard to read. This guide breaks down how business electricity is priced, what the numbers look like in 2026, how to compare suppliers properly, how the switch works, and the rights that protect you.
In short. Your price is a unit rate plus a daily standing charge, and you should compare both. Small business electricity averages around 29.6p per kWh, while out of contract rates can reach 44 to 47p. Contracts are fixed term, so you can usually only switch in a renewal window, and switching never interrupts your supply.
Every quote is built from two numbers. The unit rate is what you pay per kWh of electricity you use. The standing charge is a fixed daily fee for keeping the supply connected, charged whether you use any power or not.
In 2026 the average small business unit rate sits at roughly 29.6p per kWh, with a typical daily standing charge around 55p. Standing charges vary widely, from about 40p to 90p a day for most SMEs and higher for larger sites. A tempting unit rate can still be poor value if the standing charge is inflated, so weigh the two together against your actual usage.
The unit rate is not all supplier profit. Only around a third to 40 percent of a typical bill is the wholesale cost of the electricity itself. The rest is network charges for the cables that deliver it, government policy costs and environmental levies, metering, and the supplier's own margin.
This is why quotes cluster within a range. No supplier can undercut the network and policy costs, they can only compete on their margin and on how well they buy wholesale energy. A quote that looks dramatically cheaper than the rest deserves a close look at the small print.
The meter on your wall decides how you are billed, and it is worth knowing which you have.
Single rate. One unit rate at all times. Standard for most small businesses.
Two rate, Economy 7 style. A cheaper night rate and a dearer day rate, worth it only if a real share of your usage is overnight.
Half hourly. Required for larger sites. The meter records usage every half hour and pricing is more bespoke.
Your supply is identified by an MPAN, the long reference printed on your bill. Have it ready when you request quotes so suppliers can price accurately instead of estimating.
Business electricity has stayed expensive since the 2021 to 2022 energy crisis. Wholesale costs have eased from their peak but remain well above pre crisis levels, which is why most businesses still pay over 20p per kWh. Prices also move quickly, so a good quote can expire within days, which makes the timing of your renewal more important than it used to be.
Business electricity comes in a few shapes, and the right one depends on how much certainty you want.
Fixed term. A locked unit rate for one to five years. Best for budgeting certainty.
Variable. Moves with the market, up or down. Suits businesses expecting prices to fall.
Deemed. The default rate when no contract is in place. Avoid it.
Out of contract. The default rate after a deal ends. Also expensive, and avoidable.
This is where most quiet overpaying happens. When a fixed contract ends and you have not agreed a new one, you are moved onto out of contract rates, and the penalty is steep. Published 2026 rate schedules show out of contract electricity reaching 39.6p to 47p per kWh, with standing charges commonly two to four times higher than a fixed equivalent.
To put that in real terms, take a small business using 30,000 kWh a year. At a fixed 29p its unit costs are about 8,700 pounds. Left on a 45p out of contract rate, the same usage costs about 13,500 pounds, before the higher standing charge is even added. The gap appears with no warning letter. The rate simply changes on the end date.
The single most costly mistake is letting a contract lapse. Diarise your renewal window the day you sign.
Contract length is a judgement about the market, not just about your business. A longer fixed term buys certainty and shields you if wholesale prices rise, but locks you in if they fall. A shorter term keeps you flexible at the cost of facing the market sooner.
When prices look high and volatile, many businesses prefer a shorter fix so they are not tied to a peak for years. When prices look low, a longer fix locks the benefit in. There is no universal answer, only the right call for the market in front of you.
A cheap headline rate is only part of the picture. Run every quote past the same checks.
✓ Unit rate and standing charge shown clearly.
✓ A contract length that suits your plans.
✓ A quote based on your real usage, not a guess.
✓ Exit terms and any early termination fees spelled out.
✗ Estimated usage that looks nothing like your bills.
✗ Rates that expire unless you sign on the spot.
Switching is more straightforward than many owners expect, and the power never goes off.
1. Gather your details. A recent bill and your MPAN, plus your contract end date and renewal window.
2. Compare like for like. Quotes for the same usage and the same contract length.
3. Agree and sign within your renewal window.
4. The new supplier handles the switch, which typically completes within a few weeks.
Your supply, cables and meter stay the same. Only the company that bills you changes. A supplier can object if you owe money on the old account, so clear any balance first.
If you are a microbusiness, Ofgem rules give you extra protection. Suppliers must set out clear principal contract terms, cannot tie you into unfair automatic rollovers, and must tell you your contract end date and renewal window. You can also take an unresolved complaint to the Energy Ombudsman for free. Knowing these rights makes it easier to push back on a poor renewal offer.
Two extra costs sit on every business electricity bill that home users do not face in the same way. VAT is usually charged at 20 percent, although some very low usage businesses and charities qualify for a reduced 5 percent rate. The Climate Change Levy is a separate government tax on the energy your business uses. Neither is negotiable, but knowing they are there helps you read a quote properly.
Many suppliers now offer renewable or carbon backed business tariffs. They can support your sustainability goals, though the pricing and the strength of the green claim vary. Check what the tariff actually covers, whether it is backed by genuine renewable generation or simply certificates, before choosing on the label alone.
Small business electricity averages around 29.6p per kWh in 2026, with a daily standing charge near 55p. Your own rate depends on your usage, location, meter type and the deal you agreed.
No. The supply, cables and meter are unchanged, and no engineer visit is needed. Only the company that bills you changes.
Usually not. Fixed term contracts lock you in, and you switch during your renewal window. Leaving early typically means exit fees, if it is allowed at all.
It is the default rate you are placed on when there is no contract, for example after moving into new premises. These rates are typically the most expensive available.
Most fixed deals run from one to five years. Longer terms give price certainty, shorter ones keep you flexible.
No. You can compare directly using your bills. A broker can save time, but always understand how they are paid so you can judge the deal.