Why Is Business Electricity So Expensive?


The costs of business electricity seem to be more expensive than that of domestic electricity. Why is that so?

It is clear that business energy rates are mostly lower than domestic rates, but still, the overall costs seem to be much higher than domestic costs for electricity.

What contributes to business electricity being so expensive? Let’s look at a few reasons for business electricity being so expensive and compare different business electricity rates to get a more clear idea.

How Is Business Electricity Different?

Usually, business electricity contracts are much longer than domestic ones, ranging from 3 to 5 years. In addition, electricity contracts for businesses are separate from gas or water contracts, unlike domestic dual fuel contracts.

In addition, the tariffs for businesses seem to be more in alignment with the needs and requirements of the business itself rather than being fixed at a certain cost.

This is why it is important to find an appropriate contract and pay the right tariff which fits your company throughout the contract.

What Makes Business Electricity Expensive?

Businesses pay a high 20% VAT on electricity in addition to different charges and other costs which are not applied to regular users.

Many taxes and charges only apply to business owners alone, causing the electricity to be much more costly.

The tariff itself causes the bills to be higher and continuous usage and long contracts only seem to make business electricity even more expensive than expected.

As a result, electricity for business requires efficient decision-making for the costs to be as low as possible.

What Are Annual Average Business Electricity Costs?

As discussed before, the average rates for electricity depending on the size of your business. In short, micro businesses expect an average of £1000 in electricity costs per year.

Small businesses can see this amount double on a yearly basis while businesses larger than that have almost triple the cost of electricity on the whole.

Assessing your expenditures can help you in comparing your costs with these average values and assist you in being informed about the rates that best suit your business.

In many cases, the tariff being paid for your business may be higher than you should be paying, and checking in with your supplier to change your tier might be a probable solution for you.

How Do Business Electricity Rates Compare?

Business electricity rates vary yearly. Currently, in the United Kingdom, commercial electricity costs for businesses are different depending on the company.

British gas has a rate of almost 19 pence per kWh on average. In comparison, edfENERGY offers a more competitive cost of 18.65 pence per kWh.

Other companies like ScottishPower and SSE have average rates lowered to an average of 17.5 pence per kWh.

Overall, the expected cost per kWh for small businesses is about 14 to 16 pence. Medium businesses see the rate go down towards an average of 11 to 13 pence per kWh.

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An average cost of 10 pence per kWh for very large businesses is the lowest available average cost.

Comparing the electricity cost of your supplier to other suppliers and averaging your overall bills to figure out if you are paying appropriately will help you keep track of your usage and cut down on expensive electricity costs for your business.

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