Business Energy Contracts with No Standing Charges
What is a standing charge?
The standing charge on your business gas and electricity bill is the amount you pay each month to cover the cost of physically supplying energy to your premises, and keeping it connected to the energy network.
How do standing charges work on business energy contracts?
The amount you pay in standing charges will be affected by the type of business energy contract you’re on, as rates vary between fixed and variable contracts.
If you’re on a fixed energy contract, your supplier could price your standing charge either as pence per day or pounds per month. All electricity contracts include some sort of standing charge - there are currently no ‘zero standing charge’ electricity tariffs available.
Some gas contract offers can have a unit rate and no standing charge, but these tariffs tend to have higher unit rates than other offers. Also, standing charges tend to be the same regardless of the length of the contract.
So, if you take out a 24-month, fixed-term gas contract, for example, the numbers could breakdown as follows:
With standing charge: Unit rate 2.1022, group standing charge £36.43 per day. Total annual costs: £60,638.22
Without standing charge: Unit rate 2.7189. Total annual costs: £61,222.52
Or, if you sign up to a 36-month fixed deal, you could expect to pay the following:
With standing charge: Unit rate 2.1118, group standing charge £36.43 per day. Total annual costs: £60,854.41
Without standing charge: Unit rate: 2.7281. Total annual costs: £61,436.46
Actual charges for both gas and electricity vary from one supplier to the next. Some suppliers have a higher unit rate and a lower standing charge, while others vice versa. For electricity, the standing charges for a large business customer could range between £0.86 and £2.52 per day.
If you’re a large energy user on a flexible contract, it’s likely that you’ll have your standing charges as a pass-through cost - this is a fee paid to other companies who operate and maintain the energy network.
These costs are the same for all suppliers, and they always appear on the DUoS or gas transportation charges on your bill. The charges could fluctuate during the course of your contract, in line with changes to DUoS and gas transportation charges. Your supplier might also change their management fee on a per-meter basis rather than as a £/MWh cost.
Could your business benefit from a no standing charge tariff?
If you run a seasonal business that only operates for part of the year, or if you take time off your business for holidays or weekends, you might want to consider a no standing charge tariff so that you don’t end up paying for gas and electricity during the periods when you’re not using any.
Comparing business energy tariffs with no standing charges could help to cut your business energy costs.
What are the advantages of a no standing charge tariff?
The main advantage of a no standing charge tariff is that you only pay for the gas and electricity you actually use. If you don’t use any energy for a long period of time, you won’t be charged anything. On the other hand, if you’re on a tariff that does include a standing charge, you’ll pay a daily fee for gas and electricity even on days when you don’t use it.
The unit rates on tariffs with no standing charges are usually higher than on those that include a standing charge, but this rate often comes down after you’ve used a certain amount of gas and electricity. This means it could be a good option if your business operates from more than one premises.
What are the disadvantages of a no standing charge tariff?
Although it’s easy to assume that tariffs with no standing charge are cheaper, because they cut out the daily fee, this isn’t necessarily the case. Unit rates on this type of tariff tend to be more expensive than on tariffs that include a standing charge, so you might actually end up paying more every month, especially if you’re a high to medium usage customer.
If you’re still unsure whether your business could benefit from an energy plan with no standing charges, give our energy experts here at MoneySuperMarket a call on 0800 088 6986.