Understanding the difference between standing charges an unit rates

All energy charges are made up of two parts: Standing charge and Unit Rate. 

What are standing charges? 

Standing charges are a fixed amount that you pay daily to your energy supplier to cover the cost of delivering gas and electricity to your business premises. 

This is a flat rate paid regardless of the amount of energy you use e.g. if you use more or less energy, the standing charge will remain the same.

What is a unit rate? 

A unit rate is the price-per-unit of the gas and electricity your business premise consumes. For example, electricity is measured in kilowatt per hour (kWh), so a unit rate is a cost per each kWh used e.g. 1p per kWh.

A kilowatt hour (kWh) is a measure of energy that equates to 1,000 watts – or 1 kilowatt (kW) of energy being used for one hour. 

Unit rates and Standing charges can vary depending on your: 

• Energy type - gas charges are typically slightly lower than electricity tariffs 

• Energy provider - different suppliers have varying charges.

• Energy usage - the size of your business and when it uses energy the most.

• Type of business energy tariff - certain suppliers’ will offset a low or nil standing charge against a higher price-per-unit of energy.  

• Contract length - a long business energy contract term means you lock in a fixed standing charge which cannot be increased but equally, it can’t be lowered if prices nosedive.

• Postcode - your business location and demand in your area affect the price.

Lower Unit Rate or Lower Standing Charge?

If your business uses large amounts of gas and/or electricity, it can be beneficial to select a lower unit rate with a higher standing charge. This decision needs to be made with your annual consumption to hand to ensure that this is the best deal for you. 

If you don’t use much energy, the business is empty for large periods of time or is a seasonal business - it can be better to choose a lower standing charge. 

If you want assistance with deciding which the best option is for your business then speak to us today for advice at T. 01709 245 366, or on E. katie.gill@sorolaenergy.co.uk.