Many businesses think the unit rate is the most important part of an energy contract. Although it plays a key role, the standing charge can be just as influential, especially for businesses with lower usage.
What the unit rate represents
The unit rate is the amount you pay for each kilowatt hour (kWh) of electricity or gas consumed. Higher consumption leads to higher total costs. This figure is often the focus when comparing deals because it is easy to understand and easy to compare.
What the standing charge represents
The standing charge is a fixed daily fee. It covers the cost of maintaining your supply and supporting national energy infrastructure (more about non-commodity charges). Even if your business uses very little energy, you still pay the standing charge every day.
Why both matter
Two contracts can look different on paper. One might offer a low unit rate but a very high standing charge. Another might offer a higher unit rate but a lower standing charge. The best choice depends on your consumption trends.
For example:
- A warehouse with high consumption should prioritise a low unit rate
- A small office with low consumption may benefit more from a low standing charge
How to make the right decision
To choose the best tariff, you need an understanding of your annual usage. This allows you to calculate the total cost rather than basing the decision on one number. There may be options available for more seasonal businesses, with a 0p daily standing charge, but higher unit rates, so if there is no usage for extended periods, no charges will apply. A TPI such as Procure Smart can help by analysing your consumption profile and recommending a better structure.
How Procure Smart helps businesses understand pricing
We simplify contract comparisons and explain how prices are built. This avoids confusion and prevents businesses from choosing tariffs that look cheap but cost more in practice. Our goal is to make energy decisions simple and transparent.
Get in touch today for a free, no-obligation chat with one of our experts to find out how we can support your business to achieve cost efficiency on your business services.
