How do standing charges work on business energy contracts?
When it comes to standing charges on business energy contracts, you have two options: you can either have one or not.
Sounds simple right?
Well, it’s not as easy as it might seem. Currently, there aren’t any electricity tariffs that offer you a zero standing charge option. However, the good news is that there are ‘no standing charge’ business gas tariffs in the UK.
One option may be more suitable for one type of business over another. That’s why here at Bionic, we’ve cut through the noise to help you understand what’s the best option for your business energy contract.
What is a standing charge?
A standing charge is an amount you have to pay for the energy company to supply you with gas and electricity. It covers the costs associated with keeping your property connected to the energy network.
In 2016, Ofgem declared that it’s no longer required to have a standing charge applied to an energy tariff. However, there are still few ‘no standing charge’ tariffs around.
How do standing charges work on different types of contracts?
Standing charges can be applied differently depending on what type of contract you’re on. If your agreement includes a standing charge, then it will be applied regardless of your energy use — even if you use no energy at all.
When you choose your business energy package, consider your unique circumstances. Are you only open at certain times throughout the day? Do you use a lot of energy? The answers to these questions can impact your costs significantly.
A fixed contract offers you the opportunity to lock in your gas and electricity prices for a while, removing the fear of spiralling costs. While you may be paying slightly more per unit of energy you use on a fixed contract, it does mean you know what you’ll be paying each month.
Your supplier can’t raise your standing charge in line with wholesale energy market price fluctuations on a fixed contract. Equally, though, you’ll miss out on lower charges if the market drops.
While you can’t currently secure an electricity tariff without a standing charge, it’s worth looking at the costs when it comes to comparing your fixed-term gas contract. A ‘no standing charge’ contract is likely to have a higher rate overall, so it’s prudent to calculate what the difference might be. It may not always save you money to go with no standing charge.
Additionally, you may have to pay if you want to leave to switch to another supplier if you’re on a fixed contract. Your supplier will write a termination fee into your agreement, so always check you’re happy with it before you sign on the dotted line.
Choosing a variable or flexible contract might be a better solution if your energy consumption is quite high. It can also mean you aren’t tied in for as long — usually only 30 days — making it easier to switch suppliers or move over to a better tariff.
Your standing charge on a variable contract might be less easy to spot on your bill, hiding in plain sight under a pass-through clause. This allows your supplier to increase the unit charge and standing charge if they see their costs increase, allowing them to maintain their margins.
Are standing charges different for business energy users than domestic customers?
Due to its very nature, business customers might pay different standing charges than those a domestic customer might pay.
It’s linked to maintaining the supply to your premises, including infrastructure, so it may vary depending on your use. Your business may even be subject to additional charges imposed by the government relating to reducing carbon emissions.
However, businesses may feel that a standing charge does cost them more because they have to pay it even when they’re not using energy.
Can you get energy tariffs without a standing charge?
It is possible to switch to a ‘no standing charge’ energy tariff for your gas supply. This means you’ll only be paying for the gas you’re using.
That said, your unit rates may be higher as a result. Whether you save money depends on when, how, and where you use your energy as to whether you’ll save.
We have a team of experts who can help to guide you through this process. Why not get in touch to discover if you could save on your business gas prices with Bionic?
‘No standing charge’ tariffs: The pros and cons
To help you to decide what is best for your business, we’ve listed out some pros and cons of ‘no standing charges’ tariffs.
- You’ll only pay on the days your business premises are being used.
- If your energy usage is relatively low, a ‘no standing charge’ tariff may offer you savings overall.
- You may be subject to higher unit rates on a ‘no standing charge’ tariff; essentially, everything you use will cost you more. You may get a better rate if you regularly pass a certain usage threshold, though.
- If you use a lot of energy in your business, you’re likely to pay a lot more due to the higher unit rates on a ‘no standing charge’ tariff.
Since standing charges stopped being a requirement back in 2016, more and more suppliers are offering a range of ‘no standing charge’ gas tariffs to their customers.
If you’re unsure whether your business would benefit from a ‘no standing charge’ tariff, get in touch with our team of energy experts to find out more.