Understanding your Energy Bill: Standing Charge

Craig Watson • 3 March 2023

Understanding Your Energy Bill: Standing Charges Explained

At SeeMore Energy, our aim is to help organisations understand every cost on their electricity and gas bills. In this first article in our 8-part “Understanding Your Energy Bill” series, we focus on one of the most common questions we hear from UK businesses: what are standing charges? and why are business electricity standing charges so high?


What Are Standing Charges?

Standing charges are a fixed daily cost shown on both electricity and gas bills. They are charged regardless of how much energy you use, meaning your business will pay them even during periods of low consumption or shutdown.

When businesses ask “what are standing charges?”, the simplest answer is: they are the supplier and network’s way of recovering essential fixed costs needed to keep your site connected and supplied.


What do standing charges cover?

Standing charges are designed to cover fixed elements of supplying energy, including:

  • Keeping your premises connected to the network
  • Metering and administration costs
  • Maintenance and upkeep of electricity and gas infrastructure
  • Regional distribution and transportation costs


Although the charge is fixed day-to-day, suppliers may factor in an estimated annual consumption when setting tariff pricing across their customer base.


Standing Charges Explained: Why They Vary by Region

A major driver of standing charge levels is location. In general, more remote areas can face higher costs than densely populated regions, because maintaining the network and distributing energy can be more expensive.

This is one reason businesses in different parts of the UK may see very different standing charge figures -- even with similar consumption.


Why Are Business Electricity Standing Charges So High?

Over the past 18 months, many organisations have noticed sharp increases, leading to a surge in searches like “why are business electricity standing charges so high?” There are three key reasons behind these increases:


1) Failed Energy Suppliers

Between January 2021 and February 2022, numerous energy suppliers ceased trading in the UK market. Large numbers of customers were transferred to other suppliers through the Supplier of Last Resort process, and Bulb Energy entered special administration.

When suppliers take on customers from failed providers, they can also inherit additional system and industry costs -- costs that can contribute to increased standing charges over time.


2) Covid Recovery and Lower Consumption

During the Covid-19 pandemic, many businesses reduced operations, shifted to remote working, or temporarily closed. Lower-than-forecast usage reduced the amount suppliers recovered through unit rates, increasing pressure on fixed-cost recovery mechanisms.

This sustained period of under-usage contributed to structural cost pressures that have continued to influence standing charges.


3) Changes in the Energy System and Renewables

Historically, the grid relied on a smaller number of large power stations producing predictable output. As renewable generation has expanded, the system has required additional infrastructure and balancing capability to manage more variable supply.

These network and system changes have added complexity and cost, which can feed into charges recovered via bills (including standing charges).


Can Standing Charges Change Mid-Contract?

In most cases, the standing charge agreed at the start of a fixed contract remains in place for the contract’s duration. However, there are situations where it can change.

If your Estimated Annual Consumption (EAC) proves to be significantly different from actual usage, some suppliers may adjust standing charges -- particularly where their terms and conditions allow it. This can be more common with gas meters, where consumption data may be updated and reported through industry systems.


What Can Be Done About High Standing Charges?

If your business feels standing charges are too high, options may be limited mid-contract. However, there are practical steps you can take:


Review contract options at renewal

The best time to influence standing charges is when renewing. It’s important to compare the full cost of tariffs -- not just the standing charge -- because:

  • A lower standing charge can be offset by a higher unit rate
  • The “cheapest” standing charge option isn’t always the lowest total cost


Use full-market comparisons

Comparing suppliers properly can be time-consuming. A trusted broker can help ensure:

  • You compare a broad spread of supplier offers
  • You understand how standing charges and unit rates balance out
  • You select the best-value tariff for your usage profile



Does Your Business Need a Standing Charge Review?

At SeeMore Energy, we can review your current contract to confirm you’re paying standing charges appropriate to your meter type, consumption profile, and tariff—and advise if anything can be challenged or improved at renewal.


To speak to our team, email admin@seemoreenergy.co.uk with the subject “Standing Charge”, or complete the contact form below.

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