Understanding your Energy Bill: Standing Charge
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 answer one of the questions we're asked most often:
"What are standing charges, why are business standing charges so high, and can they be reduced?"
Standing charges are a fixed daily cost that businesses pay regardless of how much gas or electricity they use. While they are often overlooked, standing charges can add hundreds or even thousands of pounds to annual energy costs, particularly for businesses with multiple meters.
What Are Standing Charges?
Standing charges are a fixed daily charge applied to both business electricity and gas bills. They are payable every day, whether your business uses energy or not.
This means you'll still pay standing charges if your premises are closed, operating at reduced capacity or using very little electricity or gas.
Simply put, standing charges help cover the fixed costs of supplying energy to your premises and maintaining the UK's energy infrastructure.
What Do Business Standing Charges Cover?
Business standing charges contribute towards the fixed costs involved in supplying electricity and gas, including:
- Keeping your premises connected to the electricity or gas network
- Metering equipment and meter maintenance
- Meter reading and industry data services
- Billing, customer administration, and supplier operating costs
- Local electricity distribution and gas transportation networks
- Maintaining and upgrading the UK's energy infrastructure
Unlike the unit rate, which changes according to how much energy you consume, standing charges remain the same each day throughout your contract.
Why Do Standing Charges Differ Across the UK?
One of the biggest factors affecting standing charges is location.
Businesses located in areas with lower population density or more complex network infrastructure often face higher standing charges because the cost of maintaining the network is spread across fewer customers.
This explains why two businesses using similar amounts of electricity can have very different standing charges depending on where they are located.
Why Are Business Electricity Standing Charges So High?
Over recent years, many UK businesses have experienced significant increases in standing charges.
Several factors have contributed to this:
1. Energy Supplier Failures
Between 2021 and 2022, more than 30 UK energy suppliers ceased trading.
Millions of customers were transferred through the Supplier of Last Resort (SoLR) process, while Bulb entered Special Administration.
The costs associated with these supplier failures were ultimately recovered across the industry, contributing to higher fixed costs that have been reflected in energy bills.
2. Rising Network Costs
The electricity and gas networks require continuous investment to maintain reliability, replace ageing infrastructure and connect new homes, businesses and renewable generation.
These infrastructure costs are largely fixed regardless of how much electricity is consumed, making standing charges one of the ways these costs are recovered.
3. Changes to the UK Energy System
The UK's electricity system is becoming increasingly complex.
The growth of renewable generation, electric vehicles, battery storage and decentralised generation has required significant investment in both transmission and distribution networks. Although these investments help modernise the electricity system, they also increase the fixed costs of operating the network, some of which are recovered through standing charges.
4. Supplier Operating Costs
Standing charges also help suppliers recover fixed business costs that don't depend on how much energy customers use.
These include customer service, billing systems, metering, industry data flows, compliance with energy regulations and other administrative expenses.
Can Business Standing Charges Change During a Contract?
For most fixed-price business energy contracts, the standing charge agreed at the start of the contract remains fixed for the duration of the agreement.
However, exceptions can occur where:
- the contract specifically allows certain industry costs to be passed through,
- there has been an error in the original quotation,
- or the supply arrangements change (for example, a meter exchange or significant alteration to the connection).
If you're unsure whether your standing charge can change, it's worth reviewing your contract terms.
Can You Reduce Business Standing Charges?
Unlike reducing energy consumption, there is usually little that can be done to reduce standing charges during an existing fixed contract.
However, there are still ways to minimise them.
Review Your Contract at Renewal
The best opportunity to secure lower standing charges is when your contract is due for renewal. It's important to compare the overall cost of each tariff rather than focusing solely on the standing charge. A supplier offering a lower standing charge may simply compensate by charging a higher unit rate, with the cheapest standing not always resulting in the lowest annual energy bill.
Compare the Whole Market
Business energy pricing varies considerably between suppliers. A market comparison helps ensure you:
- compare a wide range of supplier offers,
- understand the balance between standing charges and unit rates,
- select the most cost-effective tariff for your business.
Frequently Asked Questions
What are standing charges on a business electricity bill?
Standing charges are fixed daily costs that cover the expense of maintaining your electricity or gas supply, metering services and the energy network. They are payable whether or not your business uses any energy.
Why are business standing charges higher than domestic standing charges?
Business energy supplies often involve larger meters, more complex network connections, half-hourly metering and different commercial tariffs, all of which can result in higher standing charges.
Can I avoid paying standing charges?
Not while your premises remain connected to the electricity or gas network. Standing charges apply even if very little energy is used.
Does Your Business Need a Standing Charge Review?
At SeeMore Energy, we can review your current energy contract to determine whether your business is paying competitive standing charges and identify opportunities to reduce your overall energy costs when your contract comes up for renewal.
We'll compare suppliers across the whole market and ensure you aren't paying more than necessary for either your standing charges or your unit rates.
