Understanding Your Energy Bills: Unit Rates
25 October 2023
Understanding Business Energy Unit Rates and How to Reduce Your Costs
When reviewing your electricity or gas bills, one of the most important elements to understand is your unit rates. These unit rates directly affect how much you pay every month, and they play a major role when you compare business energy rates across suppliers. This guide explains what unit rates are, what influences them, and how to secure the most competitive pricing for your business.
What Are Unit Rates?
Unit rates are the price you pay for every kilowatt hour (kWh) of electricity or gas your business consumes. They usually make up the largest portion of your energy bill, and because they are tied to consumption, they have a direct impact on your operational costs.
Unit rates can differ widely between suppliers, which is why understanding current electricity unit rates for businesses is essential when negotiating contracts or assessing whether you're paying too much.
Although unit rates usually remain fixed throughout a contract, the price offered at the time of renewal can change daily depending on market conditions. Choosing the right moment to lock in a deal can significantly reduce your annual energy spend.
Which factors affect the unit rates a supplier will offer?
Several factors influence the rates suppliers offer to UK businesses:
1. Wholesale Fuel Costs
- The price of gas and electricity on global markets heavily impacts UK unit rates. Because so much UK electricity is generated using gas, fluctuations in wholesale gas prices directly affect current electricity unit rates for businesses.
2. Infrastructure and Network Costs
- Part of your unit rate covers the cost of maintaining, upgrading, and operating the national energy grid.
3. Market Volatility and Supplier Risk
- During periods of high uncertainty, suppliers build in additional risk premiums. This can increase business energy unit rates even when your consumption remains unchanged.
4. Supplier Profit Margins
- Each supplier has its own commercial model and tolerance for risk, which affects the final unit rate they quote.
How to reduce your unit rates
In a fixed contract the unit rate will remain the same for the contract’s duration. However, there are a few ways to ensure you get the best available unit rates when signing your contract:
- Comparing as many suppliers as possible: Suppliers regularly adjust their pricing. By taking the time to compare business energy rates, you can identify suppliers offering lower unit prices for your preferred contract length. A whole-market comparison ensures you don’t miss more competitive options that may not advertise publicly.
- Timing when to renegotiate your contract: Most businesses can secure their next contract up to six months before the current one ends. Monitoring wholesale market trends allows you to lock in prices at favourable moments rather than waiting until rates rise. For monthly insights into energy trends and price drivers, you can subscribe to our free market update here:
ð https://www.seemoreenergy.co.uk/newsletter - Flexible Contracts: With a flex contract you don’t sign a fixed unit rate, but instead can purchase your energy for upcoming months and seasons. With this type of contract you often avoid the risk premiums included in fixed-price contracts.
Need Help Understanding Your Bill or Comparing Rates?
If you’d like clarity on your business energy unit rates or would like us to complete a full-market comparison on your behalf, we’re here to help. Our team provides transparent, expert support so you can make informed decisions and focus on your core business.
Contact us at adam@seemoreenergy.co.uk or fill in the form below, and one of our specialists will be in touch.
Contact Us about assisting with your energy contracts
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