How Do Standing Charges Work on Business Energy Contracts

When it comes to business energy contracts, one of the terms you may come across is "standing charges". But what exactly are standing charges and how do they work?

What are standing charges?

Standing charges are a fixed daily or monthly fee that energy suppliers charge for providing energy to your business. This fee covers the cost of maintaining the energy supply and the infrastructure needed to transport energy to your premises.

How do standing charges work?

Standing charges are separate from the unit rate, which is the price you pay for each unit of energy you use. The standing charge is a fixed cost that you will pay regardless of how much energy you use.

For example, if your energy supplier charges a daily standing charge of 30p and you use no energy on a particular day, you will still have to pay 30p for that day.

Why do energy suppliers charge standing charges?

Energy suppliers charge standing charges to cover the fixed costs of providing energy to your business. These costs include maintaining the energy network, reading meters, and providing customer service.

Without standing charges, energy suppliers would have to rely solely on unit rates to cover their costs. This could result in higher unit rates, which would disproportionately affect businesses that use less energy.

How do standing charges affect my energy bills?

Standing charges can have a significant impact on your energy bills, especially if your business uses a small amount of energy. If your business uses a lot of energy, the standing charge will make up a smaller proportion of your overall bill.

When comparing energy contracts, it's important to consider both the unit rate and the standing charge. A contract with a low unit rate but a high standing charge may not be the best value for your business if you use a small amount of energy.

Can I avoid standing charges?

Unfortunately, standing charges are a standard feature of most business energy contracts. However, some suppliers offer contracts with lower standing charges or no standing charges at all.

It's important to weigh up the benefits of a lower standing charge against the unit rate and any other fees or charges that may be included in the contract.

Conclusion

Standing charges are a fixed cost that all businesses must pay for their energy supply. While they can have a significant impact on your energy bills, they are necessary to cover the fixed costs of providing energy to your business.

When comparing energy contracts, it's important to consider both the unit rate and the standing charge to ensure you are getting the best value for your business.