Guide to Standing Charges for Businesses
With the high prices of energy bills for both business and domestic properties, you may have wondered what standing charges are and why they are included in your energy bills. Do all homes and businesses have to pay them? Find out this and more in our guide…
What are standing charges?
A standing charge is calculated on your meter readings on a daily basis and will be added to your energy bill each month. Your standing charge cost will be dependent on your supplier and the size of your business. You’re essentially charged each day to ensure your property has access to gas and electricity.
Why are standing charges added to energy bills?
Standing charges cover the cost of your energy regulator maintaining the network which provides your business with the energy they need. This includes anything from maintenance costs, power lines, gas pipes and other costs.
Are standing charges compulsory?
Standing charges are difficult to avoid, if you’re being charged and you want to reduce costs you can look for a supplier that doesn’t have standing charges. However, these energy suppliers will likely have a higher tariff rate than the one you are currently on.
Your other option to avoid standing charges is by finding a green tariff. A green tariff typically has lower standing charges than standard tariffs. This is because the supplier can reduce costs due to the sale of carbon credits.
What factors affect the cost of standing charges?
Your business energy deal – Each energy supplier charges differing amounts for standard charges depending on which type of energy deal you have signed up for.
Your business’s TCR band – The TCR band or ‘targeted charging review’ was introduced by Ofgem to move away from Transmission Use of System Charges (TNUoS) and Distribution Use of System Charges (DUoS). As the costs to maintain the grid have increased, an ever smaller number of users were covering more of these costs.
The size of your business – It stands to reason that a larger business will operate from larger premises, needing increased levels of infrastructure to supply gas and electricity. This will be determined by the TCR band allocated to your premises by the distribution networks.
The amount of energy used – It stands to reason that a larger business will use vastly more energy than a small business or microbusiness. As so, these businesses will place much more demand on the services required to supply the energy they require, leading to higher supply and maintenance costs covered by the standing charges.
The type of energy used – Standing charges vary for electricity and gas. This is due to the difference in network maintenance between gas and electricity.
The location of your business – Depending on where your business is located can also affect the cost of your standing charges, This is due to the cost of maintenance can vary depending on the region you’re in.
Current energy market condition – The cost of standing charges can change depending on the current status of the energy market.
Which business energy suppliers offer zero standing charges?
Due to the current situation within the energy market, no energy suppliers are offering no standing charge tariff deals. Even before the current volatility in the energy market, there were very few that chose to offer such deals.
Of course, things can change fast in the energy market, so if you’re interested in zero-standing charge tariffs for your business. Check with our business utility experts to see if any energy suppliers have begun to offer them again when you’re ready to find and switch business energy deals.
Are standing charges still payable if you’re not using gas or electricity?
Because standing charges are used to help cover the costs of supplying energy to your business and domestic properties. Some people assume they will only be payable when gas or electricity is being used within the property.
However, a standing charge is also charged to cover the maintenance costs, not just the supply costs. The standing charge will still be payable, even if no gas or electricity is used within the property for whatever reason. Whether that be due to the property being vacant or you’re having building renovations.
The standing charge payments will not be paused or reduced, just because no electricity or gas is being used during the billing periods. As so, the standing charge will remain the same so long as you or your business remains accountable for paying any outstanding energy usage charges each month.
What is the difference between a standing charge and the unit rate?
Energy bills are calculated by two main parts which are standing charges and unit rates. Your standing charge is a daily charge regardless of how much energy you use. A unit rate is the charge for each kWh (Kilowatt Hour) of energy you use, which is how much gas or electricity you have used over a certain period.
Zero standing charge tariffs vs. standing charge tariffs?
Pros of zero standing charge tariffs:
✔ You don’t have to pay a fixed daily fee, regardless of how much energy you use. This can save you money, especially if you’re a low-energy user.
✔ No-standing charge tariffs are typically more flexible than standard tariffs, so you can switch suppliers more easily.
✔ They can be a good option if you’re on a budget or if you’re looking to save money on your energy bills.
Cons of zero standing charge tariffs:
✘ No standing charge tariffs may have higher unit rates than standard tariffs. This means that you could end up paying more for the energy you use.
✘ They may not be available in all areas.
✘ They may not be suitable for everyone. If you use a lot of energy, you may be better off choosing a tariff with a lower unit rate, even if it has a standing charge.
✘ Ultimately, whether or not a no-standing charge energy tariff is right for you depends on your circumstances. If you’re a low-energy user and you’re looking to save money, a no-standing charge tariff could be a good option. However, if you use a lot of energy or if you’re on a budget, you may be better off choosing a tariff with a lower unit rate.
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