Understanding commercial energy rates and how they’re calculated

Commercial energy rates can feel like a mystery for many business owners. Unlike domestic energy, where rates are relatively standardised, business energy pricing is influenced by various factors. Understanding how these rates are calculated can help you make informed decisions and reduce unnecessary costs.

What Are Commercial Energy Rates?

Commercial energy rates refer to the cost businesses pay for electricity and gas. These rates differ from residential rates and are typically customised to suit the specific energy needs of a business and are contingent upon the type of meter and supply installed at the premises. While this tailored approach provides flexibility, it also means that pricing is less transparent and varies significantly between suppliers.

Key Factors That Determine Commercial Energy Rates

1. Business Size and Energy Usage

• Small businesses: Typically use less energy and may pay higher rates per unit due to lower consumption.

• Medium and large businesses: Often negotiate lower rates due to their higher energy demand.

• Your historical energy usage can often play a significant role in determining your rate.

2. Contract Type

• Fixed-rate contracts: Offer stability by locking in prices for a set period, shielding you from market fluctuations.

• Flex contracts: Typically for higher users, these allow businesses to effectively trade energy on the wholesale market but require expert knowledge, can be advantageous in a declining market but risky if prices rise.

• Pass through contracts: Allows customers to fix the price of electricity or gas while paying the actual cost of non-commodity charges. Non-commodity charges are often estimated in fixed contracts leading to higher total costs.

3. Market Conditions

The wholesale cost of energy is influenced by global factors like oil prices, weather conditions, and political stability. Suppliers pass these costs onto customers, impacting your rates.

4. Location

Distribution costs, which cover the delivery of energy to your premises, vary depending on your business location. Remote areas often face higher distribution charges.

5. Meter Type

Larger meters capable of consuming significant amounts of power such as ‘Current Transformer’ meters attract higher fixed charges and can often require separate contracts for data collection at an extra cost to the end user.

6. Additional Charges

• Standing charges: A daily fee for connecting your premises to the grid.

• Climate levies: Environmental taxes like the Climate Change Levy (CCL) may apply.

• Capacity Charge: A fee for ensuring the network has enough energy for a customer's requirements

How to Find the Best Commercial Energy Rates

1. Analyse Your Current Contract

Start by reviewing your current energy bills and understanding the terms of your contract. Are you paying competitive rates? Is your contract due for renewal soon or are you on Deemed or or out of contract rates?

2. Compare Quotes

Use a reliable comparison service, like Clear Utility Solutions, to get tailored quotes from multiple suppliers. This allows you to find rates that suit your usage and budget.

3. Consider Renewable Energy Options

Many suppliers now offer competitive rates for renewable energy plans, which can align with sustainability goals while offering long-term cost benefits.

4. Negotiate

Suppliers often have some flexibility in pricing, especially for medium and large businesses. Use your comparison data to negotiate better terms.

Why Clear Utility Solutions?

At Clear Utility Solutions, we simplify the process of finding the best commercial energy rates for your business. By working with trusted suppliers and analysing your unique energy needs, we ensure you get the best deal possible. Whether you’re a small business or a larger enterprise, our expertise helps you save time and money.