Standing charges: what you pay before you use anything

What a standing charge pays for

Standing charges recover costs that don't depend on how much you use, including parts of the cost of the electricity and gas networks, metering, and the supplier's costs of running your account. You pay it for every day of the billing period.

Why it matters more for small sites

A busy factory uses so much energy that the standing charge is a small fraction of the bill. A small shop, salon or office may use relatively little, so the standing charge can be a much bigger share. For these sites, an offer with a lower standing charge can work out cheaper even if its unit rate is higher.

Working out which offer is cheaper

To compare fairly, combine both charges using your own annual consumption:

Annual cost = (unit rate × annual kWh) + (standing charge × 365)

	Offer A	Offer B
Unit rate	25p per kWh	23p per kWh
Standing charge	50p per day	£1.20 per day
Cost at 10,000 kWh a year	£2,682.50	£2,738.00
Cost at 20,000 kWh a year	£5,182.50	£5,038.00

Illustrative figures to show the maths, not real prices.

At 10,000 kWh a year, Offer A is cheaper because of its lower standing charge. At 20,000 kWh, Offer B wins because of its lower unit rate. That's why your actual consumption matters more than either headline figure.

Low-use supplies: VAT and Climate Change Levy

If your average use is no more than 33 kWh a day of electricity (about 1,000 kWh a month) or 145 kWh a day of gas (about 4,397 kWh a month), the supply should be charged VAT at 5% rather than 20%, and no Climate Change Levy. Check your bill: if you qualify and are being charged 20%, contact your supplier.

Can you avoid a standing charge?

Some suppliers occasionally offer business tariffs with no standing charge and a higher unit rate. These can suit very low-use or seasonal sites, but rarely suit busy ones. Run the sum above with your own numbers.

Several meters, several standing charges

Each supply point has its own standing charge. If you have meters you no longer need, such as an unused supply in a building you have closed, it may be worth asking whether they can be removed.

Standing charges on half-hourly supplies

Larger supplies often have several fixed daily charges, such as a standing charge plus a capacity charge based on the agreed kVA. Together these can be significant, so checking that your agreed capacity matches your real peak demand can matter. See half-hourly data.

Why standing charges differ between suppliers

Suppliers recover their fixed costs in different ways. Some put more into the standing charge and less into the unit rate; others do the opposite. Network costs also vary by region, so the same supplier may quote different standing charges in different parts of the country.

Common mistakes

• Comparing only the unit rate
• Forgetting to multiply the standing charge by 365
• Paying for meters that are no longer needed
• Missing the 5% VAT rate on low-use supplies

Sources

• HMRC: VAT Notice 701/19, fuel and power (gov.uk)
• Ofgem: Energy advice for businesses (ofgem.gov.uk)

Questions

We introduce enquiries to an energy broker partner and may receive a fee. We're not a supplier and don't give whole-of-market advice. How we're paid