Why is business energy so expensive?

The short answer

Several things stack up. Electricity prices in Britain tend to move with gas prices, because gas-fired power stations are often the last plants needed to meet demand and so set the wholesale price. On top of the wholesale energy cost sit network charges for using the wires and pipes, charges to fund government energy policy, supplier costs and margin, and a risk premium for each customer. A business buys all that without the price cap that limits household default tariffs. None of these costs is unique to businesses, but you see them in the open, and you can influence only some.

The layers of a business unit rate

Layer	What it is	Can you affect it?
Wholesale energy	The cost of buying power or gas on the market	Partly: through timing and contract type
Network charges	Paying for the transmission and local wires and pipes (TNUoS, DUoS)	Partly: meter type, capacity and when you use power
Policy and scheme costs	Costs recovered through bills for energy schemes (e.g. Renewables Obligation, Capacity Market)	Only if you qualify for an exemption
Climate Change Levy	A tax on business energy use	Only via exemption or reduced rate
Supplier costs and margin	Billing, credit risk, hedging, profit	Yes: through shopping around
Broker commission	May be built into your unit rate	Yes: ask to see it

Our guides to non-commodity charges and how prices are set go through these in detail.

Network costs are rising

The wires and pipes cost money to build and maintain, and charges are set by regulated formulae. Moneysupermarket Business noted in October 2026 that TNUoS (transmission charges) rose by more than 60% from April 2026. We could not verify that from an official source, so treat it as that publisher's claim.

No price cap, and a bigger risk premium

Ofgem's household cap, described on its pricing rules page, relates to domestic default tariffs. Business supply has no equivalent, so the price is whatever a supplier is willing to offer and you will accept. Suppliers also take on business-specific risks: unpaid bills, customers who close, and site changes. Those risks are priced in, and they are priced higher for firms with weaker credit; see credit scores and prices. The result is that a small firm may see a markup that a bulk buyer would not. Read why there is no business price cap for the protections that do exist.

You pay for what you do not use: standing charges

Small users bear fixed costs unevenly. Take indicative micro rates of 28.4p/kWh and 58.0p/day (Moneysupermarket Business, 21 October 2026, whose page has internal inconsistencies). A kiosk using 2,000 kWh pays £568.00 for units plus £211.70 for standing charge: £779.70 total, which works out at 39.0p/kWh (779.70 ÷ 2,000). A café using 20,000 kWh pays £5,680.00 plus £211.70: £5,891.70, or 29.5p/kWh. The smaller you are, the more your effective rate rises. See standing charges.

Headline comparisons mislead

Domestic rates are usually quoted including 5% VAT, while business rates are quoted excluding 20% VAT. A 28.4p business rate is 34.08p including VAT (28.4 × 1.2). If you are VAT registered you normally reclaim the VAT, so your true cost is the ex-VAT figure. Always compare like with like. The official non-domestic average for Q2 2026 was 24.51p/kWh for electricity and 5.28p/kWh for gas including the Climate Change Levy (DESNZ). Read why business electricity is dearer than domestic.

You can end up on the most expensive rates

Many small firms pay more simply because of drift: contracts roll over, or they move into premises and land on default rates. Averages from the same publisher put out-of-contract electricity at 40.0p/kWh plus 254.0p/day against 28.4p plus 58.0p for a micro fixed deal. For an 8,000 kWh user that is £3,200.00 + £927.10 = £4,127.10 versus £2,272.00 + £211.70 = £2,483.70. The £1,643.40 difference is entirely avoidable. See our guide to renewals.

Worked example: what a network cost rise does to a small bill

Suppose the pass-through network and policy costs on a contract rise by an illustrative 1.5p/kWh (this is not a forecast). A hairdresser using 12,000 kWh a year would pay 12,000 × £0.015 = £180 more, before VAT. A small workshop using 40,000 kWh would pay 40,000 × £0.015 = £600 more. On a fully fixed contract the supplier carries that risk for the term, which is one reason fixed rates include a margin. When your contract ends, the new price will reflect whatever those costs are then.

That is why two businesses can sign on the same day and see different increases: their usage, meter type and contract structure decide how much of each cost reaches them.

Questions to put to a supplier or broker

• Which parts of this price are fixed for the term, and which can change?
• How much of the unit rate is broker commission, in pounds over the whole contract?
• What standing charge will I pay, and is it fixed?
• What rate applies if the contract ends and I have not renewed?

Written answers make it much easier to compare offers on total cost. If a supplier or broker will not say which parts of the price can change, or how much commission is included, treat that as a reason to look elsewhere rather than a detail to sort out later.

What you can control

• Never sit on default rates. Keep track of your end date.
• Compare total annual cost at your usage; see the cost calculator.
• Ask for broker costs to be shown in the Principal Terms.
• Cut use. See saving energy in a small business.
• Check tax: reduced VAT or CCL exemptions you might be missing; see VAT and CCL.

No general government scheme currently covers business bills; the Energy Bills Discount Scheme ended on 31 March 2024.

Next steps

1. Check whether you are on a fixed contract or default rates.
2. Work out your effective p/kWh including standing charge.
3. Get fresh quotes before renewal.
4. Reduce use where it is cheapest to do so.

Biz Energy is independent and takes no commission from suppliers or brokers.