If you’re only using gas or electricity occasionally- for example, if your business is closed for a long while, having a ‘no standing charge’ tariff could significantly reduce your bills. Most businesses have regular operating hours throughout the year, meaning a no standing charge tariff, with its higher unit costs, wouldn’t make sense for them. But if your business doesn’t use a lot of energy, and is closed for a significant part of the year, then a no standing charge tariff could make sense for you. Read on to find out how these tariffs work.
A standing charge is the amount you pay each month to cover the cost of supplying your home with gas and electricity, and keeping your home connected to the energy network. Standing charges have applied to all energy bills since Ofgem’s Retail Market Review (RMR). The RMR suggested that all energy plans should have the same price structure, so that customers can compare business energy deals more easily. The standing charge works just like your telephone and broadband line rental costs, and is listed on your energy bill as a flat, daily unit rate.
Every supplier sets their own standing charge rate, following the recommendations of the Competition and Markets Authority (CMA). Standing charges for business electricity can vary between 15p and 160p a day, while standing charges for business gas are between 25p and 130p a day. Both of these can add a noticeable amount to your energy bills.
Energy companies like standing charges because it gives them a better degree of revenue predictability, because they can guarantee they will be paid a certain minimum amount by their customers. This helps them to pay for investment in the UK’s energy infrastructure.
If standing charges are imposed by your energy supplier, then you have to pay it, but there are a couple of energy suppliers that offer tariffs with no standing charge. Out of the Big Six energy suppliers, only nPower offers an electricity plan with no standing charge. Meanwhile, Ebico and Utilia are some of the smaller no standing charge energy providers.
How much you pay depends on which supplier you’re with. Standing charges also vary depending on the type of tariff that you’re on, and which part of the country that you live in.
One big advantage of a no standing charge tariff is that you only pay for the energy that you use. So if you’re away from home for a long time so aren’t using gas or electricity, you won;t be charged anything. In contrast, if you’re on a normal standing charge tariff, you’ll pay the daily fee for gas and electricity, even if you aren’t using it.
Another bonus of no standing charge tariffs is that the unit costs are often reduced after a certain amount of gas and electricity has been used, which can be really useful if your business is comprised of multiple premises.
Though it might seem that having no standing charge is cheaper as you’re getting rid of the daily fee, these tariffs charge you a higher unit price for gas and electricity. So you could end up paying more each month, especially if you generally have a high energy usage.
Before switching, you need to work out exactly how much you’d save by switching to a standing charge free tariff. Though you’d be saving on the daily charges, higher unit prices mean you may still end up paying more for your energy. If your business uses a lot of energy, for example by running a lot of electrical appliances in a kitchen, then a no standing charge tariff might leave you worse off.
It all depends on the circumstances of your business. If you use lots of energy, it’s probably wiser to go for a tariff that has lower unit prices.
If instead you don’t use an awful lot of energy, for example if your business has limited operating hours or is only open seasonally, it could be worth considering a plan with no standing charge. For example, if you own a campsite or holiday resort, it doesn’t make sense to be paying a standing charge outside of your operating months! Or even if you just take time off for holidays and weekends, it’s worth calculating whether your standing charge is causing you to pay too much for your business’ gas and electricity.