As a business owner, your energy bill is made up of two main parts.
1. Unit Rate (p/kWh) – this is what you pay for the energy you use.
2. Standing charge (p/day) – this is a fixed daily fee you pay whether you use energy in your business or not.
The standing charge is essentially a fee for being connected to the energy network, so even if your consumption drops, the standing charge continues to apply. Like being a member of a gym, you’re not going, but you will still be charged.
At the moment standing charges are rising because fixed infrastructure and policy costs are increasing and these costs must be recovered regardless of how much energy is used. To clear up a misconception, standing charges are not supplier “profit.” They primarily cover non-commodity costs set by networks, regulators and government schemes.
Let’s take a closer look at why the standing charges for gas and electricity are rising.
Electricity and gas must travel through extensive infrastructure:
These costs are regulated by Ofgem.
Key pressures:
These costs sit inside:
They are largely recovered via standing charges.
Government schemes are funded through energy bills, including:
Following supplier failures in 2021–22, industry-wide costs were socialised across all meters, increasing standing charges to recover those losses.
As businesses become more efficient (LEDs, solar, reduced usage):
This means even low-usage sites can see disproportionately high daily charges.
Electricity standing charges have risen faster due to:
Gas networks are also increasing, but at a slower rate.
The key things to note for your business and how it will impact are:
Even on fully fixed contracts, these costs are embedded; you simply don’t see them itemised in the same way.
Standing charges are increasing not because suppliers are charging more for energy, but because the cost of running and upgrading the UK’s energy system is rising.
Understanding what sits behind those costs is now critical to an effective procurement strategy.
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