Unit rate, standing charge and non commodity costs. A plain English breakdown of how a business electricity price is built and where the negotiable margin sits.
Every business electricity quote arrives as a handful of numbers, but those numbers hide a stack of components that behave very differently. Understanding the stack is the difference between comparing prices and actually understanding what you are buying.
Roughly half of a typical commercial electricity bill is the wholesale commodity, the electricity itself. This is the part that moves with the market and the part a supplier competes on. The remainder is made up of network charges for using the transmission and distribution system, balancing costs, capacity market charges and government levies. These are largely fixed by third parties and passed through in one form or another.
The standing charge covers the fixed daily cost of maintaining your connection and metering. It is easy to overlook because it is quoted in pence per day, but for a small site with modest consumption it can represent a surprising proportion of the annual bill. Always compare on total annual cost rather than unit rate alone.
Where the negotiable margin sits is in the supplier's own cost to serve and risk premium. That premium reflects your credit position, your consumption predictability and how long the contract runs. A business that presents clean, validated consumption data with a solid payment history is a lower risk customer and will be priced accordingly.
The practical takeaway is simple. Prepare your data, compare on annual cost, understand which elements are pass through and which are fixed, and treat the contract terms with the same attention as the price.