Business energy standing charges explained

Standing charges can make up a large slice of a small business’s energy bill, and they’re one of the most common things people query. This guide explains what a business standing charge is, what it pays for, why it varies from one region and meter to another, and how to weigh it up when you compare quotes.

What is a business energy standing charge?

A standing charge is a fixed daily amount you pay for each electricity or gas supply, whether or not you use any energy that day. It is usually shown on your bill in pence per day, alongside the unit rate you pay for each kWh.

Ofgem’s definition for business customers notes that standing charges apply to both gas and electricity and vary by supplier, where you are, how you pay and what meter you have. It also notes that not all non-domestic suppliers use standing charges.

Because it’s charged per supply, a business with several meters or sites pays a standing charge on each one.

What do standing charges pay for?

Standing charges cover costs that don’t rise or fall with the amount of energy you use. According to Ofgem, these include:

• using and maintaining the network that delivers electricity and gas to your premises
• meter reading visits
• government support schemes

Ofgem describes standing charges as covering the fixed costs of delivering energy to homes and businesses. In practice, suppliers decide how to split their costs between the standing charge and the unit rate, which is why two quotes can look so different.

Network residual charges

Network costs feed directly into the electricity standing charge. After its Targeted Charging Review, Ofgem decided that “residual” network charges, which recover the fixed costs of the existing grid, would be levied as fixed charges on all households and businesses. The change to distribution charges took effect in April 2022.

Distribution network operators now put every non-domestic site into one of four residual charging bands, while households share a single band. Smaller sites are banded by how much electricity they use; larger, half-hourly metered sites are usually banded by their agreed capacity. A site in a higher band pays a higher fixed charge.

Can you see the breakdown?

Under Ofgem’s voluntary best-practice guide, suppliers have agreed to explain their charges in broad “buckets”: network and metering, environmental and social schemes, third-party fees, tax and operating costs. They can show what share of each bucket makes up the unit rate and standing charge. If your bill doesn’t show this, ask your supplier.

Why do standing charges differ by region?

Standing charges vary by region mainly because network costs vary by region. Ofgem says the standing charge depends on how many people live in your region, how much energy is used there on average, the amount of energy the supplier needs to buy, and the cost of building and improving the local network.

Great Britain has 14 electricity distribution regions. You can tell which one you’re in from the first two digits of your MPAN core, the distributor ID. See our MPAN guide.

An illustration from the household price cap

Business energy is not price-capped, so there is no official table of business standing charges. The household price cap shows the size of the regional gap, though. This is a household example only, used to show regional variation.

For 1 October to 31 December 2026, the capped electricity standing charge for households paying by Direct Debit, calculated from Ofgem’s annual figures, ranges like this:

Region (household price cap, Direct Debit)	Electricity standing charge
London	about 42.9p a day
North West England	about 45.7p a day
South West England	about 55.6p a day
Southern Scotland	about 61.4p a day
Merseyside and North Wales	about 67.7p a day

Gas standing charges vary far less by region. Under the same cap they ranged only from £101.36 to £104.98 a year before VAT, roughly 28p a day.

Your own business standing charge could be higher or lower than these figures. The point is that where your premises are affects what you pay, especially for electricity.

Why do standing charges differ by meter type?

The type of meter and connection you have changes what fixed charges apply.

• Smaller sites on standard or economy meters usually pay a single daily standing charge per supply.
• Larger sites on half-hourly meters can pay several fixed network charges. A distribution charging statement lists a fixed charge per MPAN per day, a capacity charge in pence per kVA per day based on the site’s maximum import capacity, and an excess capacity charge if the site goes over it.
• Capacity is a fixed cost too. You pay for your agreed capacity whether you use it or not. Under the charging statement we checked, if you exceed it you pay the excess capacity charge for the whole month in which it happens, and once a capacity is agreed it can’t be reduced for 12 months.

Our guide to reading a business energy bill explains capacity and reactive power charges in more detail.

Do the Climate Change Levy and back-billing rules apply to standing charges?

The Climate Change Levy doesn’t apply to standing charges. Ofgem’s glossary confirms it is charged only on the units you use, not on the standing charge or any other part of the bill. See our Climate Change Levy guide.

Back-billing rules do cover standing charges for microbusinesses. The Energy Ombudsman explains that you can’t be back-billed for energy used, or standing charges, from more than 12 months ago unless you’ve been billed for them before.

Can you get a business energy tariff with no standing charge?

Yes. Some suppliers offer business tariffs with no standing charge, or a lower one, but they recover those costs through a higher unit rate. Ofgem made the same point when it announced plans for lower standing charge tariffs in 2025: tariffs with a lower standing charge will have a higher unit rate.

That trade-off means:

• Low or seasonal users can come out ahead, because they avoid paying a fixed charge on days they use little or nothing.
• Higher users usually lose out, because the extra pence on every kWh soon adds up to more than the standing charge they’ve avoided.

Example: when does no standing charge pay off?

This is a hypothetical example. Say you’re comparing two electricity tariffs:

• Tariff A: 50p a day standing charge
• Tariff B: no standing charge, but a unit rate 4p/kWh higher

Tariff A’s standing charge costs 50p x 365 = £182.50 a year. Tariff B costs an extra 4p on every unit. The break-even point is £182.50 divided by 4p, which is about 4,563 kWh a year. Below that, Tariff B is cheaper overall. Above it, Tariff A is.

Our unit rate vs standing charge guide shows the formula and more examples.

How do you compare standing charges between quotes?

Never compare standing charges on their own. Compare the total annual cost at your actual usage:

1. Get your annual usage for each meter, in kWh, from your bills.
2. Work out the annual cost of each quote: (365 x standing charge) + (annual kWh x unit rate).
3. Check what else is charged. On half-hourly supplies, look for capacity, excess capacity and reactive power charges, which may sit outside the headline standing charge.
4. Check what’s fixed. Ask whether the standing charge is fixed for the whole contract or whether some third-party costs can be passed through and change.
5. Check every meter. If you have several supplies, each one has its own standing charge.

Can you reduce your business standing charge?

You can’t negotiate network costs away, but you can make sure you’re not paying for more than you need:

• Choose a tariff structure that fits your usage. A low user may be better off with a lower standing charge and higher unit rate.
• Review your agreed capacity. If a half-hourly site has a capacity set far above what it uses, you may be able to agree a lower one with your network operator. Remember the 12-month rule on reductions.
• Check your residual charging band. The charging statement we checked explains that if you think your site has been put in the wrong band, you can ask the network operator to investigate. Ask your supplier first if the problem is your metering data.
• Ask about supplies you no longer use. If you’re paying a standing charge on a meter you don’t need, talk to your supplier about your options.

For a wider view of what businesses pay, see our average business energy bill guide and the latest business energy prices.

Frequently asked questions