TL;DR: Key Takeaways
- Most of your bill is out of your hands. Only 38% of a typical small business electricity bill is the wholesale energy cost. The other 62% is non-commodity charges - network costs, policy levies, taxes, and operating costs set by regulators and government.
- But how you source that 38% is where the action is. You can’t control wholesale energy prices, but you can control which supplier you buy from, how competitively you negotiate your tariff, and whether a broker commission is eating into your rate. The difference between a competitive deal and deemed rates can be 40-80%.
- There is no price cap for businesses. Unlike households, business energy rates are entirely unregulated. Nobody is protecting you from a bad deal.
- 65% of UK businesses rank energy as their #1 risk. This isn’t a niche concern. A 2026 CBI and Energy UK report (opens in new tab) found energy costs are now the single biggest worry for UK businesses - ahead of cybersecurity, AI, cash flow, and global tariffs.
- Standing charges hit low-usage businesses hardest. If you use under 10,000 kWh/year, your standing charge can account for up to 30% of your total bill.
Where Your Money Actually Goes
Ask most business owners what they are paying for when they pay their energy bill and they will say “electricity” or “gas.” That is roughly 38% correct.
A 2026 joint report from the CBI and Energy UK (opens in new tab) - using British Gas data for a small business using 10 MWh of electricity per year - shows the actual breakdown:
| Component | Share of bill | What it pays for | Can you control it? |
|---|---|---|---|
| Wholesale energy | 38% | The actual electricity or gas | Not directly - but you control which supplier you buy from and how competitively you source your tariff |
| Network costs | 27% | DUoS + TNUoS - moving energy through the grid | No |
| Policy costs | 19% | Includes Renewables Obligation, Contracts for Difference, capacity market, and other levies | No |
| Operating costs | 8% | Supplier margin, admin, billing, metering, customer service | Indirectly - by choosing an efficient supplier |
| Other costs | 6% | Includes broker commission paid to intermediaries | Yes - by choosing how you switch |
| Taxes | 2.5% | Climate Change Levy + VAT (5% or 20% depending on usage) | No (unless exempt from CCL; VAT rate depends on usage) |
The numbers shift slightly depending on your consumption, region, and meter type - but the proportions are broadly consistent. Ofgem’s wholesale market data (opens in new tab) confirms that for most SMEs, the wholesale component is the minority of the total cost.
For gas, the picture is simpler. Wholesale costs account for about 51% of a small business gas bill, with network costs at 16%, operating costs at 17%, policy costs at 12%, and taxes at 5%. The non-commodity share is smaller because the gas network is less complex than electricity distribution.
The implication is important: when wholesale energy prices fall - as they have from the 2022 crisis peak - your bill does not fall proportionally. The 62% that is non-commodity charges stays roughly the same. This is why UK business electricity costs remain around 70% above pre-crisis levels (opens in new tab) even though wholesale prices have dropped significantly.
What You Cannot Control (And Why It Keeps Rising)
Understanding which costs are fixed helps you stop wasting energy (pun intended) trying to negotiate them down.
Network charges (27% of your electricity bill)
These pay for the physical infrastructure that delivers electricity to your premises - the cables, substations, and transformers operated by your regional Distribution Network Operator (DNO) and National Grid.
Network charges are rising. From April 2026, Ofgem’s RIIO-3 price control (opens in new tab) funds essential upgrades to the electricity and gas networks. This is necessary investment - the grid needs upgrading for decarbonisation, electric vehicles, and heat pumps - but it means your bill goes up regardless of what happens to wholesale prices.
Network charges also vary significantly by region. A business in southern England pays different DUoS rates than one in Scotland. You cannot negotiate these, but you can factor location into your cost planning.
Policy costs (19%)
These fund the UK’s clean energy transition - Renewables Obligation, Contracts for Difference, Feed-in Tariffs, and the Capacity Market. They are levied on suppliers and passed through to you.
Policy costs are set by government and are non-negotiable at the business level. Some energy-intensive industries qualify for exemptions, but the vast majority of SMEs pay the full amount.
Climate Change Levy (2.5%)
The CCL is a government tax on commercial energy consumption. Current rates are 0.775p/kWh for electricity and 0.672p/kWh for gas. Charities and very low-usage businesses can claim exemptions - but most SMEs pay it in full.
The trend is not your friend
The CBI/Energy UK report (opens in new tab) warns that without government intervention, the pressure on business energy costs will intensify. Network charges are rising under RIIO-3. Additional policy costs are coming (Network Charging Compensation uplift, Bill Discount Scheme for transmission infrastructure, Dispatchable Power Agreement, Gas Shippers Obligation). And European countries with lower electricity prices than the UK are introducing additional business support schemes - widening the competitiveness gap.
None of this is within your control. But knowing it puts the next section in perspective.
What You Can Control (And Why It Matters More Than You Think)
You can’t influence the wholesale price of energy - that’s set by global markets. But you absolutely can influence the rate you pay for it: which supplier you choose, how competitively you source your tariff, and whether a broker commission is silently inflating your unit rate. That’s where your decisions make a real difference.
Your contract status
This is the single biggest lever you have. DESNZ quarterly pricing data (opens in new tab) shows the gap between what businesses on competitive deals pay versus those on default rates:
| Contract status | Typical electricity rate | vs competitive fixed deal |
|---|---|---|
| Competitive fixed contract | 22-27p/kWh | Baseline |
| Rolled-over contract | 28-35p/kWh | +15-30% |
| Deemed rates | 35-46p/kWh | +40-80% |
A business using 20,000 kWh/year on deemed rates at 38p/kWh pays roughly £7,600. Switch that to a competitive 24p/kWh deal and the annual bill drops to £4,800 - a saving of £2,800. The energy you consume is identical. The network charges are identical. The policy costs are identical. The only difference is the rate you agreed (or failed to agree) to.
For a deeper dive into these savings scenarios, see our guide to how much you can save switching business energy.
Broker commission
The “other costs” category in the CBI breakdown (6% of the bill) includes commission paid to third-party intermediaries. In practice, broker fees for small businesses typically run 2-4p/kWh - and can reach higher in some cases.
This matters because broker commission is embedded in your unit rate. When you see a quote of 28p/kWh, some portion of that is going to the broker who arranged the deal. Since October 2024, Ofgem requires brokers to disclose their commission - but that does not mean every business checks.
Ofgem’s research into businesses’ experiences of the energy market (opens in new tab) found that 77% of businesses thought they did not pay for broker services - unaware that commission is built into the unit rate they pay their supplier. The combination of embedded commission and low awareness means this is one of the most impactful costs a business can address.
Supplier margin
Different suppliers price differently. Their operating costs, hedging strategies, and appetite for different customer segments all affect what they charge. Comparing quotes from multiple suppliers - rather than accepting the first offer or letting a broker choose for you - is how you find the gap.
The Price Cap Confusion
One of the most common misconceptions - visible across Reddit threads (opens in new tab) and business forums - is that the Ofgem energy price cap (opens in new tab) applies to businesses.
It does not.
The price cap protects domestic households on default tariffs. There is no equivalent for businesses. Your rates are determined entirely by commercial negotiation. This means:
- No price cap, but not a free-for-all. If your contract expires and you fall onto deemed rates, there is no price cap equivalent. However, under Standard Licence Condition 7.3 (opens in new tab), suppliers must ensure deemed rates are not “unduly onerous” - meaning they cannot set punitive rates solely to coerce you into a fixed-term contract. In practice, though, deemed rates are still typically 40-80% above competitive deals.
- No automatic protection from price spikes. During the 2022 energy crisis, some businesses saw rates of 60-90p/kWh with no government backstop (the Energy Bill Relief Scheme was temporary and has ended).
- No standardised billing. Domestic bills follow a regulated format. Business bills vary wildly between suppliers in structure, terminology, and transparency.
This is precisely why understanding your bill matters more as a business than as a household. Nobody else is watching the numbers for you.
Standing Charges: The Hidden Burden for Small Businesses
If you are a low-usage business - a small office, a sole trader working from commercial premises, a seasonal operation - standing charges deserve special attention.
Standing charges are a fixed daily fee for maintaining your grid connection. You pay them whether you use 1 kWh or 1,000 kWh. For a business using 10,000 kWh/year, the standing charge can represent up to 30% of the total bill. For a business using 50,000 kWh/year, it is closer to 5-10%.
The problem: standing charges are rising. Network investment (RIIO-3), smart meter rollout costs, and balancing charges all flow into the standing charge. And because standing charges are a fixed daily fee, they hit low-usage businesses disproportionately hard - the same daily charge costs you the same whether you use 10 kWh or 100 kWh.
What to do about it:
- When comparing supplier quotes, always calculate the total annual cost (unit rate x consumption + standing charge x 365), not just the unit rate
- Check whether you qualify for 5% VAT instead of 20% - this applies to businesses using under 1,000 kWh/month of electricity, and charities can also claim the reduced rate regardless of usage
- Read our detailed guide to business electricity standing charges for current rates by meter type and region
The £2 Billion Problem
The scale of overpayment across UK SMEs is staggering. BFY Group estimates (opens in new tab) that SME energy debt could total between £1.3 billion and £1.8 billion. Nearly 90% of firms have seen energy bills rise over the past three years. And 48% of businesses say energy now accounts for 25% or more of their total costs.
Yet the CBI/Energy UK report - the most comprehensive industry analysis of business energy costs published in 2026 - mentions third-party intermediaries exactly once, in passing. The entire focus is on wholesale costs, network charges, and policy levies: the 62% you cannot control.
The 38% you can control - supplier choice, broker transparency, contract timing - barely features in the national conversation. That is the gap.
What To Do Next
You cannot change network charges. You cannot negotiate down the Climate Change Levy. You cannot opt out of policy costs. But you can make sure the 38% of your bill that is within your control is working as hard as possible.
Here is where to start:
- Check your current rates against DESNZ quarterly data for your size band. If you are paying above 30p/kWh on electricity, you are likely overpaying.
- Read your bill properly and understand what each line item means. Billing errors are common - 52% of all supplier complaints are now billing-related.
- Know your contract end date. Set a reminder 90 days before. Falling onto deemed rates is the most expensive mistake a business can make.
- If you use a broker, ask for commission disclosure in writing. It has been mandatory since October 2024. If they will not tell you, walk away.
- Compare quotes from multiple suppliers. The gap between the cheapest and most expensive offer for the same MPAN can be significant.
The energy market is not designed to be transparent. But the more you understand about where your money goes, the better positioned you are to keep more of it.
How Meet George Helps
Meet George is an AI-powered business energy switching service built to close the information gap this article describes. Most businesses either don’t know they’re overpaying or don’t have the time to do anything about it. We’re here to fix both problems.
Here’s how it works:
- Upload your bill - we extract the data and compare your current rates against the live market
- See your options - you get a clear breakdown of what you’re paying now, what you could be paying, and the difference
- Switch if it makes sense - no sales calls, no pressure, no hidden fees
Our pricing is simple: a flat 1p/kWh fee, shown separately on every quote. That’s it. For context, traditional brokers typically add 2-4p/kWh to your unit rate - buried in the contract small print for you to find.
We built Meet George because the 38% of your bill you can control deserves as much attention as the 62% you can’t. We’re launching soon - join the waitlist to be first in line.
Sources: CBI & Energy UK, “Cutting Business Energy Costs: The case for action” (2026) (opens in new tab); DESNZ Gas and electricity prices in the non-domestic sector (opens in new tab); Ofgem Non-Domestic Market Review (opens in new tab); Ofgem, Businesses’ experiences of the energy market 2023 (opens in new tab); Ofgem, Guidance on Deemed Contracts (2023) (opens in new tab); BFY Group, “Are we ignoring a £1.8bn debt problem in business energy?” (opens in new tab).
