If you've looked at a business energy bill and wondered why you're being charged before you've used a single unit, you're not alone. That charge has a name: the standing charge. And it's on every bill, every month, regardless of how much energy you use.

This guide explains what it is, what it pays for and how to think about it when you're comparing contracts.

What is a standing charge?

A standing charge is a fixed daily fee that your energy supplier charges for keeping your business connected to the gas or electricity network. It's separate from the unit rate, which is what you pay for the energy you actually use.

You'll see it shown as a pence-per-day figure on your bill. Multiply it by the number of days in the billing period and that's what you owe, on top of your usage costs.

If your business closed for a month and used no energy at all, you'd still pay the standing charge. That's what makes it a fixed cost rather than a variable one.

What does the standing charge actually cover?

According to energy suppliers, the standing charge covers several costs associated with maintaining your energy connection. These include:

• Maintaining the pipes and cables that bring energy to your premises
• Operating and reading your meter
• Network and distribution costs charged to your supplier by the grid operators
• Some suppliers include meter rental in the standing charge rather than listing it separately

In short, it's described as the cost of being connected and ready to use energy, whether you do or not.

How much is a typical business standing charge?

Business standing charges vary more than domestic ones. Unlike home energy, there's no price cap on business contracts, so suppliers set their own rates.

The amount depends on several things:

• Your meter type. Larger businesses on half-hourly meters tend to pay higher standing charges than those on standard meters.
• Your location. Network costs differ by region, and suppliers pass some of that through to customers.
• Your supplier and contract. Standing charges are negotiated as part of your overall contract, so they vary from one deal to the next.
• Your energy use. High-volume users sometimes negotiate lower standing charges as part of a broader deal.

As a rough guide, business electricity standing charges typically range from 20p to over £1 per day, and gas standing charges from around 15p to 50p per day. But these figures can be higher for larger premises or more complex meter setups.

Standing charge vs unit rate: which matters more?

Both matter, but they matter differently depending on how your business uses energy.

If your business uses a lot of energy consistently, the unit rate has a bigger impact on your total bill. A small difference in pence per kWh adds up quickly when you're using thousands of units a month.

If your business uses relatively little energy, or if usage is seasonal and there are periods where the premises are quiet, the standing charge becomes a bigger proportion of what you pay. Paying a high daily charge for a building that sits empty half the time is worth thinking about.

When you're comparing contracts, look at both figures together. A contract with a low unit rate but a high standing charge isn't automatically better than one where both are moderate.

Can you negotiate the standing charge?

Yes, particularly if you're a larger user or you have leverage from competing offers. Business energy contracts are negotiated, not set in stone. If you're shopping around at renewal time, use quotes from other suppliers as a starting point for the conversation.

Smaller businesses have less negotiating power, but it's still worth asking. At the very least, make sure you're comparing the total annual cost of each contract rather than focusing on just one part of the price.

Zero standing charge contracts

Some suppliers offer contracts with no standing charge. These typically have a higher unit rate instead, so the costs are just structured differently rather than actually being lower overall.

A zero standing charge contract can work out cheaper if your usage is very low, because you're only paying for what you use. But if your usage is high, a higher unit rate will cost you more in the long run.

Do the sums based on your actual usage before deciding which structure suits you.

Standing charges when a business moves premises

If you move into a new premises, a standing charge starts from the day you take responsibility for the supply, even if you haven't signed a new contract yet. Until you switch to your own deal, you'll be on the previous occupier's supplier at a deemed rate, which is usually much higher than a contracted rate.

Get in touch with the existing supplier as soon as you move in and start the process of switching to your own contract straight away.

How to keep your standing charge costs down

• Compare contracts at renewal, not just unit rates but the total annual cost including the standing charge
• If your usage is low, consider whether a zero standing charge contract with a higher unit rate works out cheaper for you
• Don't let your contract lapse onto a deemed rate, where standing charges and unit rates are both higher
• If you have multiple sites, ask whether your supplier can offer a combined deal that reduces costs across the board