The four building blocks

Start with the electricity itself. Suppliers buy power on wholesale markets that trade constantly, and the price they pay is the largest slice of what you pay. When your renewal quote looks nothing like the one from two years ago, wholesale movement is almost always the reason.

The second block pays for the wires. Distribution charges (DUoS) cover your regional network, and transmission charges (TNUoS) cover the national grid that moves power across the country. These are set by where your site sits, which is why a warehouse in Cornwall and an identical one in Leeds see different numbers for the same consumption.

Third come the policy costs. Government schemes are funded through business bills, including the Climate Change Levy charged on most non-domestic use. You’ll see the levy as its own line on the bill; the rest arrive baked into the unit rate.

The last block is the supplier’s. It covers their cost of serving you, the risk they take on your contract, and their margin. Smaller than most people assume, and the one part a supplier can genuinely sharpen when they want your business.

What’s personal to your site

Five inputs turn those blocks into your quote. Your annual consumption, first, and its shape across the day. A site drawing steadily through office hours is cheaper to serve than one that spikes at peak times, which is why larger, half-hourly metered supplies are priced on their actual usage pattern rather than an estimate.

Then your region, through those network charges. Your meter type. Your company’s credit profile, because the supplier is extending you thirty days of power at a time. And the contract length you ask for, since a supplier hedging three years of your consumption carries different risk from one hedging twelve months.

There’s a practical lesson in that list: complete data gets sharper prices. A supplier quoting against your actual MPAN, consumption history and credit position doesn’t have to pad the number for the unknowns.

Why quotes move day to day

Your quote is a snapshot of the wholesale curve on the day it was issued. Most are valid for a few days, sometimes only until close of business, and that’s not a sales tactic. The supplier’s own buy price has moved by morning.

The consequence for you is unglamorous but real: once you’ve compared properly and picked a deal, sign inside the validity window. Businesses that sit on a good quote for a fortnight usually end up chasing a market that’s moved on. Current panel averages sit on our business electricity page if you want a sense of where the market is before you ask.

Unit rate and standing charge, the trade-off

Every quote splits into a unit rate per kWh and a daily standing charge, and suppliers can shift cost between the two lines. A low unit rate with a heavy daily charge can cost a low-usage site more across the year than a plainer-looking quote.

An illustrative example, with round numbers rather than live rates. At 20,000 kWh a year, an offer of 25p/kWh with a 60p daily standing charge totals £5,219; one at 27p/kWh with a 20p daily charge totals £5,473, so the lower rate wins. Run the same two offers for a site using 5,000 kWh and they come out £1,469 against £1,423. The “expensive” rate is now the cheaper deal.

What you can influence, and what you can’t

Wholesale prices, network charges and policy costs are weather. You don’t negotiate with them; you time around them. What you control is everything else: when you go to market, how long you commit for, how complete your data is, and how your consumption looks to the supplier pricing it.

That reframes the job usefully. Chasing the cheapest supplier is guesswork dressed as strategy. Showing up with clean data, in a calm market, comparing whole-of-market on total annual cost, is repeatable. Do it every renewal and the results compound quietly for a decade.