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Unit rate

What is a unit rate (p/kWh)?

A UK business energy bill has two main building blocks and the unit rate is the one tied directly to your consumption. The unit rate is the price you pay per kilowatt-hour (kWh), measured in pence per kWh. Multiplied by your kWh consumption it gives the variable element of the bill. The standing charge sits alongside as the fixed daily amount. Get those two right and you have read almost everything you need to read on a bill. Get either wrong and the bill is wrong. UK business unit rates bundle wholesale energy cost, network charges, policy levies, supplier margin, and operating costs into a single working figure on a fixed contract, or break them out on pass-through and indexed structures.

Unit rates work the same way whether you’re on a business electricity or business gas contract. They’re the variable cost per kWh that drives most of your business energy bill.

The unit rate is simple in concept but layered in practice. UK business unit rates bundle wholesale energy cost, network charges, policy levies, supplier margin, and sometimes more into a single working figure. Understanding what is in the unit rate and how each component moves helps with bill validation, renewal decisions, and comparing competing offers.

What a unit rate represents

The unit rate is the price per kilowatt-hour for the variable energy element of your bill.

• Expressed in pence per kWh (p/kWh).
• Multiplied by your kWh consumption to produce the variable energy cost.
• Distinct from the standing charge (a fixed daily amount independent of consumption).
• Defined in the supply contract and applied to every kWh used.

Two contracts with different unit rates produce different variable costs on the same consumption. The standing charge usually moves alongside but separately.

What goes into a unit rate

A UK business unit rate bundles several cost components into a single working figure.

• Wholesale energy cost. The supplier’s cost of buying the gas or electricity it sells to you.
• Network charges. DUoS, TNUoS, BSUoS for electricity. Transportation charges for gas. Usually bundled on smaller supplies, itemised on larger ones.
• Policy levies. Renewables Obligation, Contracts for Difference, Capacity Market, FiT levy, Nuclear RAB Levy.
• Supplier margin. The supplier’s commercial margin on each unit.
• Operating costs. Customer service, billing systems, capital costs allocated across consumption.

The split between these components varies by supplier and contract type, but the customer sees a single all-in p/kWh figure on a typical fixed contract.

Typical UK business unit rates

Unit rates vary widely by fuel, supply size, contract type, and contract date. Illustrative ranges for 2026.

Example only. Real unit rates vary with wholesale conditions, supplier, contract date, and contract term. The ranges above are 2026 indicative figures.

How unit rates are set on contracts

The mechanism varies by contract type.

• Fixed-rate contracts. The supplier sets a single all-in p/kWh figure based on its assessment of wholesale, network, policy, and margin costs over the contract term.
• Pass-through contracts. Wholesale and network charges are passed at actual cost, with the supplier margin added separately.
• Indexed contracts. The unit rate tracks a wholesale index (e.g., NBP day-ahead for gas).
• Flexible contracts. The customer takes positions on the wholesale market through the supplier across the year. The blended rate emerges from the positions taken.
• Out-of-contract or deemed rates. Set by the supplier from a published default tariff.

Electricity vs gas unit rates

Electricity unit rates are typically much higher than gas unit rates.

• Electricity 22-35 p/kWh; gas 5-12 p/kWh for comparable customers.
• The gap reflects different generation costs, network complexity, and policy cost burden.
• For UK businesses with significant gas consumption, the per-kWh price advantage of gas remains material even after CCL and the cost of running gas-fired equipment.

The price gap is part of why heating electrification (heat pumps, electric boilers) has economic challenges even where the technology is mature.

Time-of-use unit rates

Some UK business electricity supplies have unit rates that vary by time of day.

• Economy 7. Lower night rate (typically 7 hours) and higher day rate (other 17 hours). Available on NHH meters with two registers.
• Half-hourly pass-through. Unit rate effectively varies per half-hour with the wholesale market.
• DUoS red/amber/green bands. Network charges varying by time of use add complexity to the effective rate even on flat-rate contracts.

See Economy 7 for the day/night structure and half-hourly meter for time-of-use on HH supplies.

Unit rates on pass-through contracts

On a pass-through contract, the unit rate is broken down into components rather than presented as a single number.

• Wholesale commodity rate (varies daily or half-hourly).
• Supplier margin (fixed amount per kWh).
• Network charges (varies by site and band).
• Policy levies (recovered separately).

The customer sees the underlying cost movement, accepts the price risk, and benefits when wholesale prices fall. The fixed contract version of the same supply bundles all this into a single rate and the customer pays a smoothed average.

How the unit rate appears on bills

UK bills present unit rates in a few common formats.

• Single rate. One number applied to total kWh consumption.
• Time-of-use rates. Day rate and night rate shown separately for Economy 7.
• Itemised on HH bills. Wholesale, capacity, DUoS, TNUoS, BSUoS shown as separate lines that together produce the effective unit cost.

The bill calculates kWh times unit rate to give the variable cost, then adds standing charges, CCL, and VAT for the total.

Comparing unit rates between offers

Pitfalls to avoid when comparing.

• All-in vs unbundled. A fixed all-in rate from one supplier is not directly comparable to a pass-through quote that separates wholesale and margin. Total-cost modelling on your actual consumption is the only fair comparison.
• Standing charge differences. Two offers with similar unit rates can have different standing charges. The combined total per year on your actual consumption is what matters.
• Contract term. Longer fixed terms typically come with higher unit rates (price protection premium). Match the term to your appetite for price stability.
• Contract dates. Unit rates change daily with wholesale prices. The same supplier quoting today vs next week may have different unit rates simply due to market movement.

For business gas specifically, see the Clearsight unit rate for business gas guide.

Practical implications for businesses

For UK business customers, the unit rate matters at three moments.

• Contract renewal. Compare unit rates across offers but weighted by your consumption profile.
• Bill validation. Verify that the rate on the bill matches the contract rate. Rate-loading errors are one of the most common sources of bill overcharge.
• Procurement decisions. The choice between fixed, pass-through, indexed, and flex contracts is fundamentally a choice about how the unit rate is set, how it varies, and who carries the price risk.

Related entries. standing charge, kWh, CCL, VAT on business energy, bill validation, Economy 7, half-hourly meter, non-half-hourly.

How unit rates move with wholesale prices

The wholesale energy cost is the largest single component of most UK unit rates. Wholesale prices vary daily based on supply, demand, weather, and geopolitical conditions. The transmission of wholesale price moves into customer unit rates depends on contract type.

• Fixed contracts. Insulated from wholesale moves for the contract term. The supplier carries the price risk.
• Pass-through contracts. Customer carries wholesale price risk directly. Bills move with the market.
• Indexed contracts. Unit rate tracks a defined wholesale index (e.g., NBP day-ahead, monthly forward).
• Flexible contracts. Customer takes positions on wholesale through the supplier; blended rate emerges from the positions.

For a small UK business on a fixed contract, the unit rate quote you accept today is locked in for the contract term. Renewal in 12-24 months will reflect wholesale prices at that point, which may be materially higher or lower than today.

Common unit rate pitfalls

• Comparing rates across different units. Wholesale gas may be quoted in p/therm; retail bills are in p/kWh. Convert before comparing (1 therm = 29.31 kWh).
• Forgetting policy levies. Quotes for pass-through contracts sometimes exclude policy levies that the bill will then add. Make sure the comparison is on a like-for-like basis.
• Standing charge swap. Suppliers sometimes offer a lower unit rate paired with a higher standing charge that produces a similar total. Model the all-in annual cost on actual consumption.
• Rate loading errors. A common bill validation finding is that the rate on the bill does not match the contract rate. Check every bill against the contract rate.

Frequently asked questions