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Why Is Electricity So Expensive?

So, you’ve just received your monthly business energy bill. The same question on your mind is on everyone else’s too: why is electricity so expensive?

In this article we’re looking at business electricity and energy as a whole, discussing where the price hikes come from, if they are getting better, and what you can expect to pay moving forward.

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Electricity prices per kwh

What is Going On With Energy Prices in the UK?

Energy prices in the UK have become one of the top topics of conversation for businesses and homeowners. Massive changes to pricing and schemes in 2023 have left most concerned about what the future of energy prices in the UK has in store.

With the limited supplies, conflict in Ukraine, and storage space issues, the UK has had a tough go of trying to lower energy prices since the start of the pandemic.

However, as of July 2023, UK energy prices have decreased quite significantly. Due to the new Energy Bills Discount Scheme that was put in place in April and reliance on Russian gas decreasing, energy prices are lowering.

While prices haven’t dropped to pre-pandemic levels, they are going down slowly but surely. For example, a three-bedroom household in the UK that was paying £2,500, could pay about £2,074 a year. This is mostly due to the energy price cap, but more on that later.

The prices are still exorbitant, but the point is your business electricity and gas bill will reduce as the new scheme and price caps take effect.

The energy prices in the UK are quite volatile, so there is no telling what the future holds. One thing for certain is that you need a trusted energy broker to give you the best possible service and comparison for your business’s electricity and gas needs.

Are Energy Prices Still Rising?

The energy-saving efforts across the UK to cut demand have made a real difference in energy prices. This, along with the reduced scare of the Ukraine and Russia disagreement, has brought the cost down somewhat.

There is still a lot of room for lowering energy costs in the UK, but that will be down to the market and whether we can all pull together to bring down energy consumption and demand.

The chances of hitting pre-pandemic energy prices in the next ten years are quite slim, so while things are improving, the cost of energy in the UK is significantly higher than it was pre-covid.

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Wholesale energy prices have been on a downward trend since the end of 2022. Studies show that the highest electricity prices were recorded in August 2022 with day-ahead power costing just over £360 MWh.

Luckily, energy prices have improved as of May 2023 with day-ahead power coming in at just over £80 MWh. That’s a £280 decrease in just under a year!

The day forward electricity prices aren’t looking too bad either with a spike in August 2022 to just over £500 MWh coming way down to just over £100 in May 2023. That’s a £400 decrease.

Moving onto the gas, forward delivery had a spike in August to £592 and went down to £102 in May 2023.

Similarly, day-ahead gas prices went from $356 in August 2022 down to £73 in May 2023.

Things are looking good for wholesale energy prices. As the political landscapes change across the world, Business Energy Comparison is committed to providing you with the best possible energy prices on the market.

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What Causes Energy Price Volatility?

There are a lot of factors that impact businesses’ electricity and gas prices, let’s take a closer look:

  • Political events: If the disagreements between Russia and Ukraine have shown us anything, it’s just how quickly conflicts can change energy supply and prices across the globe. Tensions in energy exporting countries can put a halt on supply, leaving dependent countries to hike prices to lower demand.
  • Supply and demand: If the demand for energy outweighs the available supply, prices increase dramatically.
  • Economy: Energy and the economy go hand in hand. If the economy flourishes it often brings a time of excessive energy usage which causes prices to increase.
  • Weather: As we all know, energy demands in the UK increase drastically in the winter as businesses and homeowners need more heating. The same goes for summer when air conditioning and fans come out to cool down. Any rise in demand puts pressure on energy suppliers, leading to price hikes.
  • Storage facilities: The UK has just been through this itself. A lack of energy storage facilities leaves a massive problem in keeping up with demand and storing sufficient supplies. Any storage disruptions will make the energy market more volatile.

The UK energy prices increased quickly because it found itself faced with a few of these volatility factors at once. The growing demand, political events, storage issues, and a harsh winter all played a role in the sudden increase in business electricity prices.

What Are the Latest Business Energy Rates?


Here we will guide you through the latest business electricity rates. But please keep in mind that this is simply a guide and your overall cost will depend on your usage and the business electricity supply market.

The below business electricity prices are based on an average annual usage per business size:

  • Micro businesses: 44.9p (price per kWh) – £4,836 per year (average annual: 10,000 kWh)
  • Small Business: 40.7p (price per kWh) – £8,565 per year (average annual: 20,000 kWh)
  • Medium business: 34.6p (price per kWh) – £14,214 per year (average annual: 40,000 kWh)
  • Large Business: 36.1p (price per kWh) – £20,359per year (average annual: 40,000 kWh)

You need to compare SME business energy prices to understand the exact needs of your business.

That along with a business utilities comparison will give you a much clearer picture of what you need, what business electricity tariffs you should be paying, and the best providers for the job.


Moving onto business gas rates. Understanding your usage and what it is going to cost is a vital part of understanding your business budgets.

Let’s take a look at the average gas rates to give you a roundabout idea of where you stand:

  • Micro businesses: 18.6p (price per kWh) – £2,130 per year (average annual: 10,000 kWh)
  • Small Business: 13.1p (price per kWh) – £3,436 per year (average annual: 25,000 kWh)
  • Medium business: 16.2p (price per kWh) – £8,350 per year (average annual: 40,000 kWh)
  • Large Business: 10.2p (price per kWh) – £7,645 per year (average annual: 40,000 kWh)

As you can see, there is a big difference in price based on business size. It’s vital to do a large business energy comparison to ensure you aren’t paying more than you need to.

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What is the Energy Bill Discount Scheme (EBDS)?

The Energy Bills Discount Scheme (EBDS) is the latest energy support scheme for businesses. The aim is to help large and small businesses struggling to find their way with the rise in energy prices.

The scheme differs from the previous Energy Bill Relief Scheme in that, rather than placing a price cap for business energy, it offers a discount on unit rates for fixed-price contracts that were signed after 1 December 2021.

EBDS provides a discounted rate on a portion of the units as long as they are higher than the minimum threshold.

It’s also down to your business type, with high-incentive energy trade businesses getting a further discount with a lower minimum price threshold.

Here are the basics:

  • Electricity: You’ll get around 2.0p per kWh off based on the difference between the unit rate paid to the business electricity supplier and the wholesale price (Price threshold: 10.70p per kWh).
  • Gas: You can get around 0.7p per kWh off of the difference between the wholesale price and what you pay the energy supplier (Price threshold: 30.20p per kWh).

Unfortunately, if your business is already paying less or the same amount of the price threshold for gas or electricity, you are not eligible for the scheme discount.

Start your journey and compare business gas and electricity rates with Business Energy Comparison today. Use our price comparison tool and in less time than it takes to make a brew, we’ll compile your best prices from the UK’ s best suppliers.

Frequently Asked Questions

Are business electricity prices cheaper than domestic?

Generally, yes, business electricity rates are cheaper than domestic.

What are fixed-term tariffs?

Fixed-term tariffs are often preferred by businesses because they provide protection if there is a sudden increase in energy prices. You will pay a set kWh rate that remains the same, the only variation is in how much energy you use.