Every electricity bill contains two numbers that decide what you pay: the unit rate and the standing charge. Understanding what each one does makes comparisons far easier.
What a unit rate is
The unit rate is the price of one kilowatt hour of electricity. If a tariff shows 24p per kilowatt hour and you use 300 kilowatt hours in a month, the unit rate portion of that month's bill is around £72, before any other charges or taxes.
The unit rate is the part of a bill that responds to how much you use, which is why it dominates the thinking of anybody trying to reduce consumption.
What a standing charge is
The standing charge is a fixed daily amount. It applies every day of the year, including days when the property uses nothing at all. It covers costs that do not vary with consumption: maintaining the connection, reading or maintaining the meter, and contributing to the network infrastructure that delivers supply to the property.
Standing charges differ by region because network costs differ. A rural property connected by a long section of overhead line costs more to serve than a flat above a city substation, and that difference is reflected in the standing charge rather than the unit rate.
Why the balance matters more than the headline
Because the two elements respond differently to usage, the better tariff depends on how much energy is used.
- A low user, such as a well-insulated flat with no electric heating, generally does better with a very low standing charge and a slightly higher unit rate.
- A high user, such as an all-electric home or a business running machinery, generally does better with a low unit rate, because the saving applies to every kilowatt hour.
- A property that is empty for part of the year, such as a holiday let or a seasonal business, usually benefits from a low standing charge because it pays that charge all year round.
This is why a comparison based on a national average consumption figure can point in the wrong direction for your own property.
How to judge which suits you
Use your own annual consumption in kilowatt hours and compare two things: the annual cost of the standing charge, which is the daily charge multiplied by 365, and the annual cost of the unit rate, which is the rate multiplied by your annual consumption.
Adding those two figures gives an annual estimate that can be compared directly between tariffs. Do it for two or three options and the trade-off becomes obvious.
If a bill looks unusually high despite modest consumption, a high standing charge is one of the first things worth checking, along with the possibility of a misread meter or an estimate that has drifted away from actual use.
This guide is general information for UK households and businesses. It is not advice on your specific contract, and it does not replace the terms agreed with your supplier or the guidance published by regulators and network operators.