A 2-Minute Guide on How Business Energy Pricing Works
By Switch365 - (2025-11-20)
Business energy prices don’t rise and fall by luck. A mix of moving parts shapes them, and most suppliers never explain what those parts actually are.
This guide breaks everything down so you can see what really drives your price and how to stay ahead before your next renewal.
1. The Wholesale Market (the biggest factor)
This is where suppliers buy the gas and electricity they sell to you.
Prices change every hour and react instantly to global events, weather swings, European storage levels, LNG deliveries, geopolitical issues and unexpected outages.
When wholesale prices rise, your quotes rise too. When wholesale prices fall, suppliers have more room to secure better deals. It’s the single biggest influence on what you pay.
You won’t see a “wholesale” line. It’s built into your unit rate (p/kWh ).
2. Network & Distribution Costs
After generators produce the energy, the network transports it to your site. The National Grid and local network operators set these charges, which change depending on how much pressure the system is under.
Busy periods or older infrastructure can push these costs up, even when wholesale prices stay steady.
The network and distribution costs are often shown as:
• DUoS (Distribution Use of System)
• TNUoS (Transmission Use of System)
• Capacity charges
Some suppliers roll these into your unit rate.
3. Government & Policy Charges
A chunk of your unit rate goes toward environmental schemes, renewable projects and keeping the system balanced.
Suppliers don’t control these charges. Government decisions, new policies and changes to grid funding can push them up or bring them down.
They’re smaller than wholesale costs but still make a noticeable difference to your final price.
Common examples include:
• RO (Renewables Obligation)
• CFD (Contracts for Difference)
• FiT (Feed-in Tariff)
Sometimes listed separately, sometimes included in your rate.
4. Supplier Risk & Contract Length
Every supplier adds a “risk premium.”
If the market is volatile, that premium goes up. If you renew late, it goes up again.
Longer contracts usually carry less risk and offer better pricing. Shorter or last-minute deals tend to cost more. Timing matters more than people realise.
You won’t see “risk premium.” You’ll notice it in higher unit rates for short or late renewals.
What suppliers don’t tell you
Two quotes can look the same but be built completely differently.
Suppliers rarely explain the breakdown, and most SMEs never see what’s behind the number. That’s why quotes sometimes jump within hours, even when the news feels quiet.
Why prices can change so quickly
The market moves in real time.
If an LNG shipment is delayed, the temperature drops suddenly, or a power station goes offline, prices can shift quickly, sometimes within the same day.
This is why businesses that leave renewal until the last minute often end up paying more.
What this means for your business
Don’t rely on the domestic price cap; it has no link to business energy prices.
What matters is the wholesale market and when you renew. Once you understand the basics, you’re in a far better position to secure the right deal and avoid the next spike.
How Switch365 helps you stay ahead
We track the wholesale market every day and explain what’s happening in simple terms.
We help you understand what’s driving your rates, spot opportunities early and act before the next movement hits.
A quick check now can save you a lot of stress and potentially a lot of money later.
Want a clearer picture of the market or your contract?
We’ll break it down for you in minutes, without the jargon.
