When you look at an energy tariff or electricity and gas bill, two of the most important figures are the unit rate and the standing charge. Together, they make up a large part of what you pay for your energy.
Understanding the difference can make it easier to read your bill, compare tariffs and see how changes in your energy use affect your costs.
What Is a Unit Rate?
The unit rate is the amount you pay for each unit of energy you use.
For household electricity and gas, energy is normally measured in kilowatt-hours (kWh). Your unit rate is therefore usually shown as pence per kilowatt-hour (p/kWh).
For example, if your electricity unit rate is 25p per kWh and you use 100 kWh, the energy-use part of your bill would be:
100 kWh × 25p = £25
The more energy you use, the more you pay in unit-rate charges.
Electricity and Gas Have Separate Unit Rates
If your home uses both electricity and mains gas, each fuel normally has its own unit rate.
For example:
| Fuel | Unit Rate | Energy Used | Cost |
|---|---|---|---|
| Electricity | 25p/kWh | 200 kWh | £50.00 |
| Gas | 6p/kWh | 800 kWh | £48.00 |
These figures are examples only. Actual rates depend on your tariff, supplier and other factors.
What Is a Standing Charge?
A standing charge is a fixed daily amount charged by your energy supplier.
Unlike the unit rate, it does not depend directly on how much electricity or gas you use. It is normally charged for every day that you remain supplied under the tariff.
For example, if your electricity standing charge is 55p per day, over 30 days you would pay:
55p × 30 = £16.50
This would be charged in addition to the cost of the electricity you used.
If you have both electricity and gas, there will usually be a separate standing charge for each fuel.
What Does the Standing Charge Pay For?
It is easy to think of the standing charge simply as a fee for having an energy connection, but the picture is more complicated.
Standing charges can contribute towards a range of costs associated with supplying energy, including maintaining and operating energy networks, metering and supplier costs, as well as certain wider costs and obligations within the energy system.
The way these costs are recovered can change over time, which is one reason standing charges can rise or fall even when your own energy consumption has not changed.
Unit Rate vs Standing Charge
The simplest way to understand the difference is:
Unit rate = what you pay for the energy you use.
Standing charge = what you pay each day regardless of how much energy you use.
Your approximate tariff cost can therefore be thought of as:
Energy used × unit rate + number of days × standing charge
For a dual-fuel household, the calculation is carried out separately for electricity and gas.
A Worked Example
Suppose that during a 30-day month a household uses:
- 250 kWh of electricity
- Electricity unit rate: 25p/kWh
- Electricity standing charge: 55p/day
The electricity usage costs:
250 × £0.25 = £62.50
The standing charge costs:
30 × £0.55 = £16.50
So the total electricity cost for the period would be:
£62.50 + £16.50 = £79.00
This simple example excludes any other adjustments that might appear on an actual bill.
Why Unit Rates Matter
Your unit rate becomes increasingly important as your consumption increases.
A household that uses a lot of electricity or gas may benefit more from finding a tariff with a lower unit rate, even if its standing charge is slightly higher.
For example, imagine two electricity tariffs:
| Tariff A | Tariff B | |
|---|---|---|
| Unit rate | 24p/kWh | 26p/kWh |
| Standing charge | 60p/day | 40p/day |
At first glance, Tariff B might appear attractive because its standing charge is 20p per day cheaper.
Over a year, that saves approximately £73 in standing charges.
However, Tariff A costs 2p less for every kWh used. Someone using enough electricity could therefore save more through the lower unit rate than they lose through the higher standing charge.
This is why comparing only one figure can be misleading.
Why Standing Charges Matter
Standing charges can have a proportionately greater impact on households with low energy consumption.
If you use very little energy, reducing consumption can reduce the unit-rate part of your bill considerably, but it does not normally remove the daily standing charge.
For example, an electricity standing charge of 55p per day would amount to approximately:
£200.75 per year
before any electricity had been used.
This is also worth remembering for properties that are occupied infrequently. Very low consumption does not necessarily mean there will be no energy bill.
Do Standing Charges Apply If You Use No Energy?
Usually, yes.
If a property remains connected and supplied under a tariff with a standing charge, the daily charge can continue even when little or no energy is being consumed.
There are some tariffs and circumstances where charging arrangements differ, so you should check the terms of your particular tariff rather than assuming the standing charge will disappear when consumption reaches zero.
What About Prepayment Meters?
Prepayment customers also have unit rates and may have standing charges.
A standing charge can continue to accrue even during periods when no energy is being used or no credit has recently been added. Depending on the meter and arrangements involved, this can mean some of the next top-up is used to cover charges that have accumulated.
If you use a prepayment meter, it is therefore particularly useful to understand how your supplier applies standing charges.
Are Unit Rates and Standing Charges the Same Everywhere?
No.
Rates can vary according to factors including:
- your energy supplier and tariff
- where you live
- how you pay
- whether you have electricity only or electricity and gas
- the type of tariff you are on
This is why advertised averages should not automatically be treated as the rates that apply to your home.
The best place to find your own figures is your energy bill, tariff information or supplier account.
What About the Energy Price Cap?
For eligible standard variable tariffs, Ofgem’s energy price cap limits the rates suppliers can charge customers covered by it.
One common misunderstanding is that the price cap represents a maximum total energy bill. It does not.
Your actual bill still depends heavily on how much energy you use. A household using more energy will generally pay more, while a household using less will generally pay less.
The price cap is expressed using a typical annual cost for illustrative purposes, but the underlying limits concern the rates that make up the tariff, including unit rates and standing charges.
How to Compare Energy Tariffs Properly
When comparing tariffs, don’t look at the unit rate or standing charge in isolation.
Consider both rates alongside your expected annual consumption.
A tariff with a low standing charge but relatively high unit rate could suit one household differently from a tariff with a higher standing charge and lower unit rate.
Your previous energy bills can help because they may show your annual consumption in kWh. Using actual consumption generally gives you a much more meaningful comparison than looking only at headline tariff figures.
Can You Reduce Standing Charges by Using Less Energy?
Not directly.
Reducing energy consumption reduces the amount you pay through your unit rate, but a conventional standing charge remains payable regardless of the number of units consumed.
That does not make energy efficiency any less worthwhile. Reducing unnecessary consumption can still lower bills, particularly when a significant proportion of your bill comes from unit-rate charges.
Where to Find the Rates on Your Bill
Your energy bill should provide information about the tariff you are on, including the applicable unit rate and standing charge.
Look for figures expressed as:
Unit rate: pence per kWh (p/kWh)
Standing charge: pence per day (p/day)
Remember to check electricity and gas separately if you have both.
The Key Point
Your energy bill is not simply the amount of electricity or gas you use.
For most conventional tariffs, there are two fundamental components:
The unit rate determines how much each kWh of energy costs.
The standing charge is a daily cost that generally applies regardless of consumption.
Understanding both makes it easier to interpret your bill, assess a tariff and understand where your energy costs are coming from.
Before Choosing a Tariff
Rather than automatically choosing the tariff with the lowest unit rate or lowest standing charge, consider the overall estimated cost based on the amount of energy you are likely to use.
That is the figure that ultimately matters most.