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Multi-rate business energy tariffs
During the night, UK wind farms generate more electricity due to higher and more consistent wind speeds, less atmospheric turbulence, and favourable weather patterns. At the same time, power demand decreases as most of the country sleeps, leading to a significant drop in electricity prices on the national grid.
Multi-rate energy tariffs allow businesses to take advantage of lower electricity rates per kWh during off-peak periods.
This guide explains how multi-rate tariffs work and helps business owners determine whether they can save money by switching to a multi-rate tariff. Here’s what we cover:
- How multi-rate business energy tariffs work
- Is a multi-rate business energy tariff cheaper?
- Multi-rate energy tariff calculator
- Businesses that can benefit most from multi-rate tariffs
- How to get a multi-rate business energy tariff
How multi-rate business energy tariffs work
Multi-rate business energy tariffs use automatic meter readings to provide business electricity tariffs with multiple unit rates, depending on the time of day when electricity is consumed.
A multi-rate tariff typically features lower rates during off-peak periods (e.g., nights, weekends) and higher rates during peak demand times.
Apart from having more than one unit rate, a multi-rate tariff retains other features of business energy contracts, including standing charges, the climate change levy, and VAT.
💡 Multi-rate tariffs are only available for electricity connections. Business gas suppliers do not offer multi-rate business gas prices.
The most popular multi-rate business energy tariffs
The most common multi-rate tariff is a dual-rate fixed electricity, offering peak and off-peak pricing.
In a dual-rate tariff, your business energy supplier will define:
- Rates: An individual fixed rate per kWh for peak and off-peak periods.
- Timing: The tariff will specify the time periods when the off-peak and peak rates apply.
The versatility of smart business energy meters does, however, allow for more complex tariffs.
For example, Octopus Business Energy offers Shape Shifter, a triple-rate option. The Shape Shifter tariff includes a daily three-hour peak rate between 4pm and 7pm, a cheap off-peak night rate, and a medium day rate for all other times.
Meter requirements for a multi-rate tariff
To benefit from a multi-rate business energy tariff, you must have one of the following types of business electricity meters capable of separately recording usage during different periods:
- Smart meter: Smart electricity meters can be used for any type of multi-rate energy tariff.
- Half-hourly meters: Half-hourly electricity meters can be used for any type of multi-rate energy tariff.
- Economy 7 meter: Records two separate business energy consumption measurements, one for a seven-hour off-peak period and another for all other times.
- Economy 10 meter: Records two separate consumption measurements, one for a ten-hour off-peak period and another for all other times.
💡 For Economy 7/10 meters, the peak and off-peak periods depend on how the meter was originally programmed when installed and cannot be changed.
Is a multi-rate business energy tariff cheaper?
A typical multi-rate tariff includes two separate unit rates: a cheaper off-peak rate and a more expensive peak rate.
The diagram below illustrates how a typical multi-rate tariff compares to a regular single-rate tariff in 2024.
The peak rate on a multi-rate tariff is always higher than a single-rate tariff. Therefore, it will only be cheaper overall if you consume significant electricity during off-peak periods.
In the example above, you would need to use more than 20% of your electricity during the off-peak period to save money on the tariff overall.
Multi-rate energy tariff calculator
Our business energy experts have developed the following calculator, which you can use to compare quotes for a single-rate or dual-rate tariff.
Businesses that can benefit most from multi-rate tariffs
Businesses that benefit most from multi-rate business energy tariffs are those where:
- A large portion of operations takes place during the late evenings, night, or at the weekend.
- The timing of energy-intensive activities is flexible and can be scheduled for off-peak hours.
The following table provides illustrative examples of the types of businesses that can benefit most from multi-rate business energy tariffs:
| Business Type | Reason for Suitability | Key Off-Peak Activities |
|---|---|---|
| Manufacturing | Flexible production schedules allow energy-intensive processes to be shifted to off-peak times. | Running machinery, assembly lines, welding, and fabrication. |
| Warehouses | Night-time operations can align with off-peak rates for lighting and equipment usage. | Operating forklifts, refrigeration, and loading/unloading operations. |
| Data Centres | Energy-intensive operations can take advantage of off-peak rates for server cooling and processing. | Running servers, cooling systems, and batch processing workloads. |
| Agriculture | Many energy-intensive processes (e.g., irrigation, milking systems) can be scheduled during off-peak hours. | Irrigation pumps, cooling storage, and processing equipment. |
| Hotels | High-energy equipment, such as laundry and kitchen appliances, can be used during off-peak hours. | Laundry machines, dishwashers, and refrigeration systems. |
| Bakeries | Often operate in the early mornings or late at night, naturally aligning with off-peak energy rates. | Ovens, mixers, and refrigeration. |
| Pubs | Peak activity often occurs in the evenings and weekends, which may coincide with lower off-peak rates. | Refrigeration, dishwashers, late-night cleaning, and lighting. |
| Businesses with EV Fleets | Energy consumption for charging electric vehicles can be scheduled during off-peak hours. | EV charging stations, lighting, and conveyor systems. |
How to get a multi-rate business energy tariff
Here are the key steps to obtaining and benefiting from a multi-rate business energy tariff as a small business energy customer:
- Assess whether you are likely to benefit from a multi-rate tariff using our calculator above.
- Check if you have a compatible meter type. Arrange a business electricity meter installation if you need to upgrade.
- Compare business electricity rates to find the best multi-rate tariffs available for your business.
- Sign a new contract to initiate your business energy switch to the new multi-rate energy tariff.
- Evaluate your energy-intensive operations to determine if their timing can be shifted to off-peak periods.
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