Every autumn, the same conversation happens in finance departments across the country. The current electricity contract is running out, and nobody is quite sure whether to lock in a new rate or wait and see what 2027 brings. It is a fair question, and this year it has an unusually clear answer, just not the one most people expect regarding commercial electricity suppliers and rates.
Wholesale electricity, the part that makes the news, is actually behaving itself. The market's own forward curve prices summer 2027 power at around a third less than this winter. The real story for 2027 is not happening in the wholesale market at all. It is sitting in the network and policy charges that make up roughly two-thirds of a typical bill, and those are already on a five-year rising path that Ofgem itself has signed off.
This article walks through what is actually driving business electricity rates into 2027, what a handful of real numbers suggest for your renewal, and why fixing now has become a noticeably easier call than it was twelve months ago.
Quick answer: Business electricity rates for 2027 are being shaped far more by rising network and policy charges, locked in under Ofgem's RIIO-3 price controls running from 2026 to 2031, than by wholesale power prices, which the current forward curve actually shows easing into next summer. For most businesses, that combination points towards fixing sooner rather than later, especially since 24 to 36-month fixed deals are currently pricing close to 12-month rates, removing the usual premium for locking in longer. |
What Actually Makes Up a Business Electricity Bill
Before forecasting anything, it helps to know what you are actually forecasting. A business electricity bill is not one number moving up and down together. It is two very different components, and only one of them is genuinely a market price.
Wholesale electricity: smaller than you'd think
Wholesale electricity is what suppliers pay to buy power on the traded market, before anything else gets added. As of early September 2026, that works out at roughly 14.4p/kWh for winter 2026 delivery and around 9.7p/kWh for summer 2027, driven by gas prices, wind and solar output, carbon costs and interconnector flows with Europe. Despite the headlines it generates, wholesale energy makes up only around 32% of a typical business electricity bill.
Non-commodity costs: the bigger, faster-growing share
The remaining 68% is what the industry calls non-commodity costs: network charges (TNUoS and DUoS), environmental and policy levies, system balancing costs and supplier margin. These are set by regulation and government policy, not by traders, and they have been rising sharply. Transmission network charges alone jumped by more than 60% from April 2026 as the first costs of Ofgem's new five-year network settlement landed.
Chart: the approximate split between wholesale energy and non-commodity costs on a typical UK business electricity bill.
The 2027 Forecast: What's Already Locked In
Forecasting wholesale prices is guesswork dressed up as analysis. Forecasting non-commodity costs, for the next few years at least, is not, because the regulator has already published the numbers.
RIIO-3 and the network charge glide path
Ofgem's latest five-year price control for the electricity and gas transmission networks, known as RIIO-3, runs from 1 April 2026 to 31 March 2031. Ofgem deliberately smoothed the early impact, so the rise that landed in April 2026 was the gentlest part of the curve, with charges continuing to climb every year after that. In its own final determinations, Ofgem set out illustrative examples of what this could mean for business electricity costs by 2031:
Business type | Illustrative electricity network charge rise by 2031 |
|---|---|
Small business (holiday let, retail kiosk) | Around £70 a year |
Small office or hotel | Around £1,790 a year |
Medium-sized factory | Around £9,760 a year |
Table 1: Ofgem's own illustrative RIIO-3 network charge increases by business type. Source: Ofgem RIIO-3 Final Determinations, December 2025.
These are cumulative figures to 2031, not a single jump in 2027, but the direction is fixed for the whole period. 2027 is not the peak of this curve; it is an early step on one that keeps rising for several years yet.
Wholesale prices: calmer, but not falling in a straight line
The gap between winter 2026 (around 14.4p/kWh) and summer 2027 (around 9.7p/kWh) reflects normal seasonal pricing, not a genuine year-on-year fall. Winter demand always prices higher than the following summer. Both figures also remain well above the roughly 4 to 5p/kWh that was typical before 2021, and the forward curve can move quickly with weather, gas prices and interconnector flows, so treat it as a snapshot rather than a promise.
One exception: relief incoming for energy-intensive manufacturers
Not every business is looking at higher policy costs in 2027. The British Industrial Competitiveness Scheme exempts eligible manufacturers from the indirect cost of the Renewables Obligation and Feed-in Tariffs from April 2027, and from Capacity Market charges from October 2027, on top of the existing British Industry Supercharger for certified energy-intensive industries. It is a narrow group, mostly manufacturers in sectors such as chemicals, steel and automotive, but if that sounds like your business, it is worth checking your eligibility before assuming 2027's rises apply to you.
What This Could Mean for Your Bill: A Worked Example
Here is where the current market actually sits for businesses of different sizes, based on UK market data from 2026.
Business size | Typical annual usage | Average unit rate (2026) | Illustrative annual cost |
|---|---|---|---|
Micro business | 10,000 kWh | ~30p/kWh | ~£3,200 |
Small business | 20,000 kWh | ~29p/kWh | ~£6,000 |
Medium business | 40,000 kWh | ~28p/kWh | ~£11,400 |
Large business | 55,000 kWh | ~25p/kWh | ~£13,950 |
Table 2: illustrative business electricity rates by business size, UK market data, 2026, excluding VAT and standing charges.
Take that small business using 20,000 kWh a year as an example. On a current fixed deal near 29p/kWh, its annual electricity cost sits around £6,000. Drift onto a deemed or out-of-contract rate instead, and unit rates above 32p, sometimes touching 40p or more, could push the same usage past £8,000. Compare properly and secure one of the sharper fixed deals nearer 18p to 22p/kWh, and the same 20,000 kWh could cost closer to £4,000. Three very different outcomes from identical usage, purely down to which rate you end up on.
With non-commodity costs already scheduled to keep climbing through 2027 and beyond, the gap between comparing properly and simply renewing without checking is only likely to widen.
Fixing Now vs Waiting: The Decision for 2027
Neither choice is automatically right, but the numbers behind each one have shifted since last year.
Factor | Fix now | Wait and see |
|---|---|---|
Wholesale exposure | Locked at today's rate | Exposed to forward curve moves |
Non-commodity costs | Depends on contract terms | Depends on contract terms |
Term premium | 12 to 36-month rates currently close together | Premium may return if the market tightens |
Best suited to | Budget certainty; risk-averse planning | Confidence prices will fall further |
Main downside | Locked in if wholesale prices ease further | Deemed rate risk if you miss your renewal |
Table 3: fixing now compared with waiting, for a business renewing ahead of 2027.
A few habits make the decision easier, whichever way you lean:
Start comparing three to six months before your contract ends, so a slow decision never turns into a deemed-rate accident.
Check what is actually fixed. Some contracts lock only the energy unit rate, leaving network and policy costs to pass through as they rise.
Take advantage of the flattened term premium. With 24 and 36-month rates pricing close to 12-month deals right now, locking in longer costs little extra for a lot more certainty.
Avoid the deemed rate trap. Missing your renewal date can mean paying 30% or more above a negotiated deal from day one.
Check your eligibility for the British Industrial Competitiveness Scheme if you are an energy-intensive manufacturer, since it could outweigh the wider market trend entirely.
Re-run the comparison at every renewal. Whatever wins this time will not necessarily win again once RIIO-3 moves further along its curve.
How to Compare Commercial Electricity Suppliers Properly
With network charges on a known upward path and wholesale prices still capable of moving quickly, comparing commercial electricity suppliers properly matters more heading into 2027 than it has for a while. A few things are worth checking beyond the headline unit rate:
Usage profile and meter type: half-hourly meters and predictable, high-volume usage typically unlock sharper rates than a standard meter with irregular consumption.
Contract length matched to your outlook: given today's flattened term premium, a longer fix is worth a serious look rather than defaulting to twelve months out of habit.
What is genuinely fixed: ask whether non-commodity costs are included in the fixed price or passed through separately as RIIO-3 charges rise.
Standing charges, not just the unit rate: two commercial electricity suppliers can quote the same p/kWh with very different daily charges.
A renewal reminder: ask your supplier or comparison service to flag your contract end date well in advance, since that is what prevents a deemed-rate surprise.
The most reliable way to see all of this side by side is a whole-of-market comparison rather than contacting business electricity suppliers one at a time. SwitchUrEnergy compares live rates from trusted commercial electricity suppliers against your actual usage and postcode, so you can judge a real business electricity quote rather than a generic headline rate.
Frequently Asked Questions
Will business electricity rates go up or down in 2027?
Most likely up overall, but not evenly. Wholesale prices look calmer on the current forward curve, while network and policy charges are on a known, regulator-approved rising path through RIIO-3. The non-commodity side is the bigger share of the bill, so it tends to set the overall direction.
What is driving 2027 costs more, wholesale prices or network charges?
Network and policy charges. They already make up roughly two-thirds of a typical bill and are rising under a five-year settlement Ofgem has already confirmed, while wholesale prices remain comparatively calmer on current forward pricing.
Should I fix my business electricity rate now or wait for 2027?
There is no universal answer, but fixing now removes exposure to both a volatile wholesale market and rising non-commodity costs for the length of your contract. Waiting only pays off if wholesale prices fall faster than network charges rise, which is not what current data points to.
Is a longer fixed contract better right now?
Possibly. Twelve, twenty-four and thirty-six-month fixed rates are currently pricing close together, which removes much of the usual premium for locking in longer. That makes a longer fix worth comparing seriously rather than defaulting to the shortest term.
Does the Ofgem price cap apply to business electricity?
No. The price cap only protects domestic customers on standard variable tariffs. Business electricity rates are set entirely by wholesale conditions, network charges, your credit profile and your negotiated contract.
What is RIIO-3 and how does it affect my bill?
RIIO-3 is Ofgem's five-year price control (April 2026 to March 2031) for the electricity and gas transmission networks. It sets how much network operators can charge to fund grid investment, and its confirmed path means network charges will keep rising through 2027 and beyond.
How do I get a business electricity quote?
Pull together a recent bill for your usage and postcode, then compare live quotes from several commercial electricity suppliers rather than accepting the first one. A free comparison service such as SwitchUrEnergy can return a business electricity quote from multiple suppliers in minutes.
Final Words
2027 is not shaping up as a year of runaway wholesale prices. It is shaping up as a year where the quieter side of the bill, network and policy charges, does most of the damage, on a path Ofgem has already mapped out through to 2031. That is precisely the kind of rise a fixed contract protects against, and with the usual premium for locking in longer than twelve months largely gone from the market, fixing now costs little extra for a meaningfully clearer 2027.
If comparing commercial electricity suppliers one by one is not how you want to spend your time, SwitchUrEnergy checks live business electricity rates from trusted UK suppliers in minutes, at no cost to you. Get your free business electricity quote today and see what your business could be paying before your next renewal.
Sources: Ofgem RIIO-3 Final Determinations (December 2025, ofgem.gov.uk), UK wholesale electricity market reporting, gov.uk guidance on the British Industrial Competitiveness Scheme, and UK business energy market analysis, all current as of early September 2026. Figures are indicative and correct at the time of writing; confirm live rates against your own meter before signing any contract.