The Hidden 35%: What Your Energy Contract Isn’t Telling You
In today’s environment, where occupiers are under sustained pressure to control operating costs, energy spend remains one of the most scrutinised, and least transparent, elements of the service charge.
Much of the focus naturally falls on unit rates. But as Tim Parkin, Director of Building Consultancy, highlights, this can overlook a critical driver of total cost: standing charges.
This is increasingly where a material portion of cost is being carried.
A Subtle but Significant Shift in Cost Structure
Standing charges are not new, they are a long-established component of energy pricing, used to recover fixed costs such as network infrastructure and system operation.
However, what is changing is their relative weight within overall cost structures.
Recent market commentary and regulatory insight show that standing charges have been rising and, in some cases, are being used more prominently within pricing models.
This creates a subtle but important shift: contracts may appear competitive at headline rate level, while total costs tell a different story.
A Real Example: When Structure Drives Cost
In a recent service charge review for an office occupier, we analysed an electricity contract across two MPAN main meters.
The contract included:
- Day rate: 20p/kWh
- Night rate: 9p/kWh
- Standing charge: £357 per day
At face value, the tariffs aligned with market expectations.
But when assessed against forecast consumption:
- Day usage: £192,000
- Night usage: £45,000
- Standing charge: £130,000
35% of the total electricity cost was sitting in the standing charge.
This is not an anomaly – it is increasingly reflective of how pricing structures are evolving.
Why This Matters for Occupiers
Standing charges are fixed. They remain constant regardless of occupancy levels, operational hours or energy-saving initiatives.
That has several implications:
- Cost reduction strategies may deliver less financial impact than expected
- Underutilised space can still carry full fixed energy costs
- Headline tariff comparisons may not reflect true cost positioning
In short, you could be optimising usage but not optimising cost.
The Wider Context: A Volatile Energy Landscape
This structural shift is happening against a backdrop of continued global uncertainty.
The ongoing conflict in the Middle East is already driving volatility in global energy markets, with forecasts suggesting energy prices could rise sharply as supply chains are disrupted.
Europe remains particularly exposed to these shocks due to its reliance on global gas markets, where geopolitical disruption can quickly translate into higher electricity prices.
For occupiers, this matters now more than ever:
- Many contracts are approaching renewal in October 2026
- Market volatility may influence both pricing levels and contract structures
- Suppliers may continue to rebalance risk through fixed charges
This reinforces the need to fully understand not just how much you pay, but how your contract is put together.
A Consultative Approach
Managing energy cost now requires more than comparing unit rates. A clear understanding of how costs are structured, particularly the balance between fixed and variable charges, is essential.
Occupiers should assess:
- The proportion of standing charges within the overall cost
- Whether supply arrangements reflect actual usage patterns
- Opportunities to refine contract structure or capacity
- Whether a shorter contract term would give an opportunity for markets to settle
In a changing market, a structured, analytical approach will deliver better cost control and reduce hidden inefficiencies.
The key question is no longer “What rate am I paying?” but “How is my total cost structured?”
Speak to Our Team
To gain a clearer understanding of how your utility costs are represented within your service charge, our Building Consultancy team can provide independent, expert insight.
Complete the contact form below, and a member of the team will be in touch.