What is a Unit Rate in Energy?
Your energy bill is made up of two charges — a unit rate and a standing charge. Understanding what a unit rate is and how it works helps you compare deals accurately and make sure you’re on the cheapest tariff for your usage.
In this guide
What is a unit rate?
A unit rate is the price you pay for each unit of energy you actually use. It is charged per kilowatt hour (kWh) — the standard unit of measurement for energy consumption in the UK. Consequently the more energy you use the more you pay in unit rate charges.
Your energy tariff has a separate unit rate for gas and for electricity. Furthermore both are quoted in pence per kilowatt hour (p/kWh). The unit rate is one of the two main components of your energy bill — the other being the standing charge.
Simple example: If your electricity unit rate is 24p/kWh and you use 100 kWh of electricity in a month your unit rate charge for that month is £24. Additionally your standing charge is added on top of this — more on that below.
How is energy usage measured?
Energy usage is measured in kilowatt hours (kWh). One kilowatt hour is the amount of energy used by a 1,000 watt appliance running for one hour. To put this in context:
💡 1 kWh — runs a 100W light bulb for 10 hours
🍵 1 kWh — boils a kettle around 12 times
📺 1 kWh — runs a typical TV for around 5 hours
🌡️ 1 kWh — heats a room with a 1kW electric heater for one hour
🧺 ~1 kWh — runs a washing machine on a standard cycle
The average UK household uses around 2,700 kWh of electricity and 11,500 kWh of gas per year. However your actual usage depends on the size of your home, how many people live there and your habits.
Unit rate vs standing charge — what’s the difference?
Your energy bill has two separate charges and it is important to understand both when comparing deals:
Unit rate
Charged per kWh of energy you use
Varies based on how much energy you consume
Quoted in pence per kWh (p/kWh)
Standing charge
Fixed daily charge regardless of usage
Covers the cost of supplying energy to your home
Quoted in pence per day (p/day)
Both charges apply to gas and electricity separately. Furthermore both are capped by the Ofgem price cap — consequently suppliers cannot charge more than the maximum unit rate or standing charge set by Ofgem each quarter.
High user tip: If you use a lot of energy focus on finding a lower unit rate — even a small reduction per kWh adds up significantly over a year. Conversely if you use very little energy the standing charge becomes proportionally more important since it is charged regardless of usage.
What are current energy unit rates in the UK?
Under the current Ofgem price cap for April to June 2026 the maximum unit rates suppliers can charge are:
⚠️ July 2026 update: Ofgem has confirmed the price cap will rise from 1 July 2026 — consequently unit rates will increase. The electricity unit rate cap is forecast to rise to around 27.66p/kWh and the gas unit rate to around 7.05p/kWh. Switching to a fixed deal now could lock in lower rates before July. Read more →
How to calculate your energy bill
Understanding unit rates means you can calculate your own energy bill from scratch. The formula is straightforward:
Annual bill = (kWh used × unit rate) + (365 × standing charge)
Calculate separately for gas and electricity then add together
Example for a typical household:
Electricity: 2,700 kWh × 24.50p = £661.50 + (365 × 61p) = £222.65 = £884.15/yr
Gas: 11,500 kWh × 6.24p = £717.60 + (365 × 31p) = £113.15 = £830.75/yr
Total annual bill: ~£1,715/yr (slightly above cap due to rounding)
How to use unit rates to compare energy deals
When comparing energy deals the unit rate is the most important figure to look at — particularly if you are a high energy user. However you should always look at both the unit rate and the standing charge together to get an accurate picture of the total annual cost.
A tariff with a very low unit rate but high standing charge can end up more expensive than one with a slightly higher unit rate but lower standing charge — especially for lower usage households. Consequently always compare the total annual cost rather than just the headline unit rate figure.
When comparing deals check:
✓ Electricity unit rate — p/kWh
✓ Gas unit rate — p/kWh
✓ Electricity standing charge — p/day
✓ Gas standing charge — p/day
✓ Total estimated annual cost — based on your actual usage
Compare unit rates for your postcode
See gas and electricity unit rates from leading UK suppliers. Free, no obligation.
Compare energy deals →How to get a lower unit rate
There are several ways to reduce the unit rate you pay for energy. Furthermore with the July 2026 price cap rise confirmed acting now is particularly important:
Switch to a fixed tariff
Fixed tariffs lock in a unit rate for the duration of your deal — typically 12 to 24 months. Consequently if wholesale prices rise your unit rate stays the same. With the July cap rise confirmed switching to a competitive fixed deal now could save you significantly.
Switch supplier
Different suppliers offer different unit rates even within the price cap. Furthermore some suppliers consistently price below the cap maximum — meaning you pay less per kWh than you would on a standard variable tariff.
Get a smart meter
Having a smart meter makes you eligible for time-of-use tariffs that offer lower unit rates at off-peak times. Additionally smart meters give you accurate billing rather than estimates — so you only ever pay for what you actually use.
Reduce your usage
While this doesn’t change your unit rate it reduces the number of units you pay for. Consequently small changes to your energy habits — unplugging standby devices, turning down the thermostat — can reduce your total bill significantly.
Related guides
What is a standing charge? → Fixed vs variable energy tariffs explained → Ofgem confirms energy bills rising to £1,862 in July →Find the lowest unit rate for your postcode
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Compare energy deals →Written by the FastSwitch team · Last updated June 2026
FastSwitch is a free UK energy comparison service. We may earn a commission when you switch via our site — this never affects the deals or prices you see. Unit rates shown are based on the Ofgem price cap for April to June 2026 and will change from July 2026.
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