If you run a business, you pay for electricity. But are you paying too much? Let’s break it down, save you some money, and help you take control.
What Are Business Electricity Rates and Why Do They Matter?
Business electricity rates are what companies pay for the power they use. These rates affect how much money businesses spend on energy every month or year. And guess what? Businesses often pay more than homes do.
For example, in the U.S., the average residential electricity rate is about 16 cents per kilowatt-hour (kWh). But commercial users pay around 13 cents per kWh. Seems lower, right? But that’s not the whole story.
Businesses use a lot more electricity. And their rates depend on when, how much, and where they use energy. So it adds up quickly.
Let’s dive into how these rates work and how your business can save.
Businesses Pay for More Than Just Electricity
When you get your electric bill, it isn’t just for the energy. There are three big parts:
- Usage Charges: This is how much electricity your business uses. It’s measured in kilowatt-hours (kWh).
- Demand Charges: This is based on your highest use of electricity in a short time. For instance, if your machines all run at once, your demand goes up. Even if it only happens for one hour a month.
- Delivery Fees: This is the cost of getting electricity to your building. Think of it like a shipping fee.
Large companies may also have time-of-use rates. That means they pay more during busy times, like in the afternoon, than at night.
Real-Life Example: Small Bakery vs Mega Factory
Let’s say you own a small bakery.
- You use ovens, coolers, and lights during work hours.
- Your monthly usage: 3,000 kWh.
- Your rate: $0.14 per kWh.
- Your electric bill: 3,000 x $0.14 = $420.
Now compare that to a large factory.
- Monthly usage: 1,000,000 kWh.
- They might have a lower rate: $0.10 per kWh.
- But their bill? 1,000,000 x $0.10 = $100,000.
Even with lower rates, the total costs add up. That’s why understanding your rate matters.
How Are Business Electricity Rates Set?
Your electric rate depends on a few things:
- Location: Some states like Louisiana or Oklahoma have lower rates. Places like Hawaii or California are higher.
- Plan Type: Fixed or variable rates. Fixed means the same cost every month. Variable changes as market prices go up or down.
- Size of Business: Bigger users can often negotiate lower prices.
In deregulated states, businesses can choose their electricity provider. That means more options—and better deals.
Here are a few states where businesses can shop around:
- Texas
- Illinois
- Pennsylvania
- Ohio
- New York
In regulated states, you have only one utility and little choice.
What’s a Typical Business Electric Rate?
Here’s a snapshot of average commercial electricity rates by state (as of 2023):
| State | Avg Commercial Rate (per kWh) |
| Texas | 8.5¢ |
| California | 18.2¢ |
| Ohio | 10.4¢ |
| Florida | 11.1¢ |
| New York | 17.9¢ |
You can see the big difference between states. That’s why shopping and comparing makes a huge impact.
Ways to Lower Your Business Electricity Bill
Now the fun part—saving money. Here’s how smart business owners cut costs:
1. Compare Electricity Providers
If you live in a deregulated state, shop around.
Example: A small office in Houston switched providers and saved 22% in one year. Just by picking a lower-rate plan.
There are websites like:
- com
- com
These let you compare rates in your area for free.
2. Switch to Off-Peak Hours
Some utilities offer lower rates at night or weekends.
If your business can run washers, coolers, or machines during off hours—you’ll save money.
A laundry shop in Philadelphia saved $3,600/year just by scheduling dryers in off-peak hours.
3. Use Energy-Efficient Tools
Switch to LED lights. Use smart thermostats. Replace old machines.
According to the Energy Star program, businesses that use efficient products can save up to 30% on electricity bills.
A restaurant in Illinois upgraded to energy-efficient coolers and lighting—and saved $980/month!
4. Conduct an Energy Audit
Ask your utility or hire a pro to check your usage.
Many utilities offer free energy audits for small businesses. They’ll tell you:
- Where power is wasted
- What devices use the most energy
- How to fix it
Action tip: Call your utility and ask for a free audit this week.
Big Mistakes To Avoid
Here are some common errors businesses make with electricity:
- Sticking with the “default” provider rate.
- Not checking contract end dates (auto-renewals often cost more).
- Running high-powered machines during peak hours.
- Not reading the bill carefully.
Fixing even one of these can save thousands each year.
Case Study: Coffee Shop Turnaround
Janet runs a small coffee shop in Dallas. Her electric bills were climbing to $800/month.
She made three changes:
- Switched to a lower fixed-rate provider.
- Replaced old refrigerators with Energy Star units.
- Moved equipment cleaning to night shifts.
New bill? $510/month. That’s $3,480 saved every year.
What Happens if You Don’t Act?
If you don’t check your rate, your business may:
- Overpay for years.
- Face spikes in bills during summer.
- Miss out on rebates or incentives.
- Reduce profits without knowing it.
And all of this is avoidable by spending just one hour reviewing your plan.
Easy Tools to Track and Cut Energy Use
Some tools that help business owners stay on top of energy:
- Sense Energy Monitor: Tracks usage in real-time.
- Energy Star Portfolio Manager: Easy software to benchmark your energy.
- Utility Provider Apps: Many offer alerts and usage charts.
Using tools like these gives you control—and cuts surprise bills.
Final Thoughts: Take Back Control of Your Energy Bill
Electricity is one of the biggest costs for a business. But it shouldn’t be confusing. Or expensive.
Let’s break it down:
- Check your current rate and provider.
- Compare options if you’re in a deregulated state.
- Use less power during peak hours and switch to efficient tools.
Start today. A little effort can bring big savings. And you’ll keep more money in your business where it belongs.