UK energy suppliers buy wholesale power at one price and sell it to businesses at another. The gap between those two numbers runs around 30%, and it never appears as a line item on your bill.

That markup funds trading desks, risk premiums, and profit margins you didn't agree to and can't see. This article breaks down where the 30% actually goes, how to spot it in your own contracts, and what alternatives exist for businesses tired of paying it.

What is the 30 percent markup on UK business energy

Suppliers buy electricity on wholesale markets at around 23p per kWh. By the time that power reaches your business, you're paying closer to 30p. The difference between those two numbers is the markup, and it adds up fast.

Here's the thing: you won't find "markup" as a line item on your invoice. It's spread across your unit rate, tucked into standing charges, and buried in vague supply costs. You pay it every single month without ever seeing it broken out.

For a business spending £50,000 a year on electricity, a 30% markup means roughly £15,000 goes somewhere other than the actual energy. That's money leaving your account for services you didn't choose and probably don't need.

How wholesale energy pricing works in the UK

Electricity trades in half-hourly blocks on wholesale markets. Prices move constantly based on supply, demand, weather, and what's happening across European interconnectors. A windy Tuesday afternoon might see prices drop to 5p per kWh. A cold, still evening could push them past 40p.

Generators sell power into this market. Suppliers buy it. What happens between those two points determines what you eventually pay.

The role of trading desks and intermediaries

Between the generator and your meter sits a chain of people and companies, each taking a slice.

• Trading desks: Buy and sell energy positions, adding margin for managing risk

• Aggregators: Bundle demand from multiple businesses, then charge for the service

• Brokers: Find contracts on your behalf and take commission, often from both sides

None of these margins show up on your invoice. They're already baked into the quote before you see it.

How suppliers set business energy prices

Suppliers buy wholesale power, then layer on their costs: hedging, customer service, billing systems, sales teams, profit margin. They quote you a single pence-per-kWh rate that bundles everything together.

You see one number. They see a spreadsheet of margins. And there's no requirement for them to show you the breakdown.

The difference between wholesale cost and contract price

The wholesale cost is the true price of energy. Everything else is the cost of the system that delivers it to you, and that system has a lot of mouths to feed.

Where the 30 percent markup actually goes

So where does that 30% disappear to? It splits across several categories, none of which appear clearly on your bill.

Trader margins

Traders manage wholesale positions and charge for the privilege. On a million kWh contract, that's £1,000 to £5,000 for making introductions.

You might think that's reasonable. But here's the catch: you often don't know the markup exists, let alone how much it is.

Risk and hedging premiums

Suppliers hedge against price volatility by buying energy months or years in advance. They build cushion into your rate to protect themselves from market swings.

You pay for their risk management whether you want it or not. And when wholesale prices fall, that cushion doesn't shrink. It stays in your rate.

Supplier operating costs and profit

Call centres, billing platforms, sales teams, office space, shareholder returns. All recovered through your unit rate. Ofgem projects £2.47 billion in non-domestic supplier profits for 2025 alone.

These costs are legitimate. The problem is you can't see them, question them, or opt out of them. They're just part of the number you're quoted.

Network and policy charges

Distribution, transmission, and environmental levies sit outside the markup we're discussing here. These are regulated, passed through at cost, and sometimes appear as separate line items.

The 30% markup lives in the unregulated portion of your bill, where transparency is optional and comparison is difficult.

How much of your business energy bill is actual energy cost

Here's the uncomfortable truth: the commodity cost of electricity represents a shrinking fraction of what you pay.

• Wholesale energy cost: The actual power, typically 40-50% of your bill

• Non-commodity costs: Network charges, policy costs, levies, around 30-40%

• Supplier margin: The markup under discussion, often 15-30%

When wholesale prices fall, your bill doesn't fall proportionally. The other components keep climbing, and the markup stays put. Research into British businesses' energy costs confirms most still don't know what sits behind their bill.

Why energy prices keep increasing for UK businesses

Even when wholesale markets stabilise, business energy bills rise. Network operators plan up to £90 billion in grid upgrades for net zero. Policy costs fund renewable subsidies and capacity payments. These charges increase year on year regardless of what happens to gas prices.

The markup compounds the problem. When wholesale rises 10%, your bill might rise 15% because suppliers protect their margins first. They're not absorbing volatility on your behalf. They're passing it through, plus a buffer.

Why the traditional energy market works against businesses

The structure of the market creates winners and losers. Businesses tend to lose.

Information asymmetry in contract pricing

Suppliers know exactly what they paid for wholesale power. You don't. Quotes arrive as single numbers with no breakdown. You can't compare the markup because you can't see it.

This asymmetry isn't a flaw in the system. It's the foundation of the traditional model.

Complexity that benefits suppliers

Multiple contract types. Confusing terminology. Bundled charges that resist comparison. The complexity isn't accidental.

It prevents you from understanding what you're paying for and makes switching feel harder than it actually is. That's not a bug. It's a feature, for suppliers at least.

How to check what markup you are currently paying

You can't fix what you can't measure. Here's how to start getting visibility.

Comparing your rate to published wholesale prices

Ofgem publishes wholesale price data. Market reports from analysts like Cornwall Insight track seasonal averages. Compare your pence-per-kWh rate against these benchmarks.

If you're paying 28p and wholesale averaged 20p during your contract period, you've found your markup. The gap tells you what you're paying for the privilege of not buying direct.

Requesting a cost breakdown from your supplier

Ask your supplier for an itemised breakdown: wholesale cost, network charges, policy costs, margin. Most will resist or refuse outright.

That refusal tells you something. A supplier confident in their pricing has no reason to hide it.

Using half-hourly data for accurate comparison

If you have a half-hourly meter, you can match your consumption to wholesale prices at each settlement period. This reveals the true gap between what power cost and what you paid.

Some suppliers, like tem's RED, provide this visibility automatically. You see exactly what you're paying and why, down to the half hour.

How to reduce wholesale energy markups

The markup exists because the traditional model requires it. But alternatives exist, and they're worth understanding.

AI-powered purchasing technology

Trading desks employ humans who take salaries and make margins. AI can replace that function, optimising purchasing decisions in real time without the human cost layer.

tem's RED uses AI to do exactly this. It removes the trading desk markup entirely by automating what traders used to do manually.

Buying direct from renewable generators

When you buy through a traditional supplier, multiple intermediaries sit between you and the generator. Each takes a cut.

Direct purchasing connects businesses to solar farms, wind operators, and anaerobic digestion plants without the middlemen. Generators earn more. Businesses pay less. The power is the same. The route is shorter.

Pass-through pricing models

Pass-through means you pay wholesale cost plus a transparent fixed fee. No hidden margin in the unit rate.

You see exactly what the energy cost and exactly what the service cost. This model only works if the supplier has nothing to hide, which is why most traditional suppliers don't offer it.

What energy costs are increasing beyond wholesale prices

Understanding the markup is only part of the picture. Other costs are climbing too, and they affect your bill regardless of who supplies you.

Network charges and grid investment

Distribution and transmission charges fund the wires that carry power to your site. As the grid upgrades for electric vehicles and heat pumps, these charges rise. They're regulated but not capped.

Policy costs and environmental levies

The Renewables Obligation, Capacity Market charges, and other levies fund the UK's decarbonisation. They add roughly 20% to business electricity bills and increase annually.

Non-commodity cost inflation

Even if wholesale prices flatline, your bill keeps rising. Network investment, policy costs, and inflation push non-commodity charges higher every year  – Capacity Market charges roughly double between 2025–26 and 2026–27.

Businesses face cost pressure from multiple directions at once. The markup is just one piece, but it's the piece you can actually do something about.

A different model for business energy pricing

The 30% markup exists because the traditional model requires layers of intermediaries, each taking their cut. Remove the layers and the markup shrinks.

tem's RED removes the intermediary layers between businesses and renewable generators. AI replaces trading desks. Half-hourly billing shows exactly what you paid and why. The result: businesses typically cut energy costs by around 30%.

This isn't a better version of the old model. It's a different one. One that rejects opacity and replaces it with visibility.

Let's talk.

FAQs about wholesale energy pricing and business markups

Why are UK wholesale electricity prices so high?

UK wholesale prices track gas-fired generation costs because gas plants often set the marginal price. When gas is expensive, electricity follows. Interconnector flows from Europe and renewable intermittency add volatility, but gas remains the primary driver.

What is the current wholesale gas price in the UK?

Wholesale gas prices change daily on trading platforms like ICE and the NBP. Published indices give indicative rates, though contract prices differ from spot prices. Checking Ofgem or market analyst reports gives you the most current figures.

Can businesses buy energy directly at wholesale prices?

Most businesses cannot access wholesale markets directly without a supply licence. However, some models now connect businesses closer to wholesale through pass-through pricing or direct generator arrangements, removing the traditional markup.

How often do wholesale energy prices change?

Wholesale prices change constantly during trading hours. Day-ahead prices set daily. Within-day prices shift in real time. Businesses on fixed contracts are insulated until renewal, then face the accumulated change at once.

What is pass-through pricing for business energy?

Pass-through pricing means the supplier charges wholesale cost plus a transparent fixed margin. You see exactly what you pay for energy versus what you pay for service. No hidden markup in the unit rate, no surprises when you read the bill.