A unit rate is the price an energy supplier charges for each kilowatt hour of gas or electricity consumed, shown in pence per kWh. It is the variable part of an energy bill that rises and falls with how much energy a household uses.
In one line: A unit rate is the per-kilowatt-hour price applied to the actual gas or electricity a household consumes.
How a unit rate works
The unit rate is multiplied by metered consumption to calculate the usage portion of a bill. Electricity and gas have separate unit rates, and on certain tariffs the rate can differ by time of day.
If electricity costs 25p per kWh and a household uses 250 kWh in a month, the usage charge is 62.50 GBP. Adding that to the standing charge gives the total electricity cost for the period.
Ofgem caps the maximum unit rate a supplier can charge on a standard variable tariff, with the cap reviewed quarterly, so the pence-per-kWh figure on a default tariff is limited.
Unit rate vs standing charge
The unit rate scales with consumption, so cutting usage directly lowers it, whereas the standing charge stays fixed no matter what. Together they make up the full cost of supply.
Time-of-use tariffs such as Economy 7 apply two different unit rates, a cheaper night rate and a dearer day rate, rather than one flat figure.
Primary source: Ofgem: Energy price cap