Understanding Your Business Energy Bills
It takes a lot of effort to run a successful business, and often you will find that a number of different tasks will compete for priority. As a result, taking a deep look at your business energy bills will often not make it to the top of the to do list. Yet, you can really benefit from spending some time to understand this document.
Here are the three most important bits of information you need to look out for on your business energy bill:
- Your unit rate(s)
- Your standing charge
- The date your contract is due to end
On top of this, there are other costs that you will need to factor in as well. Some are clearer than others. In today’s guide, we’ll help you get a better understanding on what the various elements mean on your business energy bill. You will be able to see for yourself if your gas and business electricity prices are too high, or whether you are getting a great deal. Additionally, we will also look at various factors that you may not see on your bill, but still have an effect on the amount you will be expected to pay.
Average business energy bill
Here is a breakdown of the average consumption figures and estimated costs for each business type:
| Business Type | Average Electricity Consumption (kWh) |
Average Gas Consumption (kWh) |
Average Total Bill (per year) |
|---|---|---|---|
| Micro business | 7,500 | 5,000 | £1,520 |
| Small business | 20,000 | 15,000 | £3,665 |
| Medium business | 35,000 | 35,000 | £6,568 |
| Large business | 90,000 | 75,000 | £15,624 |
| Industrial | 250,000 | 500,000 | £52,987 |
There are thousands of businesses across the UK who are paying a premium for their commercial energy. Carrying out a quick business energy comparison with Utility Saving Expert will help you quickly find out if you are paying more than you should be for your gas and electricity.
What is included on your business energy bill
Standing Charge
The standing charge is the rate your business will pay each day for your energy supply. This does not factor in how much gas or electricity you consume.
All business electricity tariffs have a standing charge. Whereas, not all business gas tariffs have this type of charge. It is worth mentioning that if you have a lower standing charge, your energy supplier will often calculate these costs into your unit rate.
Unit Rate
The unit rate is the amount you will be expected to pay for each kilowatt hour (kWh) of gas or electricity your business uses.
It should be noted that if your tariff does have the lowest unit rate, this doesn’t necessarily mean you are paying the lowest possible amount for your energy usage. This will largely be determined by how much energy you are using. For example, a low unit rate will be vital for heavy users, while light users could benefit from a higher unit rate that has a low or non-existent standing charge.
Contract end date
As the name implies, this is the date that your current contract will come to an end. Before it’s due to expire, you should start looking for a new deal.
The contract end date is the point at which your current fixed price period ends.
Climate Change Levy (CCL)
The Climate Change Levy (CCL) is a government levy that requires you to pay for each unit of non-renewable energy your business makes use of.
The CCL will not have to be paid for any renewable energy your business uses. Additionally, if your business also uses less than an average of 33 kWh of electricity and 145 kWh of gas per day, you will also not be required to pay this charge. Annually, this amounts to 12,045 kWh of electricity and 52,925 kWh of gas.
Businesses that have a domestic or residential function may not be required to pay this levy. For example, care homes and B&Bs. To learn more, check out our Climate Change Levy guide.
VAT (Value-added tax)
Most companies will be paying 20% VAT on their business energy bills. Although, businesses that use less than an average of 33 kWh of electricity or 145 kWh of gas per day will only have to pay 5% VAT, similar to the CCL charge.
IGT charges
An IGT or independent gas transporter will own pipes that supply some business premises. This is an alternative to the standard default choice of National Grid Transco, wherein most businesses receive their supply through.
If your business is supplied by an independent gas transporter, you may have to pay a higher price for your gas. Unfortunately, this is not always made clear to premise holders that they are being supplied through an alternative pipe network. Normally, the gas supplier will have to pay a fee to the IGT to use their pipes for transportation. This will be on top of using any parts of the Transco network for its source to meter journey. Furthermore, your choice of business gas suppliers will be limited if you are served by an IGT.
Smart meter charges
Many energy suppliers will now provide customers with a smart meter as standard. These are often free to use as the supplier will recover the costs through the metering system. Although, only some meters will explicitly state a charge on the business energy bill.
With this in mind, having a smart meter makes a lot of sense for business owners. They are far more accurate and reliable when it comes to calculating energy usage and efficiency through automated meter readings. This will be a real relief to many, as meter readings of years past were often inaccurate and required extra administration work. Your business’ cashflow can also be better utilised by being able to monitor how much gas or electricity you are consuming on a day to day basis.
What you will not see listed on your business energy bill
It is equally interesting to know what your energy bill will not show you along with what is displayed. To source your gas and electricity through pipes and wires requires a substantial number of challenges to be overcome by the energy supplier. The costs to achieve this must be recovered by your supplier, this is why bills can often be quite high.
Did you know that these costs add up to account for more than 50% of the average energy bill? Here are the hidden costs included within your bill:
Wholesale Energy
Gas and electricity wholesale markets are volatile. This means that the impact on your unit rate can be significant depending on how the market fluctuates. Gas prices can change daily. The retail price of gas and electricity will be higher than the wholesale price to insulate businesses from these constant changes. Learn more in our guide to energy procurement.
Transmission and distribution
Transmission and distribution are another cost that has to be factored in. This is how much it physically costs to move gas and electricity from the source to the destination (your business). The area you are located in means the price will vary. It costs more to transport energy if you are located further away from where it is being procured. Transportation and distribution costs will be accounted for in your final energy bill.
Losses
The cost of transporting energy over a long distance will be inefficient. Losses covers energy that is loaded at the source, the amount that makes its way to the meter will not be the same amount. Suppliers are well aware of these challenges. Losses are exactly what the name suggests, energy lost along the way from the generator to the meter. There will be lower losses for energy that doesn’t have to travel as far. Users that live further away from the source will see this hidden cost within their bill.
Industry charges
You should now be able to better comprehend that authorities, regulators, organisations, pipes and wires involved in energy decisions make things extremely complex and varied. All of the above must be accounted for within a business energy bill. The money received will help to maintain and improve energy networks for the years to come. For this continuous cycle to function, energy bills have to recover all of these costs.
Government initiatives
Government initiatives also play a part in energy bills, this is on top of the Climate Change Levy. There are other levies that aren’t explicitly stated on the bill. For example, the Feed in Tariff and Renewable Obligation are also well known. However, these have not come without some level of controversy though, as they focus on de-carbonising the fuel supply to meet international agreements.
Supplier margins
Supplier margins are known to cause the most uproar amongst domestic and business energy users. Did you know that the average margin is not even the largest element on your bill? It is in fact one of the smallest. Consumers must also remember that suppliers aren’t printing money either. They must account for administration, acquisition and marketing costs before net profit is declared. On top of this, there is also an inherent level of risk when operating in this industry as many providers have gone bust.
We hope that this guide has given you a far better understanding about the multiple items that you will see on your energy bill. Being informed on the various aspects can help you find ways to save money on subsequent bills.