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Understanding Business Energy Bills

Running an energy business means having a lot of distinct duties competing for priority, so scrutinizing your company energy bills may never make it to the top of the list, but spending a couple of minutes looking at your bills can pay off.

On your company energy bill, the three most significant things are:

  1. Your standing charge
  2. Your unit rate(s)
  3. Your contract end date

We will assist you to work out if your bills are too big in this guide and clarify all the various aspects that make up your bill. We also explain the various factors you don't see on your bill, but that still influence the price you're paying.

What you see on your business energy bill

Standing Charge

The standing charge is the rate you pay to your business every day for the supply, regardless of how much energy you use.

Tariffs for company electricity always have a standing cost, but not all tariffs for company gas do. Even if the standing charge is low or non-existent, the unit rate will include the costs this would have recovered for the supplier.

Unit Rate

The unit rate is the amount of electricity or gas you use for each kilowatt-hour (kWh).

Obtaining the lowest unit rate does not always mean that you pay the lowest energy price possible. It's up to how much you're using. A low unit rate is vital for heavy users, but a low (or no) standing charge and a higher unit rate may be preferable for relatively light users.

Contract End Date

The contract end date is the point at which your present fixed price period ends.

Climate Change Levy (CCL)

The Climate Change Levy (CCL) is a government levy that you pay for every unit that a company uses non-renewable energy.

For any renewable energy you use, you won't have to pay CCL and neither do companies that use less than an average of 33 kWh of electricity and 145 kWh of gas a day. That's the electricity of 12,045 kWh and gas of 52,925 kWh per year.

If your business has a domestic or residential element, such as a B&B, care home or campsite, you also don't have to pay. If you don't believe you should pay CCL, or just want some guidance on this level, we can assist you to make sense of this energy tax here at Lloydenergy.

VAT

Talking about taxes, most businesses pay 20% VAT on their power bills for businesses.

Similar to CCL, however, you will only need to pay 5% if you use less than an average of 33 kWh of energy or 145 kWh of gas a day, or if you have that national or residential component in your company.

For more data on the reduced VAT rate and how companies can qualify, please check our VAT Declaration Guide

IGT charges

Some company premises supply their gas through pipes owned by an autonomous gas transporter (IGT) instead of National Grid Transco's usually default choice.

While it is by no means evident to the owner of the assumption that they are delivered via a distinct pipe network, being delivered by and IGT may imply they have to pay greater rates. This is because, on its trip from source to meter, the gas provider will have to pay the IGT a premium to use their tubes as well as any expenses for using any components of the Transco network.

Unfortunately, the selection of the gas provider is also restricted if you are served by an IGT. This added complication on the gas market implies knowing your conditions and the best way to solve them is essential. Business Juice can assist you find the correct gas provider and determine how much the IGT fees will cost and whether you can do anything to minimize its effect.

Smart meter charges

Some energy providers now supply as normal a smart meter.

All will recover costs for these metering systems, but only a few will be charged on the bill explicitly.

Even if a smart meter can create true economic sense with an extra charge.

The precision and regularity of their automated meter measurements can assist a company to be more energy-efficient, enhance cash flow through precise billing, and remote administration and price from the inevitable estimated read issues we've all endured.

To learn more about smart meters and what they can do for you and your company, please read our guide to smart meter manual or call us at 0800 051 5770 and we can provide you with all the data you need to decide if an intelligent solution is correct for you.

What you don't see on your business energy bill

For what you don't see on it, an energy bill is as interesting as what you do.

There is an important number of difficulties that are needed to get your gas and electricity from your source to your meter via cables and tubes, and the expenses that your energy provider will have to recover for this.

These expenses are so high that they can make up more than 50% of the average bill! In short, these "concealed" expenses are:

Wholesale energy

The electricity and gas wholesale markets are unstable. As a consequence, this can have an important effect on the unit cost of your electricity. Prices on the gas market are changing every day and every half hour on the energy market. Most companies are isolated from this ongoing fluctuation by setting the' retail' cost of gas and electricity above the wholesale price. However, once the retail price has been infringed, the entire industry is moving up again, the retail price and everything.

Transmission & Distribution

The cost of physically carrying your gas or electricity from source to destination differs by region: the further away from where the energy is produced or procured, the higher the cost of transportation. The transmission has been compared to the domestic energy motorway network while Distribution is seen as the more localized A and B highways that carry the energy to their ultimate destination. Both the travel costs and the transportation system maintenance costs themselves have to be paid out of your energy bill.

Losses

This lengthy range cost effect has a double whammy, and that is, power transportation is obviously inefficient. What is loaded in at the source is not going to be the same quantity at the meter that carries it out? These are known as losses, which are actually precisely what they are, the energy lost on the beach or generator-to-meter journey. The higher the amount of loss, of course, the more the energy has to move. As a consequence, the price of the loss falls heavier on customers who reside more remotely from the source. The price of loss is actually the price of the physical energy that has been placed in but not received.

Industry charges

As you can likely already say, the network of tubes is as broad as it is deep as it is diverse and all these need to be paid for. Not only for maintenance, but also for future-proofing to guarantee that we will be well into the future fit for purpose energy network. As a consequence, all energy bills have a cost recovery component to allow the operation of this ongoing process.

Government initiatives

While the government has been explicit with the Climate Change Levy appearing as a distinct line on energy bills, a number of other levies are hidden away. The Renewable Obligation and Feed-in Tariff, for example, are two of the better-known ones to be paid by all but a few companies. These components are controversial because they are not about keeping the lights on or maintaining the network but about de-carbonizing the supply of gas to fulfill global quotas.

Metering

The meter in your assumption may look like a box with a dial or an easy LCD read, but in reality at different moments of the day they can be quite complicated machines managing various energy patterns. These must be paid for as a physical asset (often amortized over a very lengthy period of time) as well as being "retained" and read if it is not a smart meter.

Supplier margins

The supplier margin is the final and most contentious component. Contrary to common belief, the average margin is not one of the lowest elements on the bill, in reality. Moreover, it is not all straight profit, with marketing expenses, procurement expenses, all administrative expenses covered before net profit is taken. No one suggests that energy providers are not extremely lucrative enterprises, but hopefully, this guide will help you know the many items that make up your energy bill. To learn more about the component portion of the energy price, check our guides on what makes up the price of electricity and what makes up the price of gas.

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