Understanding business energy bills

Running a business means having a lot of different tasks competing for priority, so scrutinising your business energy bills probably never makes it to the top of the list.

However, spending a few minutes taking a look at your bills can really pay off. In this guide, we’ll help you work out if your bills are too high and explain all the different elements that make up your bill. We also explain the different factors that you don’t see on your bill, but which still affect the price you pay.

What you see on your business energy bill

Standing charge and unit rate

The two most important things on your business energy bill are the unit rate and standing charge.

The unit rate is the amount you pay for each kilowatt hour (kWh) of electricity or gas you use, and the standing charge is a rate you pay every day, irrespective of how much energy you use. Business electricity tariffs usually have a standing charge, but not all gas tariffs do.

Getting the lowest unit rate doesn’t always mean you’re paying the lowest possible price for energy. It depends on how much you use. For heavy users, a low unit rate is vital, but for relatively light users, a low (or no) standing charge and higher unit rate might be preferable.

In June 2012:

• the average business electricity unit rate was 8.75p per kWh.
• the average business electricity standing charge was 21.29p per day.

If you’re paying this amount or more, then you could probably make a saving. Give our expert team a call on 0800 688 8568 or leave your details and they’ll be happy to put your rates to the test. It’s free to get a quote and there’s no obligation to switch.

Climate Change Levy (CCL)

The Climate Change Levy (CCL) is a government levy that you pay for every unit of non-renewable energy you use. You pay 0.509p per kWh of electricity and 0.177p per kWh of gas.

You do not pay CCL for any renewable energy you use and businesses that use less than an average of 33 kWh of electricity and 145 kWh of gas a day. (That's 12045 kWh of electricity and 52925 kWh of gas a year.) You also don’t have to pay if your business has a domestic/residential element, for example if it’s a B&B, care home or campsite. If you think you shouldn’t be paying CCL, our team can help you.

VAT

Most companies pay 20% VAT on their business energy bills. However, a bit like the CCL, you only pay 5% if you use less than an average 33 kWh of electricity or 145kWh of gas a day, or if you have domestic/residential element to your business. Our energy experts will help you make sure you’re paying the right level of VAT.

IGT charges

Some business premises get their gas via pipes owned by an independent gas transporter (IGT) rather than Transco, which means that they have to pay slightly higher prices, because the gas supplier will have to pay the IGT a fee to use their pipes. Unfortunately, if you are served by an IGT, the choice of gas supplier is limited too. We can help you find a gas supplier and work out how much the IGT charges will cost.

Smart meter charges

Some energy suppliers charge for having a smart meter, other don’t. Even with a charge, a smart meter can make financial sense. They can help you be more energy-efficient, improve cashflow and reduce administration. Read our guide to smart meters to find out more or give us a call to find out about free smart meters with no charges.

What you don’t see on your business energy bill

• Wholesale energy - the wholesale market has a huge impact on business energy prices, which is why they change on an almost daily basis.
• Transmission - the cost of transporting the energy varies by area: the further away you are from where the energy is generated, the more it costs to transport. This is why energy prices vary a lot by where you live.
• Losses - this is the cost of the power which is lost due to inefficiency during the energy’s journey to you.
• Industry charges - the cost of managing the overall network.
• Government initiatives - like the Renewables Obligation and Feed-in Tariffs.
• Metering - managing and maintaining your gas and electricity meters.
• Supplier margins - marketing costs, acquisition costs, administration costs and profit.