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Business Energy Bills Guide
The easiest way to understand if you’re overpaying on your business energy is to simply take a look at your latest business energy bill. However, it can be difficult to run a like-for-like comparison when each business customer is offered their own unique contract when receiving a business energy quote.
One alternative is to compare your own bill against other average business energy bills and prices - which can be found by clicking the link. However, this method can still involve some degree of estimation and guess work - for example, you will also need to understand what average levels of energy consumption looks like for a business of your size.
To help you get the clearer idea of how you can reduce your business’s energy bills, we've taken a look at the information and induvial costs that go into making up your bill.
If you would like to know about specific aspects of your business energy bill, simply click on the corresponding link below to jump straight to that section.
- Business energy bill information
- Business energy bill costs
- Business energy bill payment
- Business energy bill FAQs
Business energy bills: Key information
For many business energy customers, their bill is the main point of communication with their supplier. As such, there’s a lot of information that a supplier includes on a bill. At first glance it can be hard to distinguish which parts of the bill are relevant to you, making it all too easy to begin overpaying on the energy that your business is using.
To help, we have numbered all of the key pieces of information that can be found on a bill. For the purposes of an example we have used a British Gas bill (see below list). It may be the case that your supplier structures their bill slightly differently, however all the information outlined below can be found on all business energy bills, regardless of supplier.
1. Bill date and number
This is the date the bill was sent on, as well as the number of the bill. This information is often used by suppliers to quickly and easily identify your bill when making enquiries.
1. VAT number
This is the number that your supplier has on record for your business’s registered VAT number. If it is incorrect you should inform your supplier.
2. Account number
This is a number used by your supplier to easily identify customer accounts.
3. Contract details
This is a brief outline of your current contract details.
4. Billing period
This the period of usage that you’re being charged for.
5. Type of charges (accurate/estimated)
This indicates what type of reading your charges are based on. Accurate readings are based off a recent meter reading. Estimated readings, on the other hand, may not be representative of your current consumption habits, which is why it’s important to provide your supplier with regular meter readings.
6. Outstanding charges from previous bills
This indicates if you owe any balance from your previous bills.
7. Charges for the billing period
These are the charges that you have incurred during the latest billing period.
8. VAT charges
This section shows how much VAT is added onto your bill. Remember, certain types of organisations may be entitled to a reduced rate of VAT, but this isn’t offered as standard.
9. Total amount due
This is the sum total of your charges, including outstanding amounts from your previous bill, costs incurred from this month’s bill, as well as your VAT.
10. MPAN/MPRN Number
This is the code used by your supplier to quickly and easily identify your meter and property.
11. Break down of charges
This is a breakdown of charges, so you can see exactly what you’re being charged for in this billing period. You can also see what percentage of VAT you are being charged as well.
Business energy bill costs: A breakdown
Business Energy Wholesale Costs
When dealing in business energy, as on the domestic market, your supplier will buy energy in bulk before selling it onto their customers. The price that your supplier purchases this energy for is what is known as the wholesale cost. This wholesale cost can be impacted by a number of factors outside the energy market, such as natural disasters, political events and conflicts. This cost is not viewable on your bill, however it is reflected by your cost per unit. This means that if wholesale energy prices rise, then there is a good chance that your business energy bills will too.
How can you reduce it?
It is possible to protect your business from such increases by signing up for a fixed term business energy contract, which locks in the price that you pay per unit for the duration of the contract.
Transmission Use of System charges (TNUoS)
Once your supplier has purchased their energy from the wholesale market, they need a way to transport it and this isn’t cheap! Typically a supplier will include this TNUoS charge with the overall price of your business energy bill to cover the transport cost that they incur. Included in this cost is any charges that are incurred to maintain and upgrade the national grid where necessary.
Your TNUoS is charged at a flat rate for most businesses, however it’s worth noting that this cost might be higher for businesses who are in remote locations, due to the additional challenges of providing energy through the grid.
How can you reduce it?
TNUoS is a charge that is included within the total cost of all business energy bills. Short of taking the drastic step of relocating your business, there is little you can do to reduce this cost.
Paying for Distribution Use of System (DUoS)
Another charge that is included in your business’s energy bill is the Distribution Use of System cost. The DUoS cost is applied by what is known as a Distribution Network Operator, who are regional bodies responsible for transporting energy directly to your premises. These charges will vary depending on the type of contract that you have, your maximum supply capacity and the times that you consume energy.
How can you reduce it?
This cost is affected by factors that make up your business energy contract, such as tariff type and your maximum supply capacity. Therefore, to reduce costs you should look to change your energy consumption habits, which will reduce the amount of energy that is being transported to your premises, and your overall cost.
The Climate Change Levy (CCL)
The Climate Change Levy is a charge introduced by the government to make business more accountable for the energy that they use and the impact that it has on the environment. This cost is charged on a per unit basis and is incorporated into the overall cost of your business energy bill.
How can you reduce it?
As stated above, the CCL is charged on a per unit basis, so the easiest way that you can directly reduce the amount of CCL that you pay is by reducing your business’s overall energy consumption.
Please note: Businesses using energy from renewable sources are no longer exempt from the levy. To find out more, visit OfGem’s website.
Value Added Tax (VAT)
As with many products, VAT is charged at a rate of 20% on your business energy bill. This is typically added onto your bill and can be found in your bill breakdown - see the diagram above.
How can you reduce it?
Unfortunately for most businesses, there’s not much that you can do about reducing your VAT. However, there are some exceptions. For example, charities and other non-profit organisations are entitled to a reduced rate of VAT, but this must be applied for and is not offered by default. It’s also worth noting that if your business consumes less than 33 kWh of electricity, or 145 kWh of gas per day, then you can reduce your VAT costs to as little as 5%.
Business energy bill payments: How to
There are a number of ways that you can pay your business energy bill. The methods that are available to you can change from supplier to supplier, and each offer their own unique advantages and disadvantages. To help you make a payment decision that will benefit you and your business, we take a look at the more common methods of bill payment below:
Direct debit is one of the more common methods of payment for a commercial energy customer. Not only is this method of payment efficient for busy business owners, but some suppliers will even offer a small discount for customers who choose this method. However, it’s important to note that a fixed amount direct debit will not take into account the variance in your bills, for example during the winter months when you’re using more energy.
BACS / Online bank transfer
Online bank transfer is another payment method offered by most suppliers. The advantages of BACS and online transfers is that it offers you the flexibility to pay exact amounts based on your energy usage. However, as a busy business owner it may be the case that you don’t have the time to make the transfer every month, and if you forget to make the transfer your account could easily fall into debt.
Some suppliers can offer their customers the option to pay for their business energy bill by cheque. Obviously this method can afford you the flexibility to only pay for the energy that you have used, however it doesn’t offer you the convenience and efficiency of other methods.
Please note: When paying by cheque you must allow time for it to be posted to your supplier (typically this will take 3-5 working days). Failure to post your payment in time can result in late fees.
At the bottom of your business energy bill, you will likely find a pre populated bank giro slip that you can fill out and take to your local post office.
Business energy bills: Frequently asked questions
When looking to reduce business energy bill costs, many commercial customers have additional questions. We have a go at answering some of the more frequently asked questions about business energy bills below.
Do my business energy prices include VAT?
When you’re quoted for business electricity and gas prices, this does not include VAT – which is charged at a standard 20% for most businesses. On your bill however, VAT will be included in your overall billing total, and the standard 20% that you’re charged can be seen as part of your bill’s breakdown.
What are deemed or out-of-contract rates?
Deemed, or out-of-contract, rates are prices put in place by a business energy supplier when no formal contract has been agreed between them and the customer. Fortunately these rates are offered as part of a rolling 28-day contract, so only 28-days’ notice is required before switching.
What benefits are offered for non-profit organisations?
In terms of energy, non-profit organisations are still deemed as a business. However, it is possible to reduce the amount of VAT that you pay. It’s important to note that this reduced rate of VAT is not offered as standard and you will need to specifically request the lower rate.
How do I get my bill forwarded to my new address?
When moving into a new business premises, you’re in a rare opportunity of being able to switch your business’s energy outside of your renewal window. It’s recommended that you take this opportunity to switch to a more favourable energy deal.
For more information on business energy switching, click the link.
In addition to the above questions, Ofgem the energy industry watchdog has published a list of questions that it can be useful to ask business energy suppliers when looking to switch to a new deal. To find out more, click here.