Education

Understanding your business energy bills

20 Jan 2022

Depending on the sector you work in, your business energy costs could be one of the highest cost variable overheads you pay. If you’re an energy-intensive business, you need to examine your current bill and begin to compare other suppliers to make sure you’re on the best tariffs and get the best value on the market. You can’t assume all suppliers are the same because the competition from suppliers and billing companies is vast. You should set aside time to investigate your options with your current supplier and then compare them with other suppliers. Business energy bills aren’t as simple as your domestic bill. There’s a lot more detail in a commercial invoice for energy so let’s examine the items and elements in your invoice to help you make informed decisions about your current deal.

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Understanding your business energy bill 

Business energy bills can be more complicated than domestic bills because every business is unique, and energy suppliers can tailor the supply to an individual firm. There are typically three critical elements to your invoice.

  • A breakdown of the charges  

  • The amount of energy used measured in kilowatt-hours (kWh) 

  • The contract end date and detail about a switching window 

You must get to know your way around your account bill because some improvements may quickly become apparent. After further analysis, you might discover how other adjustments can lead to added cost savings.  

What information should you look out for on your business energy bill? 

Your energy bill will be highly detailed, and it’ll typically have the following information.  

  • Outstanding balance 

  • Total owed 

  • Charges breakdown 

The outstanding balance shows the charges for the energy you have used during this billing period, broken down into the following two amounts: 

The unit rate in kilowatt-hours (kWh) is the amount you pay for each unit of energy used. 

The standing charge is a flat daily rate covering the energy delivered to your premises. It’s charged regardless of the usage. 

Total owed shows how much you must pay in full for this invoicing period, including any earlier balance, as well as the VAT element. 

Your supplier should provide a detailed breakdown of your bill. For instance, a multi-rate contract might offer cheaper rates during off-peak hours, so you need to see how your usage gets divided between the two different rates. 

 The costs included in my bill 

The two primary costs that combine to make up your energy bills rates are the standing charge and unit rate. 

Standing charge 

The standing charge is a fee charged daily for the suppliers’ overheads to deliver energy to business premises, and there is also an upkeep charge towards the national grid. 

Unit rate 

Measured in kilowatt-hours (kWh), this is a charge covering every unit of electricity or gas your business uses. If the rate gets set at an agreed level on a fixed rate deal, it won’t change when energy prices increase. Your bills will still fluctuate compared to your energy use. 

These are the two main costs when running an energy price comparison, and you can break the unit price even further down to make a more detailed evaluation.  

The elements in your bill 

Several elements in your bill affect the final total that appears on your statement. It would be best to make yourself aware of this breakdown, so we’ve listed all the various elements here.  

Wholesale costs 

The wholesale cost charge refers to the supplier’s cost to buy the energy you use and any increases in price on the wholesale market usually get passed on to customers reflected through your cost per unit. 

Transmission use of system charges (TNUoS) 

Your TNUoS charge contributes towards the supplier’s expense to support the national grid transporting energy to your business premises. This cost is part of the standing charge, and your TNUoS varies depending on your location. 

Paying for distribution use of the system (DUoS)  

This charge covers the costs your Distribution Network Operator (DNO) incurs, who are licensed to distribute electricity in your area. Day and night charges are separated and levied, as is the supply for larger businesses. 

Climate Change Levy (CCL) 

The Climate Change Levy is a tax on each unit of commercial energy consumed. The levy should encourage businesses to improve energy efficiency. You can be exempt from the CCL if you prove you take measures to improve your energy efficiency.  

Feed-in Tariff (FiT) 

The Feed-in Tariff (FiT) is an incentive to businesses and property owners to generate energy on-site through renewable electricity generation like solar panels and wind turbines. The energy regulator Ofgem charges energy companies a levy, and this might be a separate payment on your bill. 

Renewable obligation (RO) 

The renewable obligation is a government initiative to help meet climate change targets by encouraging large-scale renewable energy generation. Some suppliers include RO as a cost itemised on your bills, or it might form part of the overall supply rate.  

These options are available through half-hourly (HH) and non-half hourly (NHH) metres. RO contracts will continue to run until 2027 despite being replaced by CFDs. 

Contracts for Difference (CFD) 

CFD costs will replace RO, and it’s a levy on energy suppliers passed on to consumers as pass-through charges on your bill in one of two methods.  

Operational Costs Levy is a fixed unit rate per kWh charged to cover the scheme’s running costs set by the Local Carbon Contracts Company (LCCC). 

Supplier Obligation Costs is a subsidy cost element according to the volume of energy generated, and wholesale electricity costs cover the low-carbon electricity funded by CFD. This is a variable charge estimated at the start of each quarter amended at the end of the quarter. 

Quarterly fixed charges 

The quarterly fee calculation is a fixed fee paid each quarter. Your bill will also show any associated charges if your business gas gets supplied by independent gas transporters (IGTs). 

VAT 

VAT gets added to your business energy bill, usually charged at 20%; you can reduce this figure to 5% if you use less than 33kWh of electricity or 145kWh of gas each day. 

Other vital information on your business energy bill 

Knowing how and where to look on your account can help you decide if you’re getting a competitive deal. 

Billing period 

The bill clearly shows the period billed for, from the last statement to a few days before receiving the current one. You might have an option to change from monthly to quarterly or vice-versa if you think it helps with budgeting.

You’ll find your account number, used to identify you as a customer, located near the top of your bill. It’s helpful to note this when you need to contact your supplier.  

The supplier should let you know before your contract’s end date to let you know the expiry date is approaching. However, it’s best if you know this without a prompt so you can begin to shop around and make comparisons.  

Your reading type  

Your bill can get calculated based on two distinct types of reading, estimated and actual. If you don’t supply a meter reading, you’ll get an estimate based on the earlier usage. Estimates are unlikely to be in your favour. It pays to do precise readings because if the forecasts are on the low side, you might suddenly get a shock bill when you provide exact meter readings.  

Pay-by date 

You’ll find the final date to settle the bill itemised with the cost breakdown. Some suppliers can charge an overdue payment fee, and others charge if you want a paper bill posted. Going paperless and paying before any extra charges get applied is therefore advisable. 

MPAN or MPRN number 

The MPAN is a 21-digit number for your electricity bill. The MPRN is six to ten digits long on your gas bill.  

Your meter serial number is usually situated close to the MPAN or MPRN, and these identification numbers will also be on the meters at your premises. Suppliers use these serial numbers to find the meter at your property. 

Account number  

You’ll find your account number, used to identify you as a customer, located near the top of your bill. It’s helpful to note this when you need to contact your supplier.  

Contract information

Your supplier should identify the details of your current contract, including the plan’s name, the renewal date and a contact number to discuss your existing contract. 

The supplier should let you know before your contract’s end date to let you know the expiry date is approaching. However, it’s best if you know this without a prompt so you can begin to shop around and make comparisons. 

Contact details  

You can find contact details on your bill if you need to bring up an issue with your supplier. Most suppliers include separate contact details depending on your query type, accounts, sales, technical help or emergencies. 

Once you understand the elements that make up your total bill, you’ll be in a good position to begin a comparison exercise to make sure you’re getting the best tariffs available. At Funding Options, we’ve made the process simple. Start your comparison by clicking here.

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