Understanding Your Business Energy Bill

No, this is in fact quite the reverse, businesses tend to pay more for their business energy bills due to differences in VAT. As a domestic user, 5% of your energy tariff goes towards VAT whereas in business, you can pay anything up to 20%. Businesses may also have to pay what’s known as CCL, a climate change levy which according to Bulb, a UK energy supplier, is presently set at 0.541p per kWh for electricity and 0.188p per kWh for gas. [2]

Units of electricity are measured in kilowatt hours (kWh’s), with one unit of electricity being equal to one kWh. It is actually easier to measure electricity because of this clear measurement structure. Your business energy bill gives you a breakdown of the number of kilowatts used and the rate for each kilowatt, enabling you to check that it is correct. Be aware, however, that there are other charges included.

It is important to understand the different tariffs featured on your business energy bill so that you can choose the one that works best for you and your working lifestyle.

A variable price tariff changes as the market fluctuates. The amount you pay can vary from month to month depending upon energy tariffs at the time, this means that some months you could be saving if the tariff is lower whilst in other months you could be paying a little more.

A fixed price tariff is used to predict your general energy usage pattern over a longer period and then come up with an average price. This enables you to pay a monthly fixed price so that there are no nasty surprises at the end of the month or contract term.

A price freeze tariff is also variable but similar in principle to a capped or fixed-rate mortgage in that the amount you pay will not exceed a certain amount, giving you peace of mind. This is a useful tariff if you know how much your business uses each month.

A no standing charge tariff excludes any extra ‘flat cost’ fees that suppliers may charge, meaning that you only pay for the energy used. This saving may be added on to your kWh unit price which might be set at a slightly higher level to compensate.

In light of recent environmental and energy consumption concerns, new packages have also appeared on the market in the form of ‘green tariffs’, these tariffs tend to offer incentives for you to cut your energy usage. They may come in the form of matching your energy usage with renewably sourced energy or might include a percentage of your bill going towards environmentally forward-thinking projects.

You may see a number of abbreviations on your business energy bill and wonder what they mean, the ‘A’ for example refers to a reading taken by the energy company, with an ‘E’ meaning estimated. The ‘C’ is usually put against any readings you have sent into the energy company, so ‘C’ stands for customer.

You may think that your electricity bill simply includes some administrative charges, standing charges and then your energy usage. It’s not quite as simple as that! The bill also contains an amount towards the environment, VAT, transmission and distribution fees and larger-scale energy supply fees.

Other metrics captured include:

• [1] https://www.bbc.co.uk/news/business-33420734
• [2] https://bulb.co.uk/business
• [3] https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home.