CHRIS RICHARDS | 10 FEBRUARY 2022
Struggling to make head nor tail of your latest business energy bill? We're here to help you get to grips with your bills and retake control of your finances.
Whether you're trying to find out how much energy you've been using or what an MPRN is, you'll find everything you need right here.
When you first look at an energy bill for your business, it's easy to feel overwhelmed by the amount of information on display. Hopefully, this section will demystify your bills and help you pick out what you really need to know.
These are the first things you'll see on your bill. This information is used to help you and your supplier identify different bills and keep accurate records. It's always worth checking that everything here is correct, particularly your business's VAT number.
Your MPRN is a combination of numbers and letters that identifies your energy meter. The MPRN displayed on your bill should exactly match the number inside your meter. If they don't match up, then you may have been charged incorrectly and should get in touch with your energy supplier immediately.
The standing charge is one of the most important parts of your energy bill. The standing charge is the flat fee that you pay every day to your energy supplier, regardless of the amount of energy that you use. The purpose of a standing charge is to cover the cost to your supplier of maintaining the energy supply.
There is always a standing charge for electricity costs, but not always for gas. Gas standing charges are typically low, so many energy companies simply add a little extra onto the unit rate instead.
The billing period should be clearly displayed on your business energy bills. This information lets you know the period of time that you're being billed for. It helps you keep better records and ensures that you never end up paying twice for your energy.
The unit price or rate is another key element of your business energy bills. This rate determines how much you pay for every kWh (kilowatt-hour) of business gas and electricity that you use.
For example, if the unit rate is 15p per kWh and your business uses 20,000 kWh of energy, then you'll be charged £3000 (20,000 x 0.15) for the period.
You'll then be able to see either estimated or accurate energy costs. If you provided energy meter readings prior to your energy bill being sent, then your supplier will be able to provide an accurate price for your usage.
If you haven't provided recent readings, then your supplier will send an estimated price based on your previous usage levels. To prevent overpaying for your business electricity and gas, it's important to send your supplier regular meter readings.
This section of your bill will lay out your current contract details and serve as a reminder of your agreement with your supplier.
The Climate Change Levy (CCL), introduced by the Government in 2001, is an environmental tax applied to non-domestic energy users. It aims to encourage businesses to cut back on their energy use, and do their bit to help stem the effects of global warming.
The majority of businesses are subject to the CCL, but there are exceptions. If your business, on average, uses less than 33 kWh of electricity and 145 kWh of gas per day, then you won't have to pay the CCL. These businesses also benefit from a cut in VAT rates.
If your business is subject to the CCL, then you'll be able to see how much you owe on your energy bills.
VAT is charged at a standard rate of 20% for all businesses. The VAT you owe on your energy use will be calculated and displayed on your bill. Again, there are exceptions to this rate if you can meet the minimum requirements described in the CCL section above. Additionally, charities only pay a 5% VAT rate.
Depending on geographical location, some businesses may also be subject to "IGT charges". IGT stands for "independent gas transporter", and refers to gas pipelines that are operated by private companies other than the National Grid.
If your business receives gas via these pipes, then you may have to pay an extra charge. There isn't really a way for a business owner to know if they're using IGT pipes, so many may be surprised to see this charge on their bill.
For the majority of businesses though, IGT charges are something they won't have to worry about.
Another charge that you could see on your business energy bill is a smart meter cost. Many business electricity and gas suppliers now install smart meters as standard. They will either recoup the cost of this installation by upping your bills slightly, or by placing an explicit charge on your bill.
Your bill will then summarise the total amount due to your supplier. Next time you take a look at this total, you should have a better understanding of all the different costs that are included in it.
There are a few things that affect the cost of your energy that won't be shown on the bill. However, it's still worth knowing what these factors are and how they impact the amount you have to pay to your supplier.
Business electricity and gas is purchased from the "wholesale" energy market. The prices in the market are extremely volatile and suppliers have to find a way to cover the risk of the price dropping once they've made a purchase. As a result, suppliers will charge a "retail" price for their gas and electricity which is higher than the wholesale price.
Effectively, you as the customer are covering your supplier's potential losses, and you'll only ever see the retail unit cost on your bills. This isn't really something to worry about, but it's good to know why there is always a discrepancy between the wholesale cost and what you have to pay.
Another cost that suppliers may include in your business energy bills is a Transmission Use of System Charge. A TNUoS covers the cost of physically moving the energy from the source to your business. The further you are away from the source, the higher the transmission charge is likely to be.
Suppliers also use the proceeds from transmission charges to keep supply lines maintained and working correctly. This cost is usually absorbed into other charges on your business electricity bills, and not explicitly stated.
Unfortunately, gas and electricity supply lines and not 100% energy efficient. This means that energy is lost as it travels to its destination. As with the transmission charge, the further your business is from the energy source, the more suppliers will charge to recover their supply line losses.
The energy system is a very complex, confusing web of wires, pipes and organisations. All of the physical elements of the system need to be maintained to keep them running for years to come.
As you'd expect, this maintenance costs money, and the industry transfers some of this cost to its paying customers.
There are also a range of Government charges and initiatives that may be featured on your energy bill. The CCL will be explicitly shown on your bill, but some of the others won't be. For example, there is the Renewable Energy Obligation fee that nearly all businesses will be subjected to.
You can't opt out of Government initiatives, but it may be the case that your business is eligible for exemptions. Be sure to look into the individual schemes and charges if you think this might apply to you.
The energy meter is another physical device that needs to be maintained in order to function correctly. Your energy company is likely to add a little to your bill in order to keep it running smoothly.
The final cost that will be included somewhere in your energy bill is your supplier's margin. Of course, energy is a business and as such your supplier is looking to make a profit. The margin is usually relatively reasonable and is far from the greatest expense on your energy bills.
Aside from the standard costs that are included in your bills, there are a few other factors that can influence how much you'll have to pay:
There are two main types of business gas, electricity and energy contracts. The first is a fixed rate tariff, where the price you pay per unit of energy stays the same throughout your contract. The other is a variable tariff, where the price per unit is likely to change depending on the markets.
A variable tariff is a more risky approach but can result in cheaper bills if you get lucky with the market prices.
Your MPRN is a combination of numbers and letters that identifies your energy meter. The MPRN displayed on your bill should exactly match the number inside your meter. If they don't match up, then you may have been charged incorrectly and should get in touch with your energy supplier immediately.
During colder months, energy usage will be higher for most businesses. As a result, you can expect your costs to be greater in these periods.
Of course, the larger your business is, the more energy you're going to need every day. In addition, standing charges are typically higher for large businesses.
The size of a business's energy bill can be slashed significantly if it can meet the minimal use guidelines.
Any business that can use less than 33 kWh of electricity per day (1000 kWh of electricity per month) is eligible for a big value-added tax (VAT) reduction and the removal of the CCL.
If your business premises are also domestic buildings, then you could be eligible for a VAT reduction. Specifically, if at least 60% of your usage goes towards domestic purposes, then you only have to pay 5% VAT on your business electricity bill and gas charges.
You can pay your energy bill in a few ways. The most popular is via direct debit but this isn't your only option. You can also pay using a cheque, bank transfer or even at your local post office. Some new businesses opt to take a business loan and pay their bill annually.
Business energy prices can be pretty significant, especially if you're operating a larger business. It's likely that you'll want to look for ways to cut down on your bills and use the savings elsewhere in your business.
Aside from making physical changes such as installing energy-efficient lightbulbs, one of the best ways to lower your expenses is to foster an energy-saving culture amongst your staff. Encouraging employees to switch off appliances and act in a responsible way can lead to impressive savings.
At Business Energy UK, we collect the very best business energy deals in one place. Every business owner has their own requirements, and you can use our intuitive platform to compare deals and find the best one for you.
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