Understanding Business Energy Bills

Understanding your business energy bills can be a challenging endeavour, but the effort is undoubtedly worthwhile. These bills contain a treasure trove of information that can empower you to gain control over your costs, identify opportunities to reduce energy consumption, and ultimately save money. Let's delve deeper into the intricacies of deciphering your business energy bills, specifically highlighting the crucial elements you should be mindful of before considering comparisons of business energy deals and exploring the possibility of switching suppliers.

Breaking-down Business Energy Bills

While it might seem that your business energy bills are merely derived from the total energy consumed in a given month, the reality is a bit more nuanced. The monthly bill you receive is determined by several factors, including:

1. Energy Consumption: The amount of energy your business consumes, measured in kilowatt-hours (kWh), is multiplied by the unit rate stipulated in your current tariff. For instance, if your business uses 100 kWh of electricity in a month at a unit rate of 4.5p per kWh, your monthly usage charge would amount to £45.
2. Standing Charge: In addition to the energy usage charges, there is a fixed daily standing charge that you must pay, regardless of your actual energy consumption. This standing charge is calculated by multiplying the daily rate by the number of days in the billing period. For instance, if your standing charge is 45p per day and the billing period spans 31 days, your standing charge for that month would total £13.95.
3. Taxes and Levies: Business energy bills are subject to various additional charges, such as Value Added Tax (VAT) and the Climate Change Levy, which will be itemized on your bill and contribute to the total amount due.
4. Discounts: If your business qualifies for any discounts, such as the reduced 5% VAT rate, these will also be reflected on your bill and offset against the total amount payable.

By gaining a firm grasp of the components that make up your business energy bills, you can become a more informed and proactive consumer, equipped to make cost-effective decisions and embark on a path to energy efficiency and savings.

Which Expenses Demand Your Attention on Your Business Energy Bill?

The structure of your energy bills can exhibit variability depending on your chosen gas and electricity providers. This diversity can pose a challenge when attempting to locate the information most pertinent to your business. However, amid this variability, three fundamental sections are universally essential and should be present on most bills:

1. A Detailed Cost Breakdown: Your bill should comprehensively outline the individual charges that contribute to the total amount you owe.
2. Energy Usage in Kilowatt-Hours (kWh): Your energy consumption, quantified in kilowatt-hours, is a critical metric to gauge and analyze.
3. Contract End Date and Switching Window Information: For prudent planning and potential supplier transitions, it's crucial to have knowledge of your contract's termination date and the window during which you can consider switching providers.

As a business proprietor, the cost you're incurring for gas and electricity will likely be your foremost concern. To illustrate, we've included an example of a British Gas business energy bill, emphasising the elements that constitute your monthly expenditure.

Should your business have an alternate energy supplier, the layout of your bill may vary slightly, but these key details should remain present. If you find any of this vital information missing, do not hesitate to contact your supplier for clarification and guidance

Step by Step Explanation of the Key Elements that Make up Business Energy Bills

1. Bill Date, Bill Number, and VAT Number: Your account number, usually located near the bill's top, is a vital identifier for your supplier. Make a note of it for easy communication with your supplier. The VAT number should also be correct as per your business's registered VAT number, as discrepancies can lead to overpayments or underpayments of VAT.
2. Account Number and Supplier Contact Details: This unique account number helps in account identification and is often accompanied by your supplier's contact information. For inquiries or complaints, refer to the contact details provided on your bill. Different types of queries might have separate contact numbers, so look out for those as well.
3. Contract Information: Your bill should include details about your current contract, such as the plan name, renewal date, and a contact number for plan discussions. Suppliers typically notify you 60 to 120 days before the contract's expiry, allowing you time to consider energy price comparisons. Alternatively, energy experts can simplify this process for you.
4. Billing Period: This section specifies the timeframe your energy usage is billed for, which is often monthly but may vary to quarterly.
5. Reading Type: Your bill can be based on two reading types:

• Estimated Readings: Used when you haven't provided recent meter readings.
• Actual Readings: More accurate, based on recent meter readings. For half-hourly meters or smart meters, your bill relies on automatic readings. To prevent overpayment or underpayment, providing actual meter readings is recommended, preferably at least once a month.

1. Outstanding Balance from Previous Bills: This figure reflects any unpaid balance from prior bills, which may fluctuate based on the season. Setting up a direct debit during low consumption periods may lead to insufficient coverage in high-usage months, resulting in debt accumulation.
2. Balance from This Billing Period: This part displays the charges for your current energy consumption, comprising:

• Unit Rate: The cost per kilowatt-hour (kWh) of gas or electricity used.
• Standing Charge: A daily flat rate covering energy delivery costs, irrespective of usage.

1. VAT Charges: Indicates the added VAT amount (typically 20%) on your energy bill, although a 5% rate may apply in specific situations. VAT recovery may be possible for VAT-registered businesses, subject to standard VAT rules.
2. Total Amount Owed: The total bill amount, encompassing previous balances, current charges, and VAT. The due date is crucial; late payments may incur fees. Be aware that payments by check or post require extra time.
3. MPAN or MPRN Number: MPAN (electricity) and MPRN (gas) numbers, usually accompanied by meter serial numbers, are essential for meter identification. These numbers facilitate quick meter identification by your supplier.
4. Breakdown of Charges: A detailed breakdown of your charges, particularly relevant for multi-rate contracts. If your usage during off-peak hours is minimal, this breakdown can help you identify better-suited business energy contracts for your needs.
   

Understanding the Components of Your Business Gas and Electricity Bills

Your business electricity and gas bills encompass two primary costs: the standing charge and the unit rate.

1. Standing Charge: This fee is billed daily to cover your supplier's expenses for directly providing energy to your premises and maintaining the national grid. It's important to note that increases in this charge can affect your overall bill.

2. Unit Rate: Measured in kilowatt-hours (kWh), the unit rate represents the cost for each unit of electricity or gas consumed by your business. If you're on a fixed rate deal, this charge remains constant, while variable deals can fluctuate based on energy usage.

These costs can be broken down further, and understanding the factors affecting them is essential for efficient energy cost management. The key contributors to your unit rates and standing charges include:

- Wholesale Costs: Part of your unit rate, this reflects the amount business energy suppliers pay to acquire the energy you use. Increases in wholesale costs are typically passed on to customers, affecting your cost per unit.

- Transmission Use of System Charges (TNUoS): This covers the supplier's expenses for maintaining the national grid used for energy transport. TNUoS costs can vary based on your business's location, typically included in your standing charge.

- Distribution Use of System (DUoS): These charges cover the costs of your Distribution Network Operator (DNO), responsible for electricity distribution in your area. It encompasses day and night charges and maximum supply requirements for larger businesses.

- Climate Change Levy (CCL): A tax on each energy unit consumed by commercial customers, designed to promote energy efficiency and reduce carbon emissions. Exemptions may apply depending on your energy efficiency measures.

- VAT: Added to your bill by your supplier, VAT is generally at 20%, but a reduced rate of 5% is possible for low energy consumption and specific types of businesses and organisaitons. VAT-registered businesses may recover VAT as input tax.

- Feed-in Tariff (FiT): An incentive for businesses and property owners generating on-site renewable electricity, replaced by the Smart Export Guarantee in 2019.

- Renewable Obligation (RO): Encourages large-scale renewable energy generation to meet climate change objectives. Some suppliers itemize RO as a separate cost, while others consolidate it within your supply rate.

- Contracts for Difference (CfD): Replacing RO, CfD charges are applied through a levy on energy suppliers, transferred to consumers as operational costs levy and supplier obligation costs.

- Quarterly Fixed Charges: Fixed fees to simplify bill reconciliation, calculated and adjusted as needed.

Additionally, if your business gas is provided by independent gas transporters (IGT), your bill will include associated IGT charges.

Failing to pay business energy bills can adversely affect your business's credit rating, potentially limiting future energy deal options.

Factors Influencing Business Energy Costs

Several factors influence the total amount you pay for energy:

- Standing Charges, Taxes, and Levies: These form a significant part of your energy bill.

- Wholesale Energy Costs: The rate your supplier pays for energy affects your prices. Variable plans, like out-of-contract rates, can change with market conditions.

- Demand and Electricity Generation Costs: Higher demand increases generation costs, resulting in higher prices. Electricity costs can fluctuate by the hour, peaking during periods of high demand.

- Global Events: Events like geopolitical conflicts can impact energy prices. Recent price spikes followed the conflict in Ukraine.



Predicting monthly business energy costs is challenging due to variations in energy usage and tailored quotes. Market volatility further complicates price predictions.

Managing Your Business Energy Bill Payments

The method you choose to pay your energy bills can impact your overall expenses. It's essential to assess your payment approach to determine if a change could save you money. There are several payment methods listed on your bill, including:

1. Direct Debit: Widely used by business energy customers for its convenience, some suppliers may offer discounts for this method, up to 7% of the overall energy costs. It's crucial to regularly review your direct debit amount to ensure it covers your energy usage adequately, especially during higher-consumption periods like winter.

2. BACS: This method allows business owners to adjust monthly payments based on actual energy usage. While it offers more control, it requires manual action for each payment.

3. Debit or Credit Card: Some suppliers provide the option to pay with credit or debit cards, but this involves contacting your supplier directly for each payment, which can be time-consuming.

4. Cheques or Giro: Payments can be made by cheque or Giro slip, which is typically found at the bottom of your business energy bill. These payments require posting, usually several days before the due date, to avoid late charges.

Choosing the payment method that suits your business best is a balance between cost savings and convenience. If you believe another payment method may better align with your business's needs, contact your supplier to explore the options.

Average Business Energy Costs

Estimating the cost of an average business energy bill is challenging due to the unique nature of every business and its location, leading to varying usage. To determine if you're paying a fair rate, consider the unit rates available to businesses of your size.

Businesses Paying More for Energy

While business and domestic energy share the same infrastructure and suppliers, business energy bills can sometimes exceed household bills due to two main factors:

1. Higher Energy Usage: Regardless of the unit rate, increased energy usage results in higher bills.
2. VAT Rates: Most businesses pay the standard 20% VAT rate on energy, in contrast to the 5% VAT rate applied to domestic energy.

However, business energy rates are often lower than those for households, as businesses can negotiate rates based on their specific needs. High energy demand is typically rewarded with lower rates. Large businesses, in particular, benefit from cheaper rates.

Nevertheless, the energy crisis has altered this landscape as there is no price cap on business energy. Unlike domestic energy bills, which have limits on unit rates and standing charges, commercial customers face potentially unlimited charges. To ensure you're on the most suitable rates, consider a business energy comparison.

Why Are My Business Energy Bills So High?

Several reasons can lead to high energy bills, potentially making payments unmanageable. These include:

1. Inaccurate Billing: Ensure you've been billed correctly; estimated bills may lead to overcharges. Regular meter readings or a smart meter can prevent inaccuracies.
2. Out-of-Contract Rates: Allowing a fixed-rate energy deal to expire may result in higher out-of-contract rates, increasing energy costs. Switching suppliers or securing a new deal with the current one can prevent this.
3. Deemed Rates: Moving to new premises without arranging an energy contract can place you on deemed rates, which are often the highest. To avoid high bills, contact a supplier to arrange a new contract.

Addressing Unaffordable Business Energy Bills

If you find yourself unable to afford your business energy bills, it's essential to take prompt action:

1. Contact Your Supplier: Speak to your supplier as soon as possible to establish a repayment plan. Delaying can lead to disconnection, with fees and potential credit score repercussions.
2. Priority Debt: Energy debt is considered priority debt and may be passed to a debt recovery company, affecting your business's credit score and future credit access.
3. Citizens Advice: If you face disconnection, you can contact Citizens Advice at 0808 223 1133 or chat online with one of their energy advisors for guidance.
   

Reasons to use an Energy Broker for Your Business

In the realm of business management, cost control is invariably a primary concern. Ensuring that your expenditures remain as low as possible is a fundamental goal. Selecting the most advantageous energy contract has the potential to significantly bolster your financial well-being. However, the prospect of delving into extensive research and haggling over contract rates might seem daunting, especially when your schedule is already brimming with the myriad demands of running a business.

This is precisely where the merits of engaging an energy broker become evident. Entrusting this task to a professional can yield a multitude of advantages for your business. Below, we've outlined some of the pivotal benefits to underscore the value of this strategic decision.

Avoid Exorbitant Out-of-Contract Rates

It's of utmost importance to steer clear of out-of-contract rates, which are typically 30% - 50% more expensive than fixed-rates. Ensuring that your contract doesn't lapse without negotiation for a new term is essential. Once your existing contract concludes, very high 'Out of Contract' rates kick in until a new contract term is established. Managing multiple contracts with differing end dates can be challenging and might lead to inadvertent lapses. A good Energy Broker will keep you informed about impending renewals, present all requisite information for your decision-making process, and skilfully arrange the most favourable new terms on your behalf.

Secure Competitive Rates

One of the primary motivations for our clients to engage with us is the assurance that they are not overpaying for their energy. The energy market's notorious price fluctuations necessitate vigilance. We closely monitor the wholesale gas and electricity markets, offering timely advice on the optimal juncture for securing new rates. Over the years, we've diligently cultivated strong relationships with a diverse array of UK energy suppliers. These connections empower us to negotiate the most advantageous tariff options on behalf of our clients.

Reclaim Your Time

Operating a business demands a substantial amount of time and dedication. The myriad daily tasks often take precedence over the meticulous comparison of energy prices. Entrusting an experienced energy broker to handle contract negotiations not only bolsters your financial standing but also affords you the freedom to concentrate on your core business activities. Researching and collecting quotes from various energy suppliers can be a laborious task and most of all extremely time consuming. High quality Energy Brokers can literally save you hours or even days of time you would you be better off spending building your business and seeking new opportunities.

Energy Expertise and Insight

While you might possess some knowledge of the business energy market, it can still be a perplexing terrain. Our team of experts boasts an in-depth understanding of the energy sector. Regular training sessions keep them abreast of the latest developments. This enables them to provide insights into critical areas such as the wholesale market, meter upgrades, and legislative changes. Even if you're not presently considering contract renewals, we offer an array of services designed to potentially save you money, time, and energy.

Comprehensive Services

Energy bills are typically accepted as accurate, and any errors are anticipated to be rectified in the subsequent bill. However, this assumption doesn't always hold true. A good Energy Broker should offer a Bill Validation service, giving assurance that your bills are accurate,  and helping to rectify any discrepancies and therefor reducing your administrative costs and saving you time.

We possess a unique capacity to function as a miniature energy department for our clients. Beyond energy procurement, our in-house Client Services team is devoted to addressing queries and resolving issues. This means we can manage everything from billing disputes to Change of Tenancy (COT) on our clients' behalf. We alleviate the intricate and time-consuming process of cost-effective energy procurement, ensuring the best tariffs and contract structures for our clients. If you're interested in learning how we can assist you, don't hesitate to reach out to us today.