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Understanding your business energy costs

understanding-energy-bills

Understanding energy costs and your energy usage is just as important for small companies as it is for large ones. However, it can be easy to get overwhelmed. Many people don’t realise that they are overpaying for their energy usage until it is time to assess their account. Uncovering your hidden overages can help you negotiate lower electricity bills and find providers who cater to your energy needs.

Key things on your energy bill

Standing Charge

A standing charge appears on most utility bills. It is a fixed daily amount that you pay irrespective of how much fuel or power you consume.

There are tariffs available without standing charges, whilst these are best suited to specific business contexts it’s generally more cost-effective to choose a tariff that has a standing charge.

Unit Rate

The unit rate is the amount you are charged per kilowatt-hour of gas or electricity used. If you are on a fixed-term contract, then this will remain the same for the length of your contract but if you are on a variable rate then it will fluctuate subject to wholesale prices and other factors.

 Pass-through costs

These may appear as a separate entry on your business energy bill. These are costs that the supplier incurs for the maintenance and operation of the energy infrastructure and passes this onto its consumers. These costs can include transportation charges, distribution charges, balancing charges and settlement and agency charges.

Climate Change Levy (CCL)

Unlike residential bill payers, businesses are charged what’s known as a climate change levy (CCL) which stands at 0.00775p per kilowatt hour (KWh) on electricity and 0.00465p per KW on gas.

These rates changed in April 2021. Rate changes are outlined in the table below:

Commodity Rate from 1 April 2018 Rate from 1 April 2019 Rate from 1 April 2020 Rate from 1 April 2021
Electricity (£ per kilowatt-hour (KWh)) 0.00583 0.00847 0.00811 0.00775
Gas (£ per KWh) 0.00203 0.00339 0.00406 0.00465

Source: Climate Change Levy Rates (Gov.uk)

There are some CCL exemptions, this includes de minimis limits for business, supplies to charities and business premises used for domestic or non-business charity purposes, more details on Climate Change Levy Rates can be found on the Government website here.

VAT

VAT is charged at the standard rate, which is currently 20%. However, charities are eligible for a reduced rate of 5% VAT in addition to businesses who have used less than 145kWh of gas per day (4,397 kWh per month) and 33 kWh of electricity per day (1000 kWh per month).

If you are eligible for the discount, you can register for a lower VAT rate by getting a VAT Declaration Form from your energy supplier. This enables you to claim a rebate for overpayments and can be backdated for up to four years.

LET'S TALK AND SEE HOW MUCH YOU CAN SAVE

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