Switching business energy can be confusing and time consuming, not least because commercial electricity and gas tariffs differ from supplier to supplier, meaning the information on your bills will vary depending upon who supplies your energy.
It’s hardly surprising that some business owners have neither the time nor inclination to make the switch, no matter how much money it could save them, but that’s where UK Power can help - our energy experts are on hand to take the hassle out of switching, and help you make an informed decision on your next energy contract.
When you check your bill, you’ll find there are a few separate charges that make up the total amount you have to pay, including:
Here’s a quick breakdown of what makes up your business gas and electricity bill.
A large chunk of your bill is made up of the costs your energy provider pays to buy your gas and electricity from wholesale suppliers - to make sure you don't run out of gas or electricity during your contract, providers buy the energy they expect you to use in advance of it starting.
Although this means there’s no way to exit your energy deal early, at least not without having to pay up your remaining contract, these fixed-price deals protect against any increase in wholesale prices, so they won’t have an immediate impact on your bills.
Transporting and distributing energy isn't cheap, so the costs that suppliers incur for doing so are also included in your business gas and electricity bills.
With providers also having to cover the expense of maintaining and upgrading the National Grid, these charges are worked into the bills you pay too. It's worth noting these will vary depending on the location of your business, as different zones place different levels of demand on the network, and are billed accordingly.
These costs are applied by the Distribution Network Operators (DNO), which are companies that are licensed to distribute electricity in the UK. The charges are applied for a range of factors, including day and night charges and the maximum supply requirements of sites that make up the network.
The Climate Change Levy (CCL) is a tax which was introduced by the government in 2001, to encourage various sectors to improve energy efficiency and cut their greenhouse gas emissions, and paid by non-domestic energy users on a per-unit basis.
In short, this is designed to act as an incentive for businesses to boost their energy efficiency credentials by reducing their carbon emissions.
Some companies are exempt from paying the CCL, depending on the amount of renewable energy they use, although nuclear power - despite having no direct impact on carbon emissions - is subject to the charge.
Although energy meters look like relatively simple bits of kit, they complete pretty complex functions like managing multiple energy patterns at differing times of the day. And so they need to be paid for and maintained as a physical asset (which is usually amortised over a very long period), and if you’ve not got a smart meter, you need to pay towards having your meter read.
VAT on business electricity and gas bills is usually charged at a rate of 20%, but some businesses will be able to pay a reduced rate of 5% this if they use less than 33 kilowatt hours of electricity - or less than 145kw hours of gas - per day.
Energy suppliers operate like any other profit-making business, and the amount they make from your custom is shown as the ‘supplier margin’ – it’s not just profit though, marketing costs, acquisition costs, administration costs all being covered before net profit is taken.
Now you know your way around your business energy bills, lets’ take a closer look at how commercial energy contracts work, and answer some of the most frequently asked questions.
This is when your contract automatically renews when your current deal expires - if you don't terminate them with a letter of notice within a specific timeframe, they will renew and you may not even know about it.
Getting a rollover contract entirely depends on the energy supplier you're with, as each of them have different and often complex rules regarding when you can cancel your contract. There are many factors to consider to prevent a rollover contract, but keep these two in mind:
If you miss the switch period then you'll be locked in to another deal for a set period of time, and this process then repeats itself, meaning you’ll pay higher bills year after year.
Yes - In addition to rollovers, there’s also '28 Day' and ‘deemed and Out of Contract Rates' that your business may be on.
If your business has not attempted to switch suppliers since the market was deregulated in the early 1990s, you may be on a 28 Day supply contract and paying variable rates. These usually expensive, which is why we recommend being on a fixed-rate, fixed-term deal. On the plus side, as the name suggests, you only need to give 28 days' notice if you want to cancel and switch.
A deemed tariff rate is applied usually when a business moves into new premises with no contract in place, and without switching to a new provider.
Similarly, out of contract rates apply when a contract comes to an end and no alternative rate is put in its place, resulting in the business being charged at the existing energy suppliers’ rate. The good news is you can get out of these contracts with just 28 days’ notice.
Meters described as half-hourly are for businesses that are energy intensive, which have had an average peak electricity demand above 100kW in any three months over the past year. Learn more about half hourly electricity, and how it can help your business save energy.
If you're new to your business premises and don’t have your own energy contract in place, you'll be supplied by the same provider as the previous tenants, and you'll most likely be charged out-of-contract or deemed rates which are higher than average.
So, it's important to arrange a new commercial energy deal for your business as soon as possible. We can help you with this process, if you let us know your new address, we can find out the name of your current supplier.
If you’ve recently moved your business to a new site and would like a new electricity meter or gas meter installed the best thing to do is to contact your local business energy supplier, who will install a meter and enter you into a fixed-price contract on the minimum fixed-term deal they offer.
Once this is sorted, we can search the market and compare business energy prices to find you a cheaper provider to use when your deal expires.