Business Energy Bills – Guides and FAQs
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 switch business energy, 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.
And if you need to switch energy at home, we can helpw with that too.
What charges are included in your business energy bills?
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:
- Wholesale energy costs
- Transmission Use of System (TNUoS) charge
- Distribution Use of System (DUoS) charge
- Climate Change Levy (CCL)
- Metering costs
- VAT on gas and electricity
- Supplier margins
Here’s a quick breakdown of what makes up your business gas and electricity bill.
What is the wholesale cost and how does it affect your business energy 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.
What are Transmission Use of System (TNUoS) charges?
Transporting and distributing energy isn't cheap, so the costs that suppliers incur for doing so are also included in your business electricity and gas 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.
What are Distribution Use of System (DUoS) charges?
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.
What is The Climate Change Levy (CCL)?
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.
What are metering costs on my business energy bills
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.
What is the rate of VAT on business electricity and gas?
VAT on electricity and gas bills for businesses is usually charged at a rate of 20%. Some businesses will be able to pay a reduced rate of 5% VAT on energy bills if they use less than what is known as the de minimis threshold.
The de minimis business electricity VAT rate is 33 kilowatt hours (kWh) or less of electricity per day, while the de minimis rate for VAT on gas is 145kWh or less of gas per day.
This differs from the VAT on energy bills for domestic customers, where VAT on gas and VAT on electricity are both charged at 5%.
What are the supplier margins on my business energy bill?
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.
How do business gas and electricity contracts work?
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.
What is a rollover contract?
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.
How to avoid getting a rollover contract
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:
- Keep an eye out for a letter from your supplier that tells you when they intend to roll you onto a new contract.
- It's then up to you to terminate your contract before a set date.
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.
Does being a not-for-profit organisation make a difference to your energy bills?
No, this doesn't make any difference - as far as the suppliers are concerned, Not-for-Profit companies count as a business, so we'll still be able to switch your business energy to a better deal.
Are there other types of contracts to look out for?
Yes - In addition to rollovers, there’s also '28 Day' and ‘deemed and Out of Contract Rates' that your business may be on.
What's a 28 Day contract?
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 are 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.
What are out-of-contract and deemed tariff rates?
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.
What is a half-hourly/100kW supply?
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.
What to do if you’re new to the premises?
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.
Can you install a meter in a new site?
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.
What if you work from home?
If you work from home and want to take out a business energy deal, you'll need to be able to show that 50% or more of the energy you use is for commercial reasons.
This excludes the running costs of any appliances that would be running regardless of whether or not you were working at home, such as fridges and freezers, but you'll most likely find that lighting, heating and equipment running costs will cover this.
As a home worker, you might find a microbusiness energy deal is better suited to your needs, as these work more like domestic energy deals. For more on this type of deal, along with eligibility criteria, check out our guide to microbusiness energy.
If you are in this position, you might be better off just switching to a better domestic energy deal - just pop your postcode in the box below to run an energy price comparison to see how much you could save.