Understanding Energy Bills

Taking the time to understand how your energy bills work and what they are made up of could make dealing with your energy bills a little bit easier. 

If you know exactly what you are paying for it can be easier to find cheaper deals and ensure that you are not overpaying.

Whilst a lot of your costs are labelled on your energy bill, not all of them are. We will break these down for you.

See a breakdown from Ofgem of what business energy bills are made up of below:

What charges you see on your business energy bills

Unit Rate

The Unit rate is the amount you pay per Kilowatt hour(kWh) for your energy. A unit rate depends on your contract type. If you have a fixed contract, then the unit rate will remain the same. If you are on a variable tariff, then your unit rate will fluctuate each month depending on wholesale prices.

Standing Charge

The standing charge is the amount you pay for your energy to be supplied to you and maintenance costs. This charge can vary depending on how much energy your business uses each month.

VAT

Businesses pay a 20% VAT on their business energy bills. Your business could be eligible for a lower rate if you use less than 33 kWh of electricity or 145 kWh of gas per day then you will only pay 5% VAT.

What charges you don’t see on your business energy bills

Wholesale energy

The wholesale energy costs make up your unit rate. The wholesale energy market is quite volatile and can have a big impact on how you are charged for your energy.

If you are on a fixed contract, then the wholesale rates at the time will determine your unit rate for the duration of your contract.

If you are on a variable rate tariff, then your unit rate will vary with wholesale energy trends.

Distribution charges

As part of the standing charge, you will pay distribution costs. This is the cost of getting your gas and electricity to you. The further away from a distribution centre, you are, the more this will be.

Industry charges

This also makes up a part of your standing charge. The energy network throughout the country requires a lot of upkeep. Therefore, all consumers must pay towards this.

Metering

Part of your bills will also include paying for your meter. whether this includes meter checks or just general maintenance of these appliances.