We know with everything else going on the last thing you want to take up time is your business energy bills.
But, taking a minute to understand how your energy bills work and what they are made up of could make dealing with your business energy that little bit easier.
From reading this guide you will understand exactly what makes up your business energy costs as these are not always labelled on the bill.
What you see on your business energy bills
Unit Rate
This is the amount you pay per Kilowatt hour (kWh) for your electricity and gas. A unit rate is usually a fixed price that you pay each month on your bills. This can vary depending on your contract, for example, if you have a variable tariff then you will pay a different amount each month depending on market movement.
Standing charge
The standing charge is the rate you pay for the supply of your energy and maintenance costs. Your standing charge each month will depend on how much electricity and gas your business uses.
Contract end date
This is the day your contract ends. Make sure you are aware of when this date is, this way you can keep on top of renewing your contract. Renewing your contract instead of going on to out-of-contract rates will mean you pay a lot less for your business energy.,
VAT
Businesses pay 20% VAT on their business energy bills usually. Some businesses are 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 parts of your business energy bill you don't see
Wholesale energy
These costs make up a part of your Unit charge. The wholesale cost of electricity and gas is extremely volatile and has a big impact on how you are you are charged.
If you are on a fixed rate tariff, then your fixed price you pay will depend on the wholesale cost of energy at the time you sign your energy contract.
If you are on a variable rate, the price you pay for energy will depend on what the wholesale prices were that day.
With the energy bill, the relief scheme’s wholesale energy costs will be discounted. See below how much of your electricity and gas bills are made up of wholesale costs, according to Ofgem:
Distribution charges
As part of the standing charge, you will pay disruption costs. This is the cost of getting your electricity and gas to you. The further away from a distribution centre, you are from where the energy is generated, the more expensive it is to transport energy to you.
Industry charges
This also makes up a part of your standing charge. The energy networks throughout the country require a lot of upkeep. Therefore, all energy consumers have to pay for this to ensure it can remain running.
Metering
Part of your bills will also include paying for your meter. whether this includes meter checks or just general maintenance of these appliances.
What makes up business gas bills
Gas and electricity bills can vary on how they are priced. Gas bills are made up of several different parts, which we will go through below.
Wholesale costs
The wholesale costs are often referred to as the raw energy cost. This price is based on how much gas is in the wholesale gas market. Gas prices aren't just made up from wholesale energy costs. Wholesale costs only make up 41% of your gas bill.
When it comes to the price cap on business energy bills, this is the part of the bill the support covers. If you are on a fixed contract during the government support then the wholesale part of your gas bill will not go above 7.5p/kWh.
Network costs
This is the cost of transporting the gas to your meter. When looking at a gas bill breakdown, this is the second largest part of your energy bill. Network costs consist of distribution costs and transmission costs.
Transmission costs are directly linked to how far the gas has to travel to reach the required entry point in the distribution network.
Environmental and social obligations
If your business is required to pay any additional government support or levies, then this will be part of your overall gas bill.
Supplier operating costs
This is the price of a supplier delivering your supply to you. This is the cost contribution to cover the supplier delivering a service to you, plus their profit. This includes the cost of metering and operational costs.
VAT
your business gas bill will also be subjected to 20% VAT
what makes up business electricity bills
As well as your gas bill many different components make up your electricity bill.
Wholesale costs
the wholesale cost of energy is the biggest part of the price of business electricity. This makes up around 35% of your electricity bill.
With the government-supported price cap, your business will now pay a discounted amount for your wholesale energy. this will be capped at 21.1 p/kWh for your electricity.
Network costs
You also pay network costs. This covers the cost of supplying your electricity from the national grid to your meter. This includes distribution, transmission and balancing costs.
Environmental and social obligation costs
Some businesses will have to pay certain levies or government initiatives within the electricity price. This used to include the climate change levy, however, this has been taken off, for now, to help businesses cope with energy bills.
Supplier Operation costs
This is the cost of your supplier’s services. This can include the cost of metering and service to your meter.
VAT
Businesses have to pay 20% VAT on all energy prices.
If you're looking to save money on your energy bills then why not get in touch today? The relationships Resolve Energy has developed with over 24 of the UK’s biggest business energy suppliers allows our energy experts to source the best business energy rates available for your company right when you need them. Request a free quote today and start saving money on your energy.
