What charges are included in your business gas and electricity bills?
There are many factors that contribute
to the amount energy suppliers charge you for your business gas and
electricity. Obviously, they add a margin for profit - which is
obviously a controversial issue - but here's a breakdown of the
charges covered by your bill.
1. Wholesale gas and electricity
Unsurprisingly, a large proportion of your bill covers the cost
of purchasing energy from the wholesale market.
Gas and electricity companies purchase the energy they expect
you to use in advance at the outset of your contract. This ensures
that your supply and your prices are guaranteed for the duration of
your contract and is a key difference between commercial and
domestic energy supplies. This is an advantage of business energy
contracts because an increase in wholesale energy prices will not
have an immediate effect on your bills.
2. Transmission Use of System (TNUoS)
The transportation and distribution of energy involves a
significant cost that is also built into your business gas and
electricity bills. Your supplier is obliged to pay a fee to the
National Grid - Britain's high-voltage electricity transmission
network - to cover the expenses they incur for maintenance, upkeep,
generators and distribution networks. These charges will vary
depending on the geographical 'zone' in which your business
operates. Each zone has different demands on electricity
consumption and generation.
For high-consuming businesses that have half-hourly
meters, TNUoS charges are based on the peak levels of demand
measured over three half-hour time periods between the months of
November and February in a financial year. These time slots are
known as Triads.
For customers whose businesses do not use half-hourly meters,
the energy company is charged based on the sum of the total
consumption between 16.00 and 19.00 every day in the entire
3. Distribution Use of System (DUoS) charges
These charges are required by Distribution Network Operators
(DNO) - the companies that are licensed to distribute electricity
in Britain. The charges comprise standing charges, day and night
charges and the maximum supply requirements of the sites on the
4. Climate change levy (CCL)
The CCL is a tax paid by non-domestic energy users. The fact
that this is paid on a per-unit basis means it provides a financial
incentive for businesses to improve their energy efficiency and
reduce their carbon emissions. Companies are exempt from paying the
CCL if the energy they use is generated by renewable sources such
as hydropower. However, nuclear power - despite causing no direct
carbon emissions - is subject to CCL.
5. Value added tax (VAT)
VAT is charged on business gas and electricity bills at the
current rate of 20%. However, if your business uses less than 33
kilowatt hours (kWh) of electricity or less than 145 kWh of gas per
day, you may be eligible to pay the "De-minimis" rate of VAT. This
is currently at 5%. If you run a
charity or non-profit organisation, you should also be eligible
to pay the lower rate of VAT.
business energy prices across the whole market, call Make It
Cheaper and speak to one of our saving experts. Call us on
0800 970 0077 or complete the contact form on this page and a
saving expert will call you back.