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Being able to fully understand the individual charges within your business’s energy bill can be essential in properly managing energy at your premises – and can help you figure out whether you’re paying over the odds for the electricity or gas your business uses.
The following is a short outline of some of the key charges that are usually applied to a business energy bill.
Most business energy contracts include a standing charge and a unit rate. The standing charge is a fixed amount that you pay to be supplied with gas or electricity on a daily basis, while the unit rate is a cost you pay for each unit of energy you use – measured in kilowatt hours (kWh). These two factors have the biggest impact on your annual energy bill.
Another charge in your energy bill is the VAT charge, which is a government-imposed goods and sales tax your supplier is required to add to your bill. Most businesses will be charged VAT at 20%, although some businesses may be eligible for the reduced rate of 5%. In order to qualify for the reduced rate, you’ll need to have an average business electricity usage below 33kWh per day (100kWh per month) and an average business gas usage below 145kWh per day (4,397kWh per month).
If you do qualify for the lower rate of VAT, you may also be exempt from the Climate Change Levy (CCL). The CCL is another government-imposed charge included in most business energy bills. It was introduced as a way of encouraging businesses to invest in energy efficiency measures and work to reduce their carbon emissions. You may also secure exemption from the CCL by using greener energy gained from renewable or qualifying combined heat and power sources.
Further costs suppliers need to take into account are network costs imposed by Ofgem (itemised as TUoS on your bill), distribution costs imposed by Distribution Network Operators (itemised as DUoS) as well as environmental initiatives imposed by the government.
Your bill will ultimately be dictated by the unit prices you pay and how much electricity or gas you use - which is why it's important to compare business electricity prices, as well as business gas prices, before accepting a business gas or business electricity tariff. As every business is unique - and business gas and business electricity prices and usage vary dramatically – it’s difficult to determine an average figure.
The easiest way to identify whether or not you’re paying over the odds is to look at the unit rates available to businesses of your size – and this can also help in calculating how much an average bill should cost.
For figures on average prices and bills, click here.
The government’s Feed-In Tariffs (FITs) and Renewable Heat Incentive (RHI) schemes applies to businesses and households that install renewable or low carbon technologies at their property. The FIT scheme is dedicated to electricity-generating technologies while the RHI scheme is dedicated to heat-generating technologies.
With the FIT scheme, your chosen FIT Licensee will pay you for the electricity you generate, and you can also sell back any excess electricity to the National Grid, using this income to offset charges on your electricity bill. With the RHI scheme, the government will provide a fixed subsidy payable over twenty years provided you have installed renewable technologies eligible under the scheme.
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