Are you confused about your business’s energy bill? Do you want to make sure that you’re getting the most for your money? This guide will give you a simple overview of the different components that make up the final total so you can understand exactly what you’re paying for.
Your energy bill can be broken down into three separate charges:
Firstly, there is the unit rate.
This represents the cost (in KwH) of the amount of electricity needed to power a 1000 watt appliance continually for an hour, and will have been agreed when initially drawing up your contract. For example, your supplier may sell you energy at 15 pence per kwh. This is used to calculate your bill. Electricity is measured in kWh but gas is measured by volume, which your supplier converts to kWh.
If you have a ‘time of use’ meter (where you get cheaper electricity at night) for an electric heating system, you’ll have two unit rates – one will be a cheaper rate for night time use. When your energy supplier doesn’t have an actual meter reading, they’ll estimate the amount of electricity you’ve used based on the usage history for the property.
To help keep your bills accurate, it’s important that you submit regular meter readings. If you submit a meter reading with plenty of time before your invoice is due, your energy supplier can use the reading to calculate your bill and ensure you’re only paying for the electricity you use.
Your bills shouldn’t be estimated if you have a smart meter – this is because it feeds back data about your usage to your supplier automatically. Find out more about smart meters here.
Secondly, your electricity bill will also include a standing charge.
This is a fixed charge that is applied to every electricity invoice and goes toward helping to maintain the electricity network, ensuring that the electricity you use is delivered safely to your business premises.
Finally, your electricity invoice will incur a VAT charge.
The usual VAT charge for businesses is 20%, although there are several circumstances where the VAT rate could be different. If your business meets the ‘De minimus’ requirements, or your electricity supply is used partly for domestic or charitable use, you may be eligible for a reduced rate VAT.
Of course, if you have more specific questions, the best person to ask will always be your energy supplier. Most will have a ‘help’ section on their website, or can be reached over the telephone.