Let’s face it – business energy bills are confusing. They are often filled with unclear terms and conditions, mysterious additional charges and technical jargon that you may not fully understand. However, understanding your bill is absolutely vital if you want to cut down on your business energy costs.
What’s in this guide?
The first step is understanding how energy pricing works. Your basic energy charges comprise of a standing charge, your charge per kWh, and additional taxes as applied by your supplier.
- Standing charges : This is a fixed amount that you pay per day, irrespective of the amount of energy consumed. Typically a nominal amount, your standing charges can range between 15-30 pence per day. Some suppliers, however, charge a much higher amount, even going up to 80 pence per day, which, when you consider your annual bill, represents an over-expenditure of around £200!
- kWh: Kilowatt hours are the standard unit for measurement of energy (similar to kilograms for weight). One kWh is the amount of energy you would consume by running a 1000 kilowatt appliance for one hour, which equates to around ten hours on an average laptop. The amount you pay for energy consumption depends on the measure of kWh, with one unit on your meter typically representing one unit of energy. The cost per kWh varies from company to company, so make sure you are getting the best deal when choosing a supplier.
- Additional charges: Some examples of typical additional charges that your supplier might tack on to your bill are a Climate Change Levy, which encourages business energy users to become more energy efficient, Value added tax (VAT), metering costs (the cost of maintaining your gas and electric meters), and supplier margin, which represents the profit that your supplier earns off you as a customer. When choosing an energy supplier, make sure you understand all the additional charges that will be included, so that you are not surprised when your bill amount seems higher than usual.
Now that you’ve understood how energy pricing work, you can use this knowledge to examine the components of a typical energy bill.
Your bill
Every bill contains some general information that is intended to help your supplier identify you more accurately, and for you to identify a specific bill from a particular time period more easily.
- The bill date
- Your unique account number with your supplier
- Contract details : A summary of the agreed upon terms and conditions with your supplier
- Billing period : Different from bill date, as it shows the date range over which you are being charged for energy consumption
- Outstanding amounts from previous period
- Outstanding amounts from current period
- Amount that needs to be paid
- Type of charge
Usually also included
- MPAN / MPRN : Your Meter Point Administration or Registration Number is a number that is used by energy suppliers to identify the energy meters on your property
- Break down of charges
Charges
The next section of your bill contains details about your energy charges. As mentioned earlier, this includes the kWh charges for the billing period, VAT charges, any outstanding balance from a previously unpaid bill, as well as any surcharges. The total amount payable is the final amount your will have to pay, which includes all of these charges.
Additional information
Some of the additional pieces of information you might see on your bill are:
- Your tariff or plan details : While this is usually not described in full detail, you might see a reference to your energy plan in the form of a plan number or some alphabets. You can always refer to your energy supplier’s website to remind yourself of the exact plan details.
- Estimate or actual reading : Next to your meter reading on the bill, it may be mentioned whether the amount of your bill is an estimate (which is based on your previous consumption, or on the energy consumption of customers similar to you), or if it is based on actual reading of your meter. Ideally, you should try to send your energy supplier actual readings on a periodic basis to ensure that your billing is as accurate as possible.
- Tariff comparison rate : Some energy suppliers provide a tariff comparison rate, which can be used to compare the value of different suppliers. The TCR represents the overall rate per kWh, including all surcharges and discounts. You should compare this value for as many suppliers as possible, to ensure you are getting the best deal for your business.
- Switching info : While it is in most suppliers’ interest not to promote the competition, providing switching information is sometimes mandated by the law, so keep an eye out for any information that could help make it easier for you to switch providers. While this information can be used as a starting point for making your comparison, it is always advisable to delve into this into greater detail with some independent research.
A recent study indicates that around 40% of small and medium enterprises have not changed their energy supplier in over 5 years.
Reasons range from a lack of knowledge of other suppliers, to concern over the amount of time it takes to switch suppliers, to unawareness about better priced suppliers, but the bottom line is that businesses could be missing out on huge savings in energy cost just because they have not explored other options.
So make sure you understand as much as you can about your bill, and do not hesitate to find a new supplier if you feel like your current supplier is selling you short!