What factors do you need to understand?

Business energy bills may or may not be about to rise to unprecedented levels in the next few months which should cause most directors and owners to think carefully about how they could service these debts. 

But how much do they know about how the price they pay for electricity and gas is calculated, what the charges are made up of and what the average bill statement tells you about it and their use?

We’re going to do a deeper examination behind all of these so that you’ll be better informed on your own consumption and how any announcements are made in the next few days or weeks will likely impact you and your business for the months ahead.

Energy Bill Breakdown

Energy bills themselves can be more complicated than is absolutely necessary and it’s hard to find the most pertinent information so we’ll look at the components of a typical business energy statement and what elements you should be paying the most attention to. 

The standard account information will include:

  • Date – when the bill was received
  • Bill number – a unique reference number issued by your energy supplier to identify the bill
  • VAT number – your registered VAT number
  • Account number – your account identification number
  • Contract details – Summary of the existing contract details you have with your supplier
  • Billing period – the time period for which the energy is being charged
  • Type of charge – this will state whether the bill is for an estimated usage amount or an actual usage amount
  • MPAN/MPRN – this number is used by suppliers to identify which energy meters are on your property and being used to obtain the billing information

The most important section and probably the one you will look at first is the charges section. This will include the following information:

  • Overall billing period charges – the overall amount being charged during this billing period
  • Outstanding charges – the amount owed from previous bills
  • VAT charges – the amount added to the bill as VAT
  • Total amount due – all of the above are added up to find this figure which is the important one – the actual amount that has to be paid in this billing period
  • Cost breakdown – an itemised list of charges that allow you to see how the bill has been compiled from various sources

Costs and charges

The average gas and electricity bill can look overwhelmingly complicated at first because of all the different charges they incorporate. Here we look at each in more detail and explain what each one is.

  • Unit cost – this is measured in kilowatt-hours (kWh) and is the amount you pay for each unit of gas or electricity you use
  • Standing charge – this is a flat daily rate that covers the cost of getting the energy to the premises and is charged regardless of whether any gas or electricity is used that day
  • Wholesale energy costs – these are the costs that the energy company pays when buying the gas and electricity from wholesale suppliers. This amount is the total they expect the customer to use in the period and is bought in advance to make sure that they don’t run out during the period of the contract.
  • Transmission Use of System charge (TNUoS) – this charge covers the costs of transporting and distributing the energy. A proportion of this charge goes towards the cost and upkeep of maintaining the National Grid. 
  • Distribution Use of System charge (DUoS) – this charge includes the costs applied by companies that are known as Distribution Network Operators (DNOs) which are companies officially licensed to distribute electricity within the UK.
  • Climate Change Levy (CCL) – An additional tax levied and designed to encourage businesses to improve their own energy efficiency and reduce their carbon footprint.  Some companies are exempt from this charge based on how much renewable energy they are using.
  • Metering costs – this is the cost of buying and maintaining your electricity and gas meters.
  • VAT – Usually charged at 20% on business gas and electricity bills but can be variable. For instance, if the company uses less than 33 kWh of electricity or less than 145 kWh of gas per day then they could be charged at the lower rate of 5%.
  • Supplier margins – This is the amount that the energy supplier makes from the customer. This number includes marketing, acquisition and administration costs as well as profits.

What is the average business energy rate and what should you be paying?

Business energy costs are variable for each company and depend on a wide number of factors. 

Cheaper rates will lower bills but the size of premises to be heated and lit, the number of employees and how energy efficient a company is will all have a material impact on overall electricity and gas usage.

Average business gas and electricity usage 

Business SizeLow end expected gas usage (kWh)High end expected gas usage (kWh)Low end expected electricity gas usage (kWh)High end expected has usage (kWh)
1-10 employees5,00015,0005,00015,000
11-49 employees15,00030,00015,00025,000
50-100 employees30,00065,00025,00050,000
Over 100 employees65,000100,000 & over50,000100,000 & over 

Business energy usage can vary greatly between industrial sectors and businesses within those sectors too. Some businesses are more seasonal than others while demand for some may be constant all year long.  

In 2021 the top 10 biggest business energy consumers by sector were:-

  1. Commercial & Miscellaneous services – 169,972,450 Mwh used annually
  2. Public administration – 64,883,779 MWh
  3. Manufacturing & Industrial services – 42,042,450 MWh
  4. Chemical manufacturing – 40,728,260 MWh
  5. Food, drink & tobacco manufacturing – 34,506,210 MWh
  6. Mineral products manufacturing – 30,028,660 MWh
  7. Printing and publishing – 21,294,530 MWh
  8. Agriculture – 17,503,150 MWh
  9. Mechanical engineering – 17,596,190 MWh
  10. Iron, steel and metal manufacturing – 17,410,110 MWh

Average business gas and electricity rates

Business SizeAverage annual gas usage (kWh)Gas daily standing chargeGas average price per kWhAverage annual electricity usage (kWh) Electricity daily standing chargeElectricity average price per kWh
1-10 employees5,000 to 15,00038.4p20.5p5,000 to 15,00055.7p50.6p
11-49 employees15,000 to 30,00034.2p16.5p15,000 to 25,00043.9p52p
50-100 employees30,000 to 65,00036.7p18.5p25,000 to 55,00044.7p52.7p
Over 100 employees65,000 to 100,000169p20.5p55,000 to 200,000107.6p46.2p

Average annual energy costs per business

Business SizeAnnual gas bill based on average usageAnnual electricity bill based on average usageTotal energy bill based on average usage
1-10 employees£2,190£5,263£7,453
11-49 employees£3,878£10,560£14,438
50-100 employees£8,922£12,243£21,165
Over 100 employees£13,942£26,033£39,975

The key to cutting the cost of commercial energy bills will be to find a tariff that offers both a lower unit rate and a lower standing charge than the one currently offered.  

There are several other factors that will impact on the cost including availability of tariffs, their length and whether they are variable or fixed rate but trying to lower those two elements should be amongst the most important in your calculations and negotiations. 

What next?

We’ve already recently covered some of the forthcoming energy challenges facing pubs and restaurants in particular but every business in the country will be affected by official decisions taken in the immediate future. 

There is expected to be an announcement based on new measures to help businesses offset or avoid large energy prices rises in the coming days which they are more susceptible to as these are not subject to the consumer price cap.

While the speculation on what will be announced is fervent, it may still take several weeks for any measures to be adopted by energy companies which will be no help if a company’s fixed rate deal runs out before then or they are already looking to sign up to a plan to secure longer term security and stability if possible. 

Business owners and directors can put the time to good use right now by taking action to shore up any weaknesses in their company’s financial defences. 

We offer a free initial consultation with an expert advisor who, once they get an understanding of the circumstances the business faces, can advise on what options are available to help so they won’t have to rely on protection from energy bills coming down the line.