Keeping overheads under control is always a critical priority if you’re running your own business.
But if you were hoping for a period of stability in your energy bills over the warmer summer months, the latest industry forecasts suggest otherwise as a surge in energy bills is now considered “pretty much unavoidable”.
In fact, rising energy bills is sparking fears among economists that inflation will surge in the middle of the year as a chain reaction of higher prices that will both dampen consumer demand and confidence and hamstring GDP growth.
Dr Craig Lowery, Principal consultant with energy consultancy Cornwall Insight, said: “Higher energy bills will be pretty much unavoidable as international market changes will now have been baked into forecasts.
“Over a month into the Middle East conflict, energy markets are experiencing the kind of volatility not seen since 2022.”
Six weeks ago forecasts pointed towards relatively stable price caps throughout the summer but America and Israel’s attack on Iran have upended those expectations.
The Ofgem energy price cap is now expected to jump 18% after June as the impact for spiralling oil and gas prices hits the markets and then filters down to consumers. The average bill set by the regulator is predicted to reach £1,929 in July – a quarterly rise of £288.
Ongoing disruption to supplies through the Strait of Hormuz and infrastructure damage are severely limiting any meaningful drop in wholesale prices.
Additionally, directors’ concerns should extend beyond their own direct operational costs. Any rise in bills at this scale has the potential to spark an inflationary spike in the middle of the year that will create a chain reaction of higher prices even before inflation normalises.
TNUoS and DUoS – The rise of non-commodity costs
Transmission Network Use of System (TNUoS) and Distribution Use of System (DUoS) charges are the fees your supplier pays to use the national electricity networks. These are commonly known as non-commodity charges with the costs built into what you pay for business electricity.
TNUoS covers the cost of the high-voltage transmission grid, including long-distance pylons and cables. DUoS covers the cost of your local distribution network, including the substations, poles and underground cables that connect to business premises.
For most small and medium-sized businesses, these network costs are wrapped into their standing charge and unit rate. They won’t appear as separate line items unless you’re on a pass-through or flexible tariff but they will still have a direct impact on your price per kWh.
From April 2026, they will make up a larger slice of business energy bills as they will be increasing to help fund upgrades needed to connect renewable energy sources like wind farms to the National Grid.
Average TNUoS rates for half-hourly electricity sites will rise by around 60%. The average rate will move from about £16 per MWh to £31 per MWh this month. For gas, the increase will be 40%.
The proportion of electricity costs made up from TNUoS alone could increase from around 8% to more than 13% for a typical half-hourly consumer and up to 25% for very high-voltage sites.
Much of these increases will come through higher fixed residual TNUoS charges in standing charges, rather than a simple uplift to unit rates.
For most SMEs, the headline impact of increased network charges will be higher standing charges and a higher overall cost per KWh, even if usage stays the same.
Exact TNUoS and DUoS costs depend on a few things including geographic region, meter types and site capacity.
Mitigating the costs
While you can’t opt out of regulated network charges or control global wholesale markets, there are strategic steps that directors can take to protect their business:
- Lock in rates – a fixed-rate contract doesn’t freeze non-commodity costs but securing a fixed rate can protect a business from immediate market volatility and securing a lower unit rate can help offset future hikes in network charges.
- Shift usage – while it might not be possible for most businesses, if you can shift energy-intensive processes away from peak time bands then you can actively reduce DUoS costs.
- Optimise capacity – Review any agreed supply capacity so that your business isn’t overpaying for headroom it never uses.
- Invest in efficiency – a focused energy-efficiency plan – utilising LED lighting, smart controls or elements of on-site generation such as solar PV and batteries – can directly offset upcoming cost uplifts by cutting the total amount of energy you rely on from the grid.
The last thing any business needs right now is more uncertainty about their so-called fixed costs but they have it.
If you’re concerned with the future of your business then they can help you understand what options you have to make meaningful changes relatively quickly that can positively impact your company.