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Business energy costs explained


Understanding your business energy costs and your business energy bill can be just as confusing as comparing prices. Out guide should help.

When you get your business energy bill you’ll see it’s made up of different costs. The amount you’re charged doesn’t just depend on where your business is based but it’s also made up of different figures such as the standing charge, unit rate and environmental costs.

Unit rate

The Unit Rate is the price you pay per unit of gas or electricity used – your consumption. Depending on what type of meter you have may mean you have several different rates for electricity. For example, you may have day, night and weekend rates. The unit rate along with the standing charge are the prices you need to look at as explained in the article: Comparing the standing charge and unit rate.

Deemed and out of contract rates

You may be asked when you’re comparing energy prices if you are on “deemed contract rates” or “out of contract rates”.

Deemed contract rates refer to when a customer moves into new premises and simply uses the existing energy supply. It’s when the customer isn’t in contract with the existing supplier. They are called deemed rates because the consumer is deemed to have taken out a contract with the existing provider.

Out of contract rates refer to when a customer goes past the contract end date and has not agreed or accepted the renewal prices from the supplier. If this happens the supplier charges out of contract rates.

Both deemed contract rates and out of contract rates are more expensive than if you are in an agreed contract and so you shouldn’t be on these rates for longer than is necessary.

Standing charge

The standing charge is a fixed daily cost. It’s paid on top of your consumption charges. So no matter how much gas or electricity you consume you’ll pay the same amount to cover your standing charge.

The standing charge covers things like transporting your energy and looking after your meter.

The amount you pay in standing charges depends on where your business is located. It’s something everyone has to pay whether you’re a domestic or business consumer. However, some gas tariffs don’t have a standing charge but the unit rates will reflect this.

Your energy supplier is charged by the National Grid or the local distributor who owns the pipes and wires which transport energy around the country. It means that if your business is based in a rural area the standing charge may be higher than if it was based in a town or city because it will cost more to transport energy into the countryside. It may also cost more to repair damaged pipes or wires in a rural setting.

Climate Change Levy 

This is an environmental energy tax and it’s been part of business energy bills since 2001. It was introduced to try to help reduce greenhouse gas emissions. The Climate Change Levy (CCL) is made up of the main rates and the carbon price support rates. The main rates of the CCL apply to gas, electricity and solid fuels and should be listed on your energy bill.

How much you pay in CCL charges depends on which sector your business is in, whether that’s industrial, commercial or public services. But if you only use a small amount of energy then you won’t pay CCL charges. You will also be exempt if you are a charity.

Energy intensive businesses can enter into a climate change agreement with the Environment Agency to get a reduction on CCL rates. You can check if your business is eligible on the Gov.uk website.

VAT

If your business consumes less than 33kWh of electricity or less than 145kWh of gas per day then you may be eligible to pay VAT at just 5%. This also applies to charities and non-profit organisations such as churches. However, if you’re not eligible for this lower rate of VAT then you’ll pay the current rate of 20%.

Our dedicated pages have more information on business electricity and business gas. Our energy experts will be more than happy to help: just fill in our simple form (also at the top right of this page) or give us a call on 0330 0100 251 now.

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