If you want to save money on business energy, then understanding the charges on your bill is crucial.
In 2014, Ofgem ruled that energy bills have to be transparent: that is, any charge you incur should be clearly laid out, with no sneakily-hidden or unexplained figures. Hooray!
As a result, your energy bill may be as intimidating as a doctoral maths thesis. But, with our handy guide you’ll soon be familiar with the breakdown and common charges, so you know exactly what your business is paying for.
Your bill shows all the standard account information you’d expect, as well as bill-specific details such as a unique bill number and payment period. But we’re interested in cost: what makes up that final figure?
A standing charge is the daily fee you pay to have access to energy, even if you don’t use it. All businesses use electricity, but not all will use gas on the same scale. As a result, it is possible to find cheaper deals for business gas that have no standing charges, but it’s likely that these will only be available to smaller-sized businesses.
The amount of energy you consume is measured in kilowatt hours (kWh) and is priced per unit. So, one unit of electricity is the kWh, which is the amount of energy used by a 1Kw (100 watt) electric heater for one hour, for example. The rate you pay depends on several factors, including the size of your business. And FYI: when we say size, we don’t just mean the number of employees on payroll – size is also determined by how many kWh of energy you use annually.
Bigger business means bigger usage, so typically the higher the annual kWh use, the lower the unit rate. It’s like bulk buying.
Your bill will show how many kWh of energy you’ve used during that billing period multiplied by your unit cost.
As part of the government’s ongoing initiative to support renewable energy sources, you’ll now see a Climate Change Levy – or CCL – on your bill. For every unit of energy sourced from non-renewables, you’ll have to pay an additional fee. And that quickly adds up.
Though there are currently limited green options (such as wind and hydro assets) for business gas tariffs, renewable electricity sources (such as solar power) on the other hand are thriving. Compare business electricity deals to see providers who use renewable sources and save on your bill at the same time as being environmentally friendly.
Bear in mind that not every business will have to pay the CCL, it’ll depend on annual usage. And the same goes for VAT: if you have low annual energy usage then you could pay a reduced rate of 5% VAT, otherwise look out for the standard 20% added on to your bill, too.
On your bill, your energy supplier must show when your contract is due to end, or how much notice you must give should you wish to terminate. Such details give businesses the time and opportunity to review their current energy tariff and, critically, prohibits them from being automatically enrolled into a new, less fruitful tariff.
As a business, you should frequently review your energy consumption and whether your supplier meets your needs. Want a cheaper deal? Switch. Want a greener plan? Switch. Changed the size of your business? Switch. It always pays to compare business energy deals and new customers are often privy to bargains that loyal ones can’t access.
Keeping an eye on your contract terms and notice period can really help to save money on your energy bills and business expenditure; your bill should always have a summary of your contract to refer back to if you need clarity.
Use all the information on your bill to your advantage: don’t pay over the odds and if you are looking for a cheaper business energy deal then switch providers.
Paying your business energy bill should be a breeze, and there are plenty of payment options to choose from that best suit your business.
Just remember that your bill will change each payment period with respect to your usage, so it’s up to you to ensure the correct fee reaches your energy supplier.
Online bank transfers are an efficient way to pay your business energy bills as they come in. Transfers are made individually and thus ensure the correct sum is paid, however be aware it’s not an automatic system. You’ll need to actively make the transaction each payment period, and when there are a million other things going on making your business that’s when missed payments can occur.
Conversely, you could pay by direct debit. Many companies opt for this payment system as it’s automatic: you set up a regular payment from your account to be paid to the company. However, you can’t customise these payments, meaning that it’s likely your next bill will show adjustments based on whether you’ve paid too much or too little.
It’s still possible to pay by cheque or over the phone, though by a country mile bank transfers and direct debits are the most reliable ways to pay.