How To Make Sense of Your Electricity Bill

At first glance, reading your business electricity bill looks a little complicated. When it comes to your business electricity bills, knowing what to expect can help avoid paying unnecessary charges.

Business owners must understand how to read the electric bill and find ways to reduce the cost of their energy consumption during the current energy crisis. Click here to find out how to reduce electricity costs for your business.

Your electricity bill is broken into three main parts that are easy to understand once you know what to look for.

What Are the Three Components That Make up Your Electricity Bill?

What you pay for on your electricity bill can be determined by three components. With this knowledge, you can implement a plan to increase your business efficiency while decreasing costs.

Your electricity bill consists of the following three components:

• Commodity costs
• Non-commodity costs
• Non-commodity systems and transmission costs

1. Commodity Costs

Commodity or wholesale costs are the easiest to understand and are related to the direct costs of generating the electricity you use. Energy technologies ranging from EV Chargers to transformers are included in the wholesale costs.

Furthermore, there is also an allowance for the costs associated with operating, building, burning fossil fuels and nuclear generation. Commodity costs also cover the installation and maintenance of renewable energy.

2. Non-commodity Costs

A third of the non-commodity costs go to the Government and distribution companies. These expenses pay for environmental and conservation initiatives, which are subsequently handed to your energy supplier and added to your business energy bills. They are also known as pass-through charges for this reason.

Non-commodity costs generally cover system and network charges related to the operation of distribution and transmission systems.

Here is a breakdown of non-commodity costs to fully understand why you will see these costs on your electricity bill.

Non-commodity Costs Relating to the Daily Distribution and Maintenance Costs:

• TNUoS: Transmission Network Use of System covers the maintenance of the National Grid.
• DUS: Distribution Use of System Charges cover the costs associated with distribution and network maintenance.
• BSUoS: Balancing Services Use of System covers costs related to balancing the electricity flowing through the network.

3. Non-commodity Systems and Transmission Costs

The following are taxes that fund government initiatives and Green energy programs.

Government Taxes and Levies:

• FIT: Feed-in Tariff funds smaller renewable generation schemes that sell energy back to the grid.
• CCL: Climate Change Levy is a tax to reduce carbon emissions and increase energy efficiency.
• CFD fit: Electricity Market Reform is a tax that supports low-carbon energy providers.
• CM: Capacity Market costs ensure that businesses and households have a steady supply during peak hours.

What You Should See Standard on Your Electricity Bill

There should be two main costs that make up your electricity bill.

The unit rate would be the amount you pay for each kilowatt hour (kWh) of electricity your business consumes. Whether you are on the standard variable tariff or a fix-rate tariff, every household and business will be charged a unit rate.

The standing charge is the rate you pay daily for the supply to your business, irrespective of how much energy you use. The costs also cover the maintenance costs for the National Grid.

What Charges Should You Be Aware of on Your Business Electricity Bill?

Depending on your energy supplier, every electricity bill will be formatted differently. However, you should keep an eye out for three key areas in your statement.

Smart Meter Charges

There are energy suppliers that provide businesses with smart meters. Typically there are no upfront costs for installing a smart meter, and energy providers would absorb the costs through everyone's bill. However, some providers will add an explicit charge to your bill for installing the smart meter. Always ask your energy supplier if you will pay the fee on your next electricity bill.

Breakdown of Charges

As a business, you must keep an eye on how much you are being charged. Estimated readings can leave you paying far more or less than the actual reading, which could surprise you on your next bill. If you have a smart meter installed, ensure those accurate readings are provided to your energy supplier.

Electricity Consumption

The amount of electricity your business consumes is measured in kWh. Track your monthly consumption and if you feel that your business is consuming too much, look for ways to be more energy-efficient.

The responsibility of running your business means having a variety of tasks competing for priority. Taking the time to scrutinize your electricity bill could help you understand where your business can cut costs by becoming more energy-efficient.