What Are You Actually Paying For?
A business energy bill can look complicated.
There may be meter readings, unit rates, standing charges, taxes and other costs.
However, you do not need to understand every industry term.
Instead, start with a few simple questions:
How much energy did we use?
What did we pay for it?
Are the meter readings correct?
Are the charges what we agreed?
Once you know these things, the rest becomes much easier.
Start With the Billing Period
First, check the dates.
Your bill should show the period you are paying for.
For example:
1 April to 30 April
This sounds obvious.
However, it is an important check.
A bill covering 60 days will naturally be higher than one covering 30 days.
Therefore, always compare like with like.
Check the Meter Readings
Next, look at the meter readings.
Your bill normally uses a start reading and an end reading.
The difference helps work out how much energy you used.
For example:
Start reading: 24,000
End reading: 25,500
The difference is:
1,500 units
However, you should also check where those readings came from.
They may be:
- Actual readings
- Customer readings
- Smart meter readings
- Estimates
Estimated readings are particularly worth watching.
Why Estimates Matter
Imagine your business is quieter than usual.
Perhaps you have reduced your opening hours.
However, your supplier continues to estimate your use based on an earlier period.
Your bills could then be too high.
The opposite can also happen.
If estimates are too low, debt can build up without being obvious.
Later, an actual reading may cause the account balance to jump.
Therefore:
Check the reading as well as the amount due.
Check the Meter Itself
If possible, compare the bill with the actual meter.
Make sure the reading looks reasonable.
Also, check the meter serial number.
This number identifies the meter.
The serial number on the bill should match the meter supplying your premises.
This can be particularly useful after moving into a new property or after a meter has been replaced.
Understanding kWh
Your energy use is normally measured in kilowatt-hours, or:
kWh
This tells you how much energy has been used.
Suppose a piece of equipment uses 2 kW of power.
If it runs for one hour, it uses:
2 kWh
Run it for five hours and it uses:
10 kWh
Your bill then applies a price to the energy used.
The Unit Rate
The unit rate tells you how much each kWh costs.
Suppose your electricity rate is:
25p per kWh
and your business uses:
2,000 kWh
The basic energy cost would be:
2,000 × £0.25 = £500
However, your final bill will normally be higher.
That is because there can be other charges.
The Standing Charge
Most business energy contracts also have a standing charge.
This is normally charged each day.
For example:
80p per day
Over 30 days, that would be:
30 × £0.80 = £24
Therefore, even a business that uses very little energy may still receive a bill.
The standing charge continues because the supply remains available.
Put the Two Together
We can now build a simple electricity bill.
Suppose your business uses:
2,000 kWh
at:
25p per kWh
That gives us:
£500
Now add a 30-day standing charge of:
80p per day = £24
So far, the bill is:
£524
However, we are not finished.
There may also be taxes and other charges.
VAT on Business Energy
Unlike most household energy, business energy is normally charged at:
20% VAT
However, some energy use can qualify for the reduced 5% VAT rate.
For example, the reduced rate can apply when the amount supplied falls within certain low-use limits. Some qualifying charitable use can also receive the lower rate.
Therefore, do not assume that every business must always pay 20%.
If you believe your VAT rate is wrong, ask your supplier to check it.
What Is the Climate Change Levy?
Many businesses will also see the Climate Change Levy, or:
CCL
on their energy bill.
CCL is a tax on certain energy supplied to businesses and public organisations.
It is charged according to the amount of energy used.
However, not every business supply pays it in every situation.
For example, supplies that qualify as small amounts of energy can be excluded. Other reliefs can also apply.
Therefore, if CCL appears on your bill, it should make sense for your type and level of energy use.
VAT and CCL Are Different
It is easy to mix these two up.
However, they are separate charges.
VAT
is a tax added to the bill.
CCL
is a separate environmental tax on certain business energy use.
Depending on your circumstances, you may pay both.
So, when checking the bill, look at them separately.
What Is an MPAN?
An electricity bill may show an:
MPAN
This means Meter Point Administration Number.
It identifies your electricity supply point.
It is not the same as the serial number printed on the physical meter.
Think of it this way:
Meter serial number = identifies the meter
MPAN = identifies the electricity supply point
You may need the MPAN when changing supplier or dealing with a problem involving the electricity supply.
What About Gas?
Gas has a similar number called an:
MPRN
This means Meter Point Reference Number.
Again, it identifies the supply point rather than simply the physical meter.
So:
Electricity → MPAN
Gas → MPRN
You do not need to memorise the names.
However, it is useful to know where to find them.
Gas Bills Have an Extra Step
Gas bills can look slightly different from electricity bills.
A gas meter records the amount of gas passing through it.
However, your supplier needs to turn that reading into energy.
Therefore, you may see a calculation involving things such as:
- Meter units
- Volume correction
- Calorific value
- Conversion to kWh
This can look very technical.
However, the result you are mainly interested in is:
How many kWh of gas am I being charged for?
You do not normally need to calculate the conversion yourself.
Check Your Contract Against the Bill
This is one of the most important checks.
Suppose you agreed to:
24p per kWh
However, the bill shows:
28p per kWh
That needs investigating.
Likewise, check the standing charge.
Do not assume that because the supplier produced the bill, every figure must be correct.
Compare the bill with the contract you agreed.
Why Has My Bill Suddenly Increased?
A larger bill does not always mean your price has gone up.
You may simply have used more energy.
For example, perhaps:
- The weather became colder
- Opening hours increased
- Production increased
- New equipment was installed
- Heating controls changed
- Previous bills were estimated
Therefore, separate price from use.
Ask:
Did we use more?
and then:
Did we pay more for each unit?
These are different problems.
A Useful Business Example
Imagine a café’s electricity bill rises from:
£800 to £1,050
The owner may immediately think:
“Electricity prices have gone up.”
However, suppose the unit rate has not changed.
Instead, a new refrigerator has been installed and opening hours have increased.
The higher bill may be caused by greater use.
That leads to a very different solution.
Changing supplier will not remove the extra energy being used.
Compare kWh, Not Just Pounds
When comparing bills, look at the energy used.
Suppose last January cost:
£900
and this January costs:
£1,100
Now check the kWh.
If energy use has increased by 25%, the higher bill may make sense.
However, if energy use stayed almost the same, look more closely at the rates and charges.
Therefore:
£ tells you what you spent.
kWh helps tell you why.
That is a very useful habit for any business.
Larger Electricity Supplies Can Have Extra Charges
For many small businesses, the bill remains fairly straightforward.
However, larger electricity users may see extra charges linked to their supply.
These can include charges connected with:
- Available capacity
- Maximum demand
- Reactive power
This is where business electricity becomes more technical.
However, these charges are not random.
They relate to the demands your business places on the electricity network.
We will explain them on the next page.
Look for Patterns
One bill tells you what happened during one period.
Several bills can tell you much more.
For example, compare the last 12 months.
Look for:
- Seasonal changes
- Sudden jumps
- Unexpected falls
- Changes in opening hours
- Changes after new equipment was installed
Patterns can help you find waste.
They can also help you plan future costs.
Keep Your Bills
Business energy bills are useful records.
Therefore, keep them somewhere easy to find.
You may need them when:
- Comparing contracts
- Checking past energy use
- Planning a budget
- Challenging a bill
- Looking at an energy-saving project
Digital copies are fine.
The important thing is that you can find them when needed.
A Five-Minute Bill Check
You do not need to study every bill for an hour.
Instead, check a few key things.
1. Billing dates
Does the period make sense?
2. Meter reading
Is it actual or estimated?
3. Energy use
How many kWh did you use?
4. Unit rate
Does it match your contract?
5. Standing charge
Is it what you agreed?
6. Taxes and other charges
Do VAT, CCL and any extra charges make sense?
7. Compare with the last bill
Has anything changed significantly?
If something looks unusual, investigate it.
In Short
A business energy bill becomes much easier when you break it into parts.
Start with:
Energy used
Then look at:
Price per unit
Next add:
Standing charges
Then check:
VAT, CCL and any other charges
Most importantly, compare the meter reading and rates with what you expect.
Do not only ask:
“How much is the bill?”
Also ask:
“Why is the bill this amount?”
Once you understand that, you can start making better decisions about your energy.
However, some businesses have another part of the bill to understand.
They may pay for the size and demands of their electricity supply, as well as the energy they use.
That takes us to our next page:
Next: Business Electricity Supply, kVA and Maximum Demand →
Energility
Understand More. Spend Less. Live Better.