Ben Brading 5 min read

Business electricity bills explained

Over a million British businesses receive an electricity bill each month, yet these bills are not easily understood. Even a small business energy customer can receive a bill that spans several pages and features a confusing array of charges.

This article aims to help you understand each element of your business electricity bill:

Your business electricity connection
Your business electricity tariff
Your business electricity charges
Taxes and levies on your bill

Your business electricity connection

Business electricity bills are always associated with a specific connection to the local electricity grid.

Your business electricity bill will display details of this connection:

The commercial property address where your electricity is supplied.
The MPAN associated with the electricity connection.
Your business electricity meter ID.
The legal name of the company occupying your property (responsible for paying the bill).

💡 In a deemed energy contract, the bill may be addressed to the “Current Occupier,” as the supplier may not be aware of which business has moved into the property.

Your business electricity tariff

A business electricity bill will detail your current contract with your supplier, including:

Business electricity tariff name
Payment method
Contract end date
Estimated annual electricity consumption

The tariff section will also disclose how your electricity is generated in a fuel mix disclosure:

Fuel mix disclosure

Electricity on Britain’s national grid is generated from a variety of sources, including:

Renewables – Predominantly from UK wind farms and solar and hydroelectric power.
Natural gas – Gas-fired power plants.
Nuclear power – UK nuclear power plants.

Your business electricity bill will show a percentage for each source.

💡 In a green business energy tariff, all the electricity is sourced from renewables and nuclear sources, which produce zero carbon emissions.

Your business electricity charges

A business electricity bill will include the following separate charges. Click the link for an explanation of each:

Consumption charges– For electricity used by your business during the billing period.
Standing charges – A fixed daily fee included in most business electricity tariffs.
Capacity charge – An additional charge if you have a half-hourly meter

Business electricity consumption charge

All business electricity bills will charge your company for each kWh of electricity used during the billing period.

Business energy suppliers will use your meter readings to determine how much electricity you consume. These readings are either:

Actual readings – Where you have submitted a meter reading to your supplier or where a smart meter automatically provides the readings.
Estimated readings – Where your supplier estimates your readings in the absence of actual meter readings.

Here’s what the consumption charges section of your bill will look like:

Conusmption charges section on a business electricity bill

Multi-rate business energy tariffs feature separate meter readings and consumption charges for different times of the day. Review our complete guide to business electricity rates for more information.

Business electricity standing charge

Most business energy tariffs include a daily standing charge. This fee covers the cost of maintaining the connection of your property to the local electricity grid.

Your electricity bill will calculate the standing charge for the period as follows:

Daily standing charge x Number of days in the billing period

Business electricity capacity charge

The capacity charge is an additional fixed daily charge applied to businesses with a half-hourly electricity meter.

This charge guarantees the availability of electricity capacity to your property. It is typically charged at a fixed rate between 70p and 150p per kVA each month.

For more information, please visit our guide to maximum demand charges.

Business electricity taxes and levies

The UK government directly taxes business electricity bills in two ways:

Climate change levy

This government tax is paid for each kWh of electricity consumed. Since 1 April 2024, the climate change levy for electricity is 0.775 p/kWh. This tax will appear as an additional charge line on your business electricity bill.

💡 Microbusinesses and charities are exempt from the climate change levy on electricity bills.

Valued Added Tax

VAT is a consumption tax that the UK government levies on the sale value of goods and services. Most businesses pay 20% VAT on top of all the other charges on their electricity bill.

Microbusinesses and charities pay VAT on business electricity bills at the reduced rate of 5%. For more information, see our guide on business energy VAT.

How does backdating work on a business electricity bill?

Backdating is when your business electricity supplier charges you for additional electricity your business used in a previous billing period.

If your business doesn’t submit regular meter readings, your supplier will estimate your electricity consumption in each bill and then reconcile the amount you owe later when they receive actual meter readings.

Invoice backdating occurs when the actual amount of electricity you’ve used is higher than the estimate your supplier used.

💡Unexpected bills from the backdating process are a frequent source of business energy supplier complaints.

What costs make up a business electricity bill?

Here are the four most important costs associated with delivering business electricity in Britain:

1. The wholesale cost of electricity

Electricity pricing is largely influenced by the wholesale electricity market, where electricity is bought before it is supplied to your business. The cost of wholesale electricity can fluctuate based on supply and demand dynamics, fuel prices, and market conditions.

The UK generates electricity from a variety of sources, including renewables, nuclear power, and fossil fuels, and also imports electricity via undersea interconnectors from neighbouring countries.

On top of wholesale purchases, suppliers must also pay a CfD supplier obligation levy for each MWh purchased to fund the Contracts for Difference scheme.

2. Transmission and distribution costs

Once electricity is generated, it needs to be transported from power stations to your business premises. This involves:

Transmission Network Use of System charges (TNUoS) – Fees paid for using the high voltage network to transport electricity across long distances.
Distribution Use of System charges (DUoS) – Fees incurred for the use of local distribution networks that deliver electricity directly to end-users.
Balancing services charge (BSUoS) – Costs associated with keeping the electricity system balanced and ensuring supply meets demand in real-time.
Reactive power charges – An additional distribution cost for properties drawing large quantities of reactive power.

3. Metering charges

Your electricity usage is measured by a business electricity meter installed at your property. Costs associated with these meters include:

Meter rental charge – Most commercial electricity meters are rented from a meter asset manager, for which your supplier pays a rental fee.
Meter operation and maintenance charge – Includes costs for the regular reading, maintenance, and occasional replacement of meters. If your business uses a smart meter, additional costs are incurred for the communication technology that enables automatic and remote readings.
Meter Operator charges – Ongoing costs for the maintenance of half-hourly electricity meters.

4. Electricity supplier margin

Like any business, electricity suppliers aim to make a profit. This margin covers operational costs and allows for profit. In Britain, electricity suppliers compete on price and service quality to attract customers.

Compare business electricity deals today using our business energy comparison service.