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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 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 – Nuclear power plants in the UK.
Your business electricity bill will show a percentage for each source.
💡 In a green business electricity 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:
Off-peak 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.
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.
💡It’s important to remember that backdating can also work in your favour if you’ve used less electricity than your supplier estimated on their bill.
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 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
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 – Costs associated with keeping the electricity system balanced and ensuring supply meets demand in real-time.
3. Metering charges
Your electricity usage is measured by an 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.
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.
Find a cheap business energy deal with our business electricity comparison service.
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