When running a business, every expense counts, which is why many small business owners are asking: “Why is my electricity bill so high?”
There are a number of reasons that your business could be seeing an increase in electricity costs. This article explains some of the reasons why your latest business electricity bill may be so high.
Why is my electricity bill so high?
Before working out why your electricity bill is so high, you’ll first need to understand how your energy bill works and the different costs associated with the total amount payable.
Irrespective of how much energy your business uses, your standing charge (the rate you pay each day for the supply of energy to your business) remains the same. Not all business electricity bills include standing charges, but those that don’t generally recover the cost by having higher unit rates.
The unit rate is the amount you pay for each kilowatt-hour (kWh) of energy you use. Although generally locked in for the contract period, the unit rate you end up paying is affected by the wholesale energy market. Energy prices are volatile, with gas prices changing daily and electricity prices changing every half hour.
Most businesses pay 20% VAT on their business energy bills, although there are some exceptions.
Non-commodity costs are not always itemised on your electricity bill, but are factored into the overall price that you pay. Examples of non-commodity costs are government levies and transportation and distribution costs.
Typical transmission and distribution costs include:
- Transmission Network Use of System (TNUoS)
- Balancing Services Use of System (BSUoS)
- Distribution Use of System (DUoS) charges
These days, approximately one third of business energy bills are now going to Government’s environmental initiatives, which include:
- Renewables Obligation Certificates (ROCs)
- Climate Change Levy (CCL)
- Feed in Tariffs (FiTs)
- Contracts for Difference (CfDs)
- Capacity Market (CM)
Increases in non-commodity costs can be passed onto the consumer unless otherwise stipulated in the supply contract.
Why is My Electricity Bill So High? 7 Questions to Ask:
1. Has there been a change of season or extreme weather conditions?
Electricity bills are generally higher in winter as your business uses more light and heating. Energy shortages during cold snaps (like the ‘Beast from the East’ in 2018) can also hike up energy prices.
One way of mitigating the effects of cold weather and high heating consumption is to turn down the thermostat as low as comfortable – as a general rule, above 18°C. You can also set a timer on your thermostat to ensure that it’s turned off when not in use.
2. Did you buy a new appliance or equipment?
Have you changed the equipment you use to operate your business? For example, desktop computer use more electricity than laptop computers – about double the amount, in fact.
If you have bought new electrical appliances recently, make sure that you are using them as efficiently as possible and turning them off when not in use.
3. Are you using ageing appliances?
Like older car models, old appliances are generally less energy-efficient as they don’t use the latest technological advances. When investing in new appliances and equipment, opt for the most energy-efficient wherever possible.
4. Have you changed the way you’re using your energy?
Leaving electronics plugged in (even when they’re not in use) draws power and can run up your electricity bill. Even if your devices – TVs, chargers, laptops, computers, coffee machines etc. – are idle, they could still be using electricity in standby mode. To make it easier to remember to cut the power to these devices completely when they’re not in use, you can connect them all to a power strip which is turned off at the end of the day.
Don’t charge your electrical items unnecessarily – once your mobile phone is fully charged, unplug the charger. This is also better practice in terms of prolonging the lifespan of your device or appliance’s battery.
5. Are your meter readings accurate?
Does your electricity bill actually reflect your energy usage? Your supplier may have based your bill off an estimate, or made a mistake in calculating your energy consumption.
Take an actual meter reading and compare it to the number on your energy bill, then contact your energy supplier to update them with the accurate reading. An invoice validation process can help recover money wasted on billing errors, and you can also look to getting a smart meter installed to record your energy consumption in real time.
6. Have you been moved onto a Standard Variable Tariff (SVT)?
If you haven’t renewed your energy contract or moved to a better option, you could be paying your supplier’s Standard Variable Tariff (SVT), which is typically not very competitive.
7. Have you moved business premises?
Different areas in the UK are subject to experience different energy prices, which means that moving premises may cause your electricity rates to change. Other changes affecting your energy prices could include the size of your new space, its insulation, type of lighting, heat source etc.
No time to work out why your energy bill is so high?
Many SMEs simply lack the time to work out why they are paying so much for their energy. Let’s face it, running a business means that you have several different tasks competing for priority, and electricity isn’t always one of them. That’s why they use the services of an expert energy consultant like Smarter Business to take on their total energy management, securing better deals and identifying potential energy efficiencies.