business electricity
Tips

Factors That Affect Business Electricity Rates and What Goes on in Your Bill

Running a business entails a lot of operational tasks; it is often easy to overlook some of the details related to the bills you pay. Business owners don’t always have the luxury of scrutinising what goes on in their energy bills. But what do you know about what you are paying? Electricity bills have the following three components:

  1. The standing charge
  2. The per unit rate
  3. The end date of your contract

Each of these components plays a vital role in understanding what you are paying for and how you can make sure that you are getting your money’s worth. Most businesses today use comparison websites like Utility Bidder to get the best energy deals. When you are running a business, you shouldn’t be bleeding money in places where you can still make some savings. Unfortunately, some factors affect how much you pay for energy, which you don’t see on the bill itself.

Wholesale energy prices

Every electricity provider buys energy from the wholesale market. The market is dependent on many economic factors which make prices go up and down significantly. But in spite of these, wholesale providers put a buffer on their prices which means you are paying higher than the actual market price. In case wholesale prices go higher than the pre-set price suppliers provide, expect energy prices to go even higher.

Transport and distribution

The cost of transporting energy to your physical location depends on how far you are from the source. Think of this as a national network of highways where suppliers carry energy to distributors, and these distributors add another cost for locally bringing power to the final destination.

Losses

Transporting energy is inefficient. During this process, the original amount measured at the source is not going to be the same amount that reaches your home. The lost energy is greater if you live farther from the initial source of power.

Supplier margins

Simply put, the supplier margin refers to that portion of your bill which goes directly to the distributor’s profit. But if you think this is the most substantial factor that affects your bill, you are mistaken. It is one of the smallest line items in an energy bill that significantly affects how much you pay.

Government initiatives

Aside from the Climate Change Levy which you can easily see on your bill, there are other government imposed levies hidden within your energy bill. There’s the Feed in Tariff and the Renewables Obligation which are two of the most common government initiatives charged to businesses. The purpose of these charges is about removing carbon from the fuel supply so that the distributor meets quotas set by international organisations.

Metering

The meter is considered a physical asset which your business needs to pay for. The device itself also needs maintenance, and if your company does not use a smart meter, it will require a technician to make a ‘physical’ reading.

Industry charges

The entire energy industry is an extensive network consisting of authorities, organisations, suppliers, and transport methods. Your business energy bill includes the cost of maintaining this network functioning correctly.