How to stop your business energy bills increasing

Have you noticed your energy bills rising year on year? What if we told you that the price of wholesale energy has actually decreased over the last seven years?

Now we have your attention.

Since 2013, wholesale energy prices have continuously decreased, yet both household and business energy bills have been increasing in price. The answer? Non-commodity costs.

Non-commodity costs explained

Energy bills are made up of two charges, the cost of the energy and the non-commodity cost. Non-commodity costs are the extra charges which have been added to your bill from the government and other third parties such as distribution companies. They can be categorised into two main groups: Transportation and distribution charges and government levies and taxes.

Each year, there has been at least one increase in non-commodity costs, and this has reflected into your energy bills. Energy professionals have also predicted that these charges will continue to rise over the years, with a 40 to 45% increase by 2028. (Zenergi).

The first cost group is The Transportation and Distribution charge, which does what it says on the tin. This is the cost of transmission, via high-voltage cables or high-pressure underground pipes as well as distribution to homes and businesses. The charge is essentially added to cover the upkeep costs of transporting energy to our homes every day. The second is Government Levies and Taxes which goes towards new energy schemes and investments put in place by the government. For example, renewable energy has benefited greatly from the charge as this has led to large wind farm investments.

Transportation and Distribution Charges

  • TNUoS – Transmission Network Use of System
  • DUoS – Distribution Use of System Charges
  • BSUoS – Balancing Services Use of System
  • Transmission and Distribution Losses

Government Levies and Taxes

  • FiT – Feed-in Tariff
  • RO – Renewables Obligation
  • CfD – Electricity Market Reform
  • CM – Capacity Market
  • CCL – Climate Change Levy
  • AAHEDC  – Assistance for Areas with High Electricity Distribution Costs

The pie chart below is an example of how your electric bill breaks down into these non-commodity charges.

Non-commodity breakdown in an energy bill

How do non-commodity charges affect your business?

Unfortunately, it is expected that non-commodity will continue to rise. Firstly, renewable generation currently contributes around 18% of energy bills, however, this is set to increase as we become more dependent on renewables. Secondly, the Transmission Network Use of System (TNUoS) charge is also expected to rise up to 10% each year to support the national grids much-needed upgrade.

As a result of this inflation, reducing your energy costs is considerably more difficult. However, by paying close attention to your energy meter, this often opens up opportunities to reduce your usage. Take a look at our ‘easiest ways to save energy’ blog for some energy-saving inspiration.

Another way to protect yourself from the worst of the increases is by implementing a long-term energy contract at a fixed cost. At Tritility Business Energy Consultants we specialise in reducing your electricity, gas and water costs. By comparing business energy prices from established utility suppliers, including SSE and Scottish Power, we are able to recommend a contract which best fits your business’s needs.

For more information about how we can assist with your business utility bills, call us on 0191 367 3676 or click here to fill out our quote form.

Source References
The Manufacturer
Zenergi