With energy bills often accounting for a large monthly expense for most businesses, understanding the fees and charges involved in the bill may be useful for you finding potential areas of savings. This may help you when it comes to comparing energy plans to find the best deal for your business.
There are a number of different charges on your energy bill and if you don’t understand what each charge is for, then it can be hard to understand what you’re paying for and where your money is going.
For many business owners, your energy bill probably goes straight to your Accounts department. It may not be being assessed regularly. Familiarising yourself with your energy bill can help you see if you’re paying too much for your business energy and find areas you can cut down on energy usage.
Many energy retailers format their bills slightly differently, but here are some common charges to look out for.
Also sometimes referred to as daily charges, supply charges are a fixed cost for delivery of electricity to your site.
These charges include the fixed costs incurred in supplying your premises with energy.
Your energy bill will include usage details of your business energy during the billing period, including the retail cost of the electricity your business uses as set by the energy retailer.
Energy usage charges are charged at cents per kWh (kilowatt hour) for electricity. These charges can vary for different periods, such as peak, off-peak and shoulder. Peak, off-peak and shoulder periods can vary between energy providers.
To be charged a time of use rate, you usually need to have a digital smart meter installed, or multiple time-switched meters instead of a single analogue meter.
You may also have separate charges for a dedicated hot-water or heating supply, and depending on the size of your business, you may have a demand charge component in your usage charges.
Demand Charges are increasingly being included in new tariffs, and are not measured using kilowatt hours (kWh), but instead on the amount of kilowatts (KW) demand that your premise draws (“demands”) from the electricity grid.
Demand charges are being used by distribution companies as a way to charge for the amount of capacity that they have to build to support customers on the grid. Demand charges can vary in how they are applied, some may apply during peak periods, while others apply for the maximum that a premise draws in a month. Check your bill and with your retailer for more information if required.
Your usage summary is a good indicator of how your energy usage changes each month. This can help you gauge whether it has gone up or down over the past year and whether you can expect seasonal spikes in energy costs.
Meter charges are a fixed cost for maintaining the energy meters on your site. These may be set by your energy retailer, or from a metering arrangement you may have entered into with a third-party supplier. For small businesses, these charges may also be built into your retail energy charges.
These charges may include meter installation, maintenance, special meter readings, inspection fees, upgrades, connection and disconnection.
Your meter readings will also be shown on your energy bill. There may be two descriptions on your bill, actual (this means a reading has been done at your business premise), and estimate (this means your bill has been calculated based on estimated usage or may contain estimated data for the billing period).
If an estimate ends up being less than a later actual reading, you will need to pay the difference next time your retailer does an actual read. If the estimate is higher than your actual, you should be credited or refunded the difference on your next bill after an actual meter read is done.
Where possible every bill should be calculated based on an actual read because it ensures what you’re paying is accurate.
Feed in Tariffs
If you have a solar system you may also see a feed in tariff credit on your bills, for the amount of energy you have exported to the grid.
Other charges such as for field visits, meter readings or alterations to your meter service may also appear on your bill.
Understanding your business energy bill can help you stay on top of your expenses and understand how your usage impacts your cash flow and profitability. If there are any charges or elements of your energy bill that you don’t understand, talk to your energy provider to get more information specific to your business energy bills and your energy retailer.
For more tips on staying up-to-date with your business expenses, check out our blog on keeping track of your finances.