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Business electricity bills have increased in price by 43% over the past ten years. Energy companies have blamed wholesale prices for the yearly price hikes, but are wholesale prices really to blame, or are non-commodity costs on the rise?
In this guide, we’ll provide a business electricity bill breakdown and assess how much each of the components costs per kWh.
One of the leading business electricity suppliers, SSE, has broken down an electricity bill into three segments – each of which constitutes to around 33% of your overall costs each year. The graphic below shows how the costs are divided between:
A third of your electricity bill breakdown goes directly to the government to pay for environmental initiatives. There are five key components that you could receive a charge, these include:
Below are the current charges paid by business users per kWh.
|Climate Change Levy||0.524p||0.541p||0.554p||0.559p||0.568p||0.583p||0.847p|
|CfD Operation Levy||0.000p||0.000p||0.000p||0.005p||0.005p||0.005p||0.006p|
Source: BEIS and others (see below). Data is shown for 12 months ending 31st March in each year.
There’s been a 165% increase in government levies from 2014 which added £540 per year to an electricity bill of a small business using 20,000 kWh.
The second quadrant of non-commodity electricity bill charges comes from the use and maintenance of electricity transmission and distribution (T&D) systems. Typical T&D costs include:
Some suppliers provide customers with the option of having these costs split and shown separately from their wholesale price.
The wholesale cost of electricity has remained relatively flat over the past ten years although prices fluctuate during different seasons. The so-called “day-ahead” price per MWh is £51 (or 5.1p/kWh) which is the same as the average prices in 2010/11.
Ensuring that your business is on a suitable tariff can help you save regardless of any fluctuations that may take place with electricity wholesale costs— especially if you are on a fixed-rate contract.
Now that all the different types of costs have been explained, we can see the impact they make to a current electricity bill breakdown by looking at the percentage charge for each item.
The data shown above for policy charges originates directly from the government’s Department for Business, Energy and Industrial Strategy (BEIS).
We’ve seen that the wholesale price hasn’t moved from 5p/kWh in ten years, but the government has increased its tax levies tenfold since 2008 from 0.456p/kWh to 4.332p/kWh in 2020. Therefore, it can be said that non-commodity costs are the cause of higher business electricity bills.
If you’re looking to reduce your business electricity prices, switching energy suppliers to a more affordable deal could help.
Compare business energy deals using our free comparison tool to find a suitable tariff for your business.
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