Understanding your commercial energy bill

A standing charge is a daily cost that is included in your electricity and gas bills. This cost is set by energy suppliers and is charged regardless of whether you use any energy on that day. The amount you pay depend on the energy supplier and where you live in England, Scotland or Wales.

The standing charge covers the costs of maintaining the energy supply network, taking meter readings, and supporting government social and environmental schemes.

The unit rates represent the price you pay for your gas and electricity. Electricity is always measured in kilowatt-hours (kWh), while gas is typically measured in either hundreds of cubic feet (ft3) for older meters or cubic meters (m3) for newer meters.

To make it easy for customers to understand and compare their energy usage, we always quote and bill both electricity and gas in kilowatt-hours (kWh). Since gas meters measure consumption in different units, we need to convert gas usage to kWh to accurately charge customers.

To do this, we use a standard industry formula that takes into account factors such as temperature, pressure, and the calorific value of the gas. The formula is: (Gas Consumption in m3) x (Volume Correction Factor) x (Calorific Value of Gas) ÷ 3.6 (to convert from joules to kWh) = Energy Usage in kWh.

Capacity charges (also known as Maximum Import Capacity or Availability Charges) reflect the cost of ensuring that the power your business needs is always available on the network.

The Capacity Mechanism Charge encompasses the costs associated with investing in and maintaining the electricity network. Customers are billed a unit fee based on the agreed capacity for their site.

This ensures that the demand for electricity is consistently met. Generators, in turn, receive compensation for their readiness to generate electricity, thereby incentivizing their availability to supply the grid as needed by consumers.

The Contracts for Difference (CfD) scheme is the government's primary mechanism for backing low-carbon electricity generation. This scheme involves a long-term contract between an electricity generator and the Low Carbon Contracts Company (LCCC).

The contract provides the generator with a stable revenue stream at a pre-agreed rate (the Strike Price) for the duration of the agreement. The CfD framework allows for payments to flow from the Low Carbon Contracts Company to the generator, and vice versa.

Reactive Power Charge refers to the disparity between the electricity supplied and the electricity converted into usable power. If a site has high levels of Reactive Power, meaning a significant amount of power is being inefficiently used, it requires more current to achieve the same level of output. This place would add pressure on the distribution network, potentially leading to increased expenses for the Distribution Network Operator. The Reactive Power Charge is a cost that helps cover these additional costs.

The Climate Change Levy (CCL) is an environmental tax charged on the energy that businesses use. A means of encouraging businesses to be more energy efficient in how they operate, the CCL aims to reduce the overall emissions that businesses produce.

Losses refer to the quantity of electricity lost during transmission and distribution across the electric grid. Energy suppliers purchase enough energy to cover the estimated cost of consumption, including the amount lost through line losses. For gas, there is also unidentified gas included in these amounts.

Every kWh of green gas is certified as green and can be traced back to where it was generated. This verification is carried out not by us, but by The Green Gas Certification Scheme. Certification costs in energy bills typically refer to expenses associated with obtaining energy certifications or compliance with various energy standards and regulations.