As a small business owner, electricity bills can be one of the most significant expenses you incur. With the increased demand for electricity, the cost of power has been steadily rising over the past few years, so it is important to understand what your electricity bill might look like.
Understanding Small Business Electrical Usage
Before we dive into the average business electricity bill, it’s important to understand how businesses use electricity. Most small businesses have basic needs that involve powering computers, printers and other office equipment. However, there are some businesses, like restaurants, that may have more energy-intensive needs like refrigerators and air conditioning.
For small businesses, electricity consumption will generally depend on the number of employees, the equipment they use, and the type of work they do. Generally, the more people you have in the office, the more electricity you’ll need.
What is the average electricity bill for a Small Business?
The average UK business electricity bill is approximately £1,400 per year. This number can vary significantly depending on the size and type of business and your business energy consumption. For example, restaurants, which tend to consume more electricity, will likely see higher electricity bills than businesses that don’t use a lot of energy-intensive equipment.
The amount of energy used for domestic purposes can also affect the overall electricity bill. Households typically use more electricity than businesses and this can push up the electricity bill for a small business.
What are the individual costs on my business bill?
Wholesale Costs: Wholesale energy costs are the charges that energy companies pay to purchase gas and electricity from wholesalers in advance to meet the energy demands of their customers during the term of their contract.
TNUos: The Transmission Use of System (TNUoS) charge covers the costs of transporting and distributing energy, and also contributes to the maintenance of the National Grid.
Distribution Use of System: The Distribution Use of System (DUoS) charge is levied by companies that are licensed to distribute electricity in the UK and are known as Distribution Network Operators (DNO).
CCL: The Climate Change Levy (CCL) is a tax aimed at encouraging businesses to increase their energy efficiency and reduce their carbon emissions. Some companies may be exempt from paying the CCL depending on the amount of renewable energy they use.
Metering Costs: Metering costs include the expenses for purchasing and maintaining gas and electricity meters.
VAT: Value-Added Tax (VAT) is typically added at a rate of 20% to business gas and electricity bills, but companies that use less than 33 kWh of electricity or less than 145 kWh of gas per day may be charged a lower rate of 5%.
Supplier Margins: Supplier margins refer to the profits that energy suppliers make from their customers, which may include marketing, acquisition, administrative costs, and profit.
Factors That Influence Small Business Electricity Bills
There are a number of different factors that can influence the amount a small business pays for electricity.
Location: The cost of electricity can vary significantly depending on where a small business is located. In some areas, electricity may be generated from inexpensive sources, such as hydroelectric or nuclear power, which can keep electricity costs low. In other areas, electricity may be generated from more expensive sources, such as coal or natural gas, which can drive up the cost of electricity.
Size of the business: The amount of electricity a small business uses can also influence its electricity bill. Larger businesses with more employees and more electrical equipment will typically have higher electricity bills than smaller businesses. This is because they are using more electricity to power their operations.
Time of use: The time of day that a small business uses electricity can also affect its electricity bill. Some utilities charge higher rates for electricity used during peak hours, such as late afternoons and early evenings, when demand for electricity is higher. This is because it is more expensive for the utility to generate and deliver electricity during these times.
Type of rate plan: Small businesses can choose from different rate plans offered by their electricity provider. Some rate plans may offer a fixed rate for electricity, which means that the price per kilowatt-hour (kWh) does not change regardless of the time of day or season. Other rate plans may have variable rates that fluctuate depending on the time of day or season. For example, a small business may have a lower rate for electricity used during off-peak hours, but a higher rate for electricity used during peak hours.
Energy efficiency: Small businesses can save money on their electricity bills by making their operations more energy efficient. This can involve investing in energy-efficient equipment, such as LED light bulbs and Energy Star-certified appliances, and implementing energy-saving practices, such as turning off equipment when not in use. By using less electricity, a small business can reduce its electricity bills and save money.
Ways to Cut your Business Energy Bill?
Due to the unstable nature of the current energy market, traditional energy-saving strategies may not significantly reduce energy bills. The best way to safeguard against future price increases is to lock in fixed rates for energy. However, it is important for businesses to strive for energy efficiency regardless of the financial savings, as using less energy has environmental and other benefits.
Here are some suggestions for making your business more energy-efficient:
Conduct an energy audit: An energy audit can help identify areas where your business is using too much energy and suggest ways to reduce consumption.
Upgrade to energy-efficient equipment: Replacing old, energy-inefficient equipment with Energy Star-certified models can significantly reduce your energy consumption and costs.
Use natural light and install energy-efficient lighting: Natural light can help reduce your need for artificial lighting, and energy-efficient lighting options, such as LED bulbs, can further reduce your energy consumption.
Install a programmable thermostat: A programmable thermostat can help you more efficiently control your heating and cooling costs by allowing you to set different temperatures for different times of day.
Turn off equipment when not in use: Make sure to turn off equipment, such as computers and printers, when they are not being used.
Implement a company-wide energy conservation policy: Encourage your employees to turn off lights and electronics when they are not in use, and consider setting up an energy-saving team to identify and implement additional energy conservation measures.
Purchase renewable energy: Consider purchasing renewable energy, such as solar or wind power, to reduce your reliance on fossil fuels.
Negotiate with your energy provider: If you have a large energy bill, you may be able to negotiate a lower rate with your energy provider.
How can my Small Business get a better energy deal?
For many small business owners, managing energy costs can be a difficult task. With energy becoming an increasingly important factor in the success of small businesses, it’s important to be able to get a better energy deal.
Fortunately, there are a number of ways that small business owners can get a better energy deal. Here are some tips to get you started:
1. Shop around: One of the best ways to get a better energy deal is to shop around. There are a variety of energy providers that offer different plans, packages, and rates. By shopping around and comparing different offers, you can find one that works best for your small business.
2. Understand your energy usage: Understanding your energy usage is an important part of getting a better energy deal. By analyzing your energy usage, you can make sure that you’re not paying for energy that you don’t need. You can also use this information to negotiate a better rate with an energy provider.
3. Take advantage of discounts: Many energy providers offer discounts for small businesses. These discounts can help you save money on your energy bills. Be sure to look for any discounts that are available and take advantage of them.
4. Invest in energy-efficient technology: Investing in energy-efficient technology is another great way to get a better energy deal. By investing in energy-efficient technology, your business can reduce its energy consumption and save money on energy bills.
5. Negotiate: Don’t be afraid to negotiate with energy providers. When you’re negotiating, be sure to be realistic with your expectations. Don’t be afraid to ask for a better rate or more flexible terms.
By taking the time to shop around, understand your energy usage, take advantage of discounts, invest in energy-efficient technology, and negotiate, you can get a better energy deal for your small business. Don’t be afraid to take the time to review your options and make sure that you’re getting the best deal possible.
What is the average business energy consumption?
According to businessenergy.com:
Small businesses, defined as those with 10-49 employees, make up over 200,000 of the total businesses according to government data. These businesses have an average electricity rate of 20.57 pence per kWh and gas rate of 3.64 pence per kWh. With an energy usage of 20,000 kWh, the average small business electricity bill would be £4,114 per year.
Medium-sized businesses, defined as those with 50-250 employees, have varying energy usage and costs. The average medium-sized business uses 40,000 kWh of electricity and 35,000 kWh of gas at rates of 18.06 pence per kWh for electricity and 4.22 pence per kWh for gas, resulting in an average yearly bill of £7,224.
Businesses with over 250 employees are considered large businesses. Due to their high energy usage, large businesses typically pay a lower unit rate for electricity and gas. In 2022, the average unit rate for electricity for large businesses is 18.00 pence per kWh and for gas it’s 3.70 pence per kWh. The average large business uses 155,000 kWh of electricity and gas, resulting in an average annual bill of £14,495.