Understanding your Energy Bills

When the UK energy market opened in 1990, businesses and house holders were given the flexibility to choose their own supplier and be in control of their own energy spend. This has bought significant issues to the industry because it is not a straightforward process. It is actually very complex and there is a need to engage an expert or educate yourselves to avoid ‘Waste’ or dare I say ‘Mistakes’.

There are the Big Six Suppliers in the UK and according to my friend ‘Wikipedia’ https://en.wikipedia.org/wiki/Big_Six_energy_suppliers they are British Gas , EDF, Eon, Npower, Scottish and SSE, which are all very strong suppliers but have different attributes to the market. There are many more suppliers known in the marketplace that add up to too many more opportunities for confusion. Now all these suppliers provide different services and though they all service your energy requirements the critical measure here has got to be ‘Billing’. Because they all do it differently.

When you are operating a business or buying a house, you need to have clear understanding on your costs. Now I have said many times that Energy is your third largest expense, so it is critical for us to understand what our costs are and how this is broken down. Unfortunately, that is not easy because the market is complex and can be confusing even to the experts. However, just breaking it down it to clear areas I believe we can address the confusion.

Billing is where I think and have said before where this all starts. Billing can be based on your contract quarterly or monthly. If this is the case these bills can not be presented unless there is a ‘meter’ reading. Sadly, though not all meters now are read regularly due to security, accessibility and resource to deliver this. Therefore, Best Practice is to always provide the supplier a ‘Customer Read’ this will ensure you are in line with your billing. This will mean that you may have to pay more but it also means you could be paying less and receive a very big rebate, in the beginning.

When you receive your bills online or by post they will possibly comprise of 4-pages it is important here to ensure that the following details are correct:

• Firstly, you are being build by the correct supplier (This does happen)
• Check:

1. Correct Company Address
2. Supply Address
3. Correct Meter Details
4. Correct VAT Values
5. Correct set-up on CCL (not all companies need to pay this)
6. Check if the Meter reading is (A) Actual (E) Estimated and (C) Customer Read this will be indicated next to the reading

The bill will clearly state the fuel you are purchasing whether it is Gas or Electricity. It is also worth you check the Meter Reference Numbers are correct here to.

Electricity is the Meter Point Administration Number (MPAN) and Gas the Meter Point Reference Number (MPRN) these are abbreviations that we are all too familiar within the industry. 

Taken from Wikipedia

The MPAN is always shown in this format and will be a ‘Unique’ reference number within the industry. You can imagine there are millions of these in the UK. There are systems in place that database them, but they do sometimes get mixed up.

Consumption

On your bill you will see a Meter reading and if we are discussing Electricity this would be in kWh and this reflects your consumption. This is impacted by how much energy you have used. Therefore, as a very basic indication, would be you have a 3kW Heater in your office or home and you have it turned on for 2 Hours this is how the meter calculates your consumption. (sorry to simplify this).

3kW x 2 Hours = 6kWh so therefore consumption would have increased by 6 units.

If this was Gas, then you would see a Cubic Ft or Cubic Meter Reading based on the age of the meter and then there would be a kWh calculation made from Calorific Value, Volume and the actual reading on the meter.

Rate

Electricity:

Your rates on the bill could be Day Rate and a Night Rate (but this does depend on your Tariff structure or contract, but it could look like this –

Day Rate 13p between 07.00 to Midnight and Night Rate 10p Between Midnight and 07.00

Now considering when you had your Electric Fire was turned on then the calculation would be - 3kW x 2 Hours 09.00 to 11.00 = 6kWh x 13p

Now all we have done here is calculate the ‘Energy Cost’ which is known as the Commodity Cost. The bill is then adjusted for the following based on whatever contract you have agreed to. The Non-Commodity could add on another 60% to your bill, these are all the taxes. These calculations are based on fixed fees or variables fees based on the consumption.

•  Climate Change Levy (CCL)
• VAT
• Renewables Obligation (RO) 
• Feed-in Tariff (FiT) 
• Capacity Market 
•  Transmission Network Use of System (TNUoS) 
• Balancing Service Use of System (BSUoS) 
• Distribution Use of System (DUoS) 
• Availability (kVa)
• Reactive Charges

In some cases, all of this is combined within one rate.

Standing Charges

There are also Standing charges, the standing charges on your energy bill covers the fixed costs of providing your business or home with both gas and electricity. This varies from supplier to supplier.

These costs include the price of keeping your business or home connected to the energy network, carrying out meter readings, maintenance, and other related charges.

Contract Details

There are guidelines of your contract end dates which must be shown on your billing but sometimes it is quite hard to decipher. What I sometimes find is that these are shown on the back within the Terms. Or If the bill states you are on a ‘Variable Rate’ contract this could mean that there is No Contract in place, and you could be on a form of deemed rate. The supplier can then vary their rates. You are much better of by being on a ‘Fixed’ Term Contract as this would be lower and it would be based on the current Wholesale Market Price, which is currently favourable.

Analysis

Analysis of your bills are very easy, and straight forward by reviewing your consumptions both Day and Night and plotting these provides trends. This should correlate with your ‘Sales Output’, so the more your output you should see an increase in energy and a depreciation in the output, we should expect to see a reduced bill.  Also, by plotting your total value of your bill by the consumption will provide a good benchmark across your properties.

Total Value (inc VAT) / Total Consumption, this will provide a benchmark value and you can trend this.

Lastly, here we have focused on energy procurement and cost which is important but at the same time focus must be applied to consumption. For example, do we need that Electric Heater on for 2 Hours or just on for 1.5 Hours. The savings there would be 25% saving which could provide a significant saving if done every day, once you considered the commodity a non-commodity charges.

NB. I have used an example of a 3kW Electric Heater throughout this study. Just imagine if this was a 22kW Ventilation plant or a 300-450kW Chiller System.

It does not matter how large or small your organisation is - ‘A corner shop to and office block and everything in between’ you make a saving on your energy consumption and the cost.