Business Energy Bill Explained

Quick Summary

Your energy bill splits into commodity costs (what you buy) and non-commodity costs (what it costs to deliver it). Non-commodity charges typically represent 40-50% of your bill. The unit rate is important but isn’t where most of your bill comes from—don’t get tunnel vision negotiating this single figure. DUoS, TNUoS, and BSUoS are network charges you can’t negotiate, but you can understand them. Once you see where the money goes, you can target the right areas for savings.

In this Article

1. Commodity vs Non-Commodity Costs
2. The Unit Rate
3. Standing Charges
4. Non-Commodity Charges Breakdown
5. Climate Change Levy and VAT
6. Key Takeaways

When you open your energy bill, you’ll see charges for things you’ve probably never heard of. DUoS, TNUoS, BSUoS, CCL—it’s designed to look complicated. But every single line is there for a reason, and once you understand what each one represents, the bill becomes manageable.

Your electricity bill has two main cost categories: what you actually use (commodity charges) and what it costs to deliver that electricity to you (non-commodity charges). Most businesses assume the unit rate—the pence per kilowatt-hour—is the biggest chunk of their bill. It often isn’t. That’s the real surprise for most people.

The structure of your bill might vary slightly depending on your supplier, but UK business electricity bills follow a pretty standard pattern. Gas bills follow the same structure, so if you’re reviewing a business gas bill this guide applies too. You’ll always see a unit rate, a standing charge, and various network charges. If you’re on a larger contract, you might also see capacity charges and reactive power charges. These aren’t hidden costs—they’re just poorly explained.

Commodity vs Non-Commodity Costs

Here’s the division that matters: commodity costs are what you buy. Non-commodity costs are what it costs to get that electricity to your premises.

Commodity costs include your unit rate and the Climate Change Levy. These are the charges for the actual energy you consume. Your supplier purchases this energy from the wholesale market and passes the cost on to you (with their margin added). This is where you can shop around and negotiate. Different suppliers will offer different rates for the same consumption profile.

Non-commodity costs are network charges, system balancing charges, and infrastructure costs. These are set by Ofgem and your local distribution network operator (DNO). You can’t negotiate these—they’re the same regardless of which supplier you use. They represent about 40-50% of your total bill on average. This is important because it means your biggest opportunity to save money is usually on the commodity side, not the non-commodity side.

The remaining chunk is VAT, which gets applied to everything. At 20%, VAT can be a significant portion of your invoice, though this is recoverable if your business is VAT-registered.

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The Unit Rate

The unit rate is what you pay per kilowatt-hour (kWh) of electricity you use. It’s shown in pence per kWh and is the most visible number on your bill.

Your consumption (in kWh) multiplied by your unit rate gives you your energy cost. If you use 10,000 kWh a month at 28p per kWh, that’s 2,800 pounds before VAT and other charges. Simple. But this is usually only about 30-40% of your total bill—not the majority.

The unit rate varies based on several factors: your location, your consumption level, your contract type, and current wholesale prices. Larger consumption usually means lower per-unit rates because of economies of scale. Fixed-rate contracts lock this in; variable-rate contracts move with the market. Business owners often focus entirely on negotiating the unit rate and miss bigger savings elsewhere.

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Standing Charges

Your standing charge is a daily fee just for being connected to the network. You’d pay this whether you use 100 kWh or 100,000 kWh that month. It covers the cost of maintaining your connection, meter reading, and customer service.

Standing charges are typically between 30p and 60p per day, though larger businesses might have higher charges. Over a year, a 50p daily standing charge adds up to around 182 pounds (excluding VAT). It’s not huge, but it’s worth checking if you’re on the competitive rate for your business size.

Some businesses negotiate standing charges down during procurement. It’s often an overlooked bargaining point—suppliers will sometimes reduce this rather than reduce the unit rate, because it looks better on your contract terms.

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Non-Commodity Charges Breakdown

Non-commodity charges are where it gets interesting (and where most businesses get lost). These are the infrastructure and system costs that aren’t about the energy itself, but about delivering it.

DUoS (Distribution Use of System) is the charge for using your local distribution network—the cables and equipment that bring electricity from the national grid to your premises. This varies significantly by region. Areas with lower population density pay more because infrastructure costs are spread across fewer consumers. Read more about DUoS charges.

TNUoS (Transmission Network Use of System) is the charge for using the high-voltage transmission network that carries electricity across the country. This is a national charge, though the rate varies by region and time of day. Find out more about TNUoS.

BSUoS (Balancing Services Use of System) is the cost of keeping supply and demand balanced in real-time. The National Grid charges DNOs for this service, and it gets passed to you. This charge fluctuates based on how much balancing the grid needs in that month.

Together, these three charges typically account for 30-40% of your electricity bill. Combined with DUoS, TNUoS, and BSUoS making up roughly 35-45% of non-commodity costs, you’re looking at a substantial portion that you have no direct control over.

Capacity charges apply if you have a high and variable load. These charges reimburse the network operator for having to maintain capacity to handle your peak demand, even if you don’t always use it. Larger businesses with spiky usage patterns might see these charges. They’re not universal—you only see them if your distribution contract includes them.

Reactive power charges appear on some business bills when your equipment draws reactive power (power that doesn’t do actual work but is needed by certain types of machinery). Induction motors and similar equipment create reactive power demand. Learn more about reactive power charges.

Pass-through charges are costs your supplier has to pass to you because they’re obligated to by other parties in the energy system. These might include charges from your local DNO, the National Grid, or other energy market participants. Understand pass-through charges better.

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Climate Change Levy and VAT

The Climate Change Levy (CCL) is a tax on energy use in the UK. It’s around 0.583p per kWh for electricity (rates vary slightly by region). It looks like a small charge per unit, but it adds up across a year’s consumption.

The CCL isn’t really a “charge”—it’s a tax designed to encourage businesses to use less energy. Most businesses can’t avoid it, though some sectors get exemptions if they’re part of a Climate Change Agreement with the government.

On top of all the other charges sits VAT at 20%. VAT applies to your unit rate, standing charge, network charges, and the CCL. If you’re VAT-registered, you can reclaim this, so your net cost is lower. If you’re not, VAT adds a significant amount to your bill.

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Key Takeaways

✓ Your bill splits into commodity costs (what you buy) and non-commodity costs (what it costs to deliver it). Non-commodity charges typically represent 40-50% of your bill.

✓ The unit rate is important but isn’t where most of your bill comes from—don’t get tunnel vision negotiating this single figure.

✓ DUoS, TNUoS, and BSUoS are network charges you can’t negotiate, but you can understand them. Know your regional rates.

✓ Standing charges and capacity charges are worth questioning during procurement—these can sometimes be negotiated down.

✓ Reactive power charges and pass-through charges only apply to certain businesses, but if they’re on your bill, you should understand why.

✓ CCL is a tax (currently 0.583p/kWh) and VAT at 20% applies across everything.

✓ Understanding your bill is the first step to reducing it. Once you see where the money goes, you can target the right areas for savings.

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