Business bills for both electricity and gas are made up of two main parts - Non - Energy Costs

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2 Business bills for both electricity and gas are made up of two main parts - Non - Energy Costs Non-energy costs pay for running the UK s gas and electricity networks and comprise a variety of obligations, levies and taxes set by the government. These costs are effectively those elements of a bill which are outside of the supplier s control. This is the reason why they are referred to as Third Party Charges. Energy Cost Unit Rate including the wholesale commodity rate, the supplier s operational costs, and profit margin.

3 During to there has been a 50% increase in Third Party Charges, with a further rise on the way for st April is an important date in the energy year as it is when many of these charges change. When compared to this year, figures for suggest medium-sized businesses could see further rises of over 10% in their electricity bills and 2% in their gas bills purely as a result of higher Third Party Charges.

4 The transmission networks act like the motorway system and enable the bulk transfer of high-voltage electricity (direct from power stations) and high-pressure gas around the country. Electricity and gas distribution networks are regional grids that branch from the national grid. They are essentially the A-roads delivering power and gas to industrial, commercial and domestic users. Electricity Transmission Charges (TUoS) account for around 8% of non-domestic electricity bills. This element has seen doublefigure percentage rises as a result of a new price control. By contrast, gas transmission charges are set to fall. Electricity Distribution Charges (DUoS) makes up around 16% of total electricity bills. These regional charges have increased 8% 15%. The DUoS charge covers the cost of receiving electricity from the national transmission system and feeding it directly into homes and businesses through regional grids. Gas transportation charges are rising due to higher costs for regional distribution (11% averaged across Britain, but with regional variations). Gas distribution costs are offsetting reductions in national gas transmission charges.

5 We have published 3 separate guides which provide further explanations about these individual Third Party Charges. Renewables Obligation requires UK electricity suppliers to supply an increasing proportion of electricity from renewable sources. Risen by approximately 33% this year & will add 1.5% to electricity bills. Feed-in Tariff the scheme launched in 2010 and offers guaranteed cash payments to households and businesses who produce their own electricity using microgeneration. The cost is increasing by at least 15%. Climate Change Levy (CCL) a Government tax, introduced in 2001, on the use of electricity & gas by businesses, agriculture & the public sector. The aim of the levy is to encourage businesses to improve energy efficiency and reduce carbon emissions. The cost increases each year in line with the Retail Price Index (RPI) & equates to approximately 6% of bills over the year. Read More

6 Business customers are charged indirectly through their suppliers for their usage of the energy networks and taxes. All Inclusive fixed-price offers, where the cost to the customer will be the same throughout the contract, include a premium to cover the supplier in the event of an unexpected rise in third party costs. The alternative of Pass Through contracts see third party charges billed to the customer at the rate faced by the supplier. Typically, the amount of Third Party Charges a business energy supplier builds into a quote is not fixed, but based on forecasted rates. Each quote will represent these charges in a different way and the amount varies depending on supplier. Make sure you understand the implications of a rise in third party charges and its effect on your business energy bills.

7 All businesses can save money on the majority of these charges by cutting energy use. The best way to work out how to do this is to monitor your energy use. From here you can target the quick wins and work out where best to improve the energy efficiency of your operations. Encouraging other members of staff to get involved can also help implement sustained behavioural change in your organisation. Businesses on half-hourly meters should also monitor their demand during triad charging periods (transmission) and red, amber, green times for distribution as a way of cutting costs. If you are able to shift your energy use away from early evenings on weekdays you could make significant savings on your bills. To minimise the scope for unexpectedly large bills customers should carefully read all documents sent by your energy supplier. When looking at your bill try and understand which third party charges are all-inclusive in your contracts and which are pass through. It is likely that some of your third party charges will be pass through even if you think you have an all-inclusive electricity contract.

8 As well as Third Party Costs increasing, they have also become more unpredictable. Charges for distribution and transmission are especially sensitive to wider market changes. These cost elements can change significantly owing to changes in demand in localised areas. Even if your usage stays the same, if another business alters their consumption, your charges could be affected. This has made it more complicated for suppliers to forecast what future Third Party Costs will be when they prepare their offers. This is especially the case when contract periods run over 1 April and into a new third party charging year.

9 About Indigo Swan We believe everyone is entitled to the truth about their energy and shouldn t be penalised because they don t have the knowhow. The information in these guides has been prepared in conjuction with Cornwall Energy who provide strategic energy market intelligence. If you have any questions please get in touch. hello@indigoswan.co.uk Indigo Swan Limited 2 Millennium Plain Norwich NR2 1TF