What Are You Actually Paying For on Your Business Energy Bill?

When a business is quoted, for example, 24p/kWh for electricity or 6p/kWh for gas, it's easy to think that's simply the cost of the energy.

It isn't.

A business energy bill can contain a number of different costs and some businesses may qualify for reductions or exemptions from certain charges.

So, keeping it simple, here's what you're actually paying for.

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⚡ ELECTRICITY

Your electricity unit rate can include costs associated with:

• The wholesale electricity itself
• Transmission and distribution network costs
• Balancing and system costs
• Government and renewable energy schemes
• Metering and supplier operating costs
• Supplier risk and margin

Depending on the type of contract, some of these costs may be bundled into one unit rate, while others can appear separately or be passed through.

You may then have:

Unit Rate – charged for every kWh used
Standing Charge – a daily charge regardless of usage

Capacity/Availability Charges – applicable to certain larger electricity supplies
Climate Change Levy (CCL) – where applicable
VAT – normally 20% for a standard business supply

🔥 GAS

Gas bills are generally simpler but can still include:

• Wholesale gas costs
• Transportation and network costs
• Government/environmental scheme costs
• Supplier operating costs, risk and margin

Plus:

Unit Rate
Standing Charge
Climate Change Levy (CCL)
VAT

💷 DON'T FORGET CCL

From 1 April 2026, the standard Climate Change Levy rate is:

⚡ Electricity – 0.801p per kWh
🔥 Natural Gas – 0.801p per kWh

That doesn't sound like much until you multiply it by annual consumption.

A business using 100,000 kWh per year could therefore see around £801 per year in CCL alone, before considering any applicable relief.

And importantly, where CCL applies, it forms part of the value on which VAT is calculated.

✅ BUT DOES EVERY BUSINESS HAVE TO PAY IT?

A charity does not automatically receive reduced VAT simply because it is a charity.

However, energy used for qualifying charitable non-business activities can potentially qualify for:

✅ 5% VAT
✅ No CCL

Where premises have a mixture of qualifying and non-qualifying use, the supply may need to be apportioned.

Where 60% or more of the energy is used for qualifying purposes, HMRC rules can allow the whole supply to receive qualifying treatment.

This can make a significant difference to an organisation's annual energy costs.

🏭 ENERGY-INTENSIVE BUSINESSES

There are further schemes available to certain qualifying energy-intensive industries.

These can potentially provide major reductions against costs associated with schemes such as:

• Contracts for Difference
• Renewables Obligation
• Feed-in Tariffs
• Capacity Market charges
• Electricity network charges

There are also specific CCL exemptions and reliefs covering certain qualifying industrial processes, Climate Change Agreements, CHP arrangements and other specialist uses.

These aren't available to every business, but they're worth checking where applicable.

📄 THE IMPORTANT BIT

Don't look at just the unit rate when reviewing an energy contract or invoice.

Check:

✔️ Unit rates
✔️ Standing charges
✔️ Annual consumption
✔️ VAT rate
✔️ Climate Change Levy
✔️ Meter and capacity charges
✔️ Additional pass-through charges
✔️ Whether any relief or exemption should apply

Two businesses using exactly the same amount of energy can end up paying very different amounts depending on their contract structure and whether the correct VAT and CCL treatment has been applied.

At Orbital Gas & Power Ltd, we don't just look at the headline unit rate.

We review the complete picture.

If you're unsure what you're paying for, or whether the VAT, CCL or other charges on your business energy bill are correct, send us a recent bill and we'll take a look.

Contact Orbital Gas & Power Ltd