Energy billing for businesses can be a bit of a maze – with enough twists and turns to hide some nasty surprises.
Potentially serious problems can occur because of complex energy settlement and billing systems.
This includes energy suppliers overcharging and then ‘back-billing’, sometimes six years after the event.
That’s why checking your business’ energy bills should be an essential task which can help you avoid paying over the odds for your business gas and electricity.
How much is at stake from these mistakes?
Energy firms make £650m a year from incorrect bills, due to frequent errors. While this chunky sum covers both domestic and business customers, it’s clear that wrong bills can potentially create significant problems for your organisation.
There are three big reasons for these mistakes: consumption errors and inaccuracies, whether it’s over or undercharging due to meter reading errors or estimated meter readings.
Then there are clerical errors, both human and those from the system and finally suppliers can misinterpret industry charging methods.
These can be noticed and rectified over time by the supplier – but meanwhile they could create cash-flow and budget issues for you.
You’re more likely to end up in a dead end when devising an energy strategy and making appropriate investment decisions if the bills you receive don’t accurately reflect your organisation’s real consumption.
Which parts of my energy bill do I need to check?
Make sure you understand the layout of your energy bill. First check the simple things, for example the price and volume and multiply the two together.
You’ll also need to check your company name and address are correct and that billing dates match up to ensure you aren’t paying twice for the same period of energy use.
Unfortunately business energy bills can then get much more complicated: prices change periodically and there are standing charges, ‘pass-through’ charges, taxes and levies to consider too.
Here are some of the most important elements to investigate:
Compare your contracted prices in your supplier contract to the prices on your energy bills, for example, most contracts will have a day rate p/kWh and a different night rate.
You should always do this when you renew a contract or change suppliers.
There’s an extra level of complexity if your organisation uses more sophisticated energy price risk management structures, such as flexible purchasing.
In these types of contract, checking the price is less straightforward and may require matching up some combination of fixed, flexible and indexed energy prices.
This should be fairly straightforward and your consumption should be clearly shown on your invoices. Make sure you are reading and recording your metered consumption data, in as much detail as possible. You will certainly need this to check against your energy bill.
Consider using smart meters to ensure this is done in the most efficient way and to extract the maximum useful energy consumption information from the meter data. A good energy consultancy/broker can provide independent advice on finding the best smart metering solution for your needs.
Third party charges
These are the factors that often complicate bills and include green taxes and levies; like the FiTs and CCL, TNUoS and DUoS (transmission and distribution charges), triads and metering charges, to name a few.
These charges are often separated out to some extent on half-hourly meter bills or bills for more complex contracts. Otherwise they are incorporated into the fixed charges or consumption charges of the bill, depending on your contract.
It’s wise to double-check that all of these charges, taxes or levies included on your bill are actually contractually chargeable to your organisation. For example, are you eligible for any relief from CCL?
Check your supply contract to see whether it is your organisation or the supplier who bears the risk of increases to these elements of the bill. Many suppliers have incorporated T&Cs into their contracts that allow these third party charges to be passed onto the consumer, even if they have ‘fixed price’ contracts. Don’t be shy about asking the supplier to clarify any of the contract terms that are concerning you!
As industry charges and government legislation are constantly changing, you’ll need to check over the above elements regularly.
Your organisation’s circumstances may also change: you may buy new premises, acquire new businesses, begin to generate some energy from renewable sources or install energy efficient technologies. All of these could affect your energy bill.
Some common mistakes to avoid getting lost in the billing maze:
● Double billing for the same period.
● Incorrect consumption usage and/or conversion.
● Incorrect agreed rates or incorrect adherence to the product and pricing.
● Incorrect charging of metering and data collection charges.
● Incorrect use of half-hourly (HH) data (kWh, kVArh).
● Incorrect application of excess reactive charges.
● Incorrect use of DUoS and TNUoS charges, e.g. incorrect £/kVA used.
● Incorrect application of volume tolerance charges.
● Incorrect application of government levies such as RO, FiT, VAT and CCL.
● Incorrect conversion factors such as calorific values (gas only)
Nick Linklater is Head of Corporate Accounts at ENER-G Procurement Limited.