Running a small business is very challenging and keeping the track of all of the financial responsibilities is the hardest part. Moreover, maintaining overhead costs is one of the largest financial obligations of small business owners. This type of cost is consisting of a lot of things including the daily operating costs like energy consumption.
For small businesses, if you can make savings on your annual electricity bills then it can be a great help for the development of the business. So, if you want to minimize your electricity bill then you have to know how and when you’re using energy, how the consumption is calculated, and what you are being charged for.
The Information Of A Business Energy Bill
A business bill can be a bit complicated for a business owner to understand because it contains a lot of information. But it is important for business owners to have a proper understanding of the bill so that they can easily find the required data from the billing paper. You can find two types of information in an energy bill. They are:
1. General information
2. Energy charges
This part of the bill contains information that includes:
1. Bill date: When you receive your bill
2. Bill Number: A reference number for your supplier to identify your bill
3. VAT number: Your registered VAT number
4. Account number: Your unique account identifier
5. Contract details: A summary of the details of the contract you have with your supplier
6. Billing period: The time period over which you’re being charged for energy
7. Type of charge: Whether your bill is based on an accurate or estimated usage figure
8. MPAN/MPRN: A number used by suppliers to identify the energy meters on your property
This part of the bill contains information regarding the charges of the energy:
1. Billing period charges: The amount you’re being charged overall during the billing period
2. Outstanding charges: The amount you owe, if any, from previous bills
3. VAT charges: The amount added to your bill for value-added tax (VAT)
4. Total amount due: The amount you owe after adding up all the above
5. Cost breakdown: A breakdown of charges that allows you to see exactly where your money’s going
Different Types Of Charges In Electricity Bill
An electricity bill consists of different types of charges. So it is important to understand the charges of an electricity bill. Let’s take a look at them!
Wholesale Energy Costs: This is the cost the energy company pays to buy the electricity from the wholesale suppliers. The company buys the energy in advance with the expectation of you using it in the future. They do this so that they don’t run out during your contract.
Transmission Use Of System (TNUoS) Charge: This charge covers the cost of transporting and distributing your energy. Some charges also include the maintaining charge of the National Grid.
Distribution Use Of System (DUoS) Charge: This type of charge is applied by companies that are licensed to distribute electricity which is also known as the Distribution Network Operators (DNO).
Climate Change Levy (CCL): This is a type of tax that is designed to encourage businesses to improve their energy efficiency and reduce carbon emissions. This charge is calculated depending on how much renewable energy the company is using.
Metering Costs: This charge includes the cost of buying and maintaining the electricity meters.
VAT: This is calculated based on the total consumption of your electricity. Usually, a company is charged 20% on the electricity bill. However, if you are using less than 33 kWh of electricity per day then you will be charged a lower rate of 5%.
Supplier Margins: This charge includes marketing, acquisition, and admin costs.
How Electricity Prices Are Calculated On Small Business
The electricity of a small business is calculated based on different factors. A clear understanding of these factors will help you identify any issues or abnormalities. Below is the list of factors that are used to calculate the electricity bill:
1. Energy consumption — the amount of electricity you have used during a given period
2. Unit rate — the price you’ve agreed to pay per kilowatt-hour (kWh)
3. Postcode — Depending on the geographic area the energy rate may differ as different Distribution Network Operator (DNO) charges differently
4. Standing charge — The fixed daily amount you agree to pay your supplier
5. Period of billing — Businesses are billed monthly or quarterly. This depends on what is agreed in the contract
6. VAT — Small businesses pay 20% VAT; charities and not-for-profits can pay as little as 5% VAT
7. Discounts — Suppliers offer discounts as a reward for paying via Direct Debit
Average Electricity Prices By Business Size
|Business Size||Number Of Employees||Average Yearly Usage (kWh)||Unit Rate (Price Per kWh)||Daily Standing Charge||Yearly Total (Before VAT)|
List Of Energy Expenses For Small Businesses
1. Light Bulbs
2. Space Heating
3. Desktop Computers
4. Central Cooling Systems
5. Security Lighting
6. Office Copy Machine
The interior lighting of a business is one of the biggest sources of energy expenses. On average a small business can have 50 bulbs operating within their facility. And if they are still using 60-watt bulbs then it is 3,000 watts of electricity being used per hour. However, if you replace the watt bulbs with LED bulbs then it will be only 475 watts of energy per hour.
This type of heater is used by business owners during the winter season. Most business owners think a space heater is the best option compared to central furnace systems. But the reality is furnace systems are less expensive. A space heater will cost you $36.50 a month and the worst part is, for a medium-size office you will need several space heaters in order to obtain a comfortable office temperature.
This is the common equipment of for any office setup. In fact, every office has several desktop computers and they cost a great deal in terms of energy. Usually, a desktop computer can use about 250 watts per hour. That means a single computer is costing your company about $250 a year. You can use a laptop instead of a desktop and save lots of energy. A laptop uses between 15 and 60 watts per hour.
Central Cooling Systems
This is another great source of energy consumption. Most of the small businesses operate with old or outdated HVAC systems. This is because a full HVAC system will cost a lot of money. However, if possible then it is best to use new energy-efficient models because a new model can save up to 50% of the cooling costs.
The lights used for security lighting are completely different from the conventional lights and on average a security light can use up to 2,000 watts per hour. Though this type of light is only used at night but it will cost the company lots of money.
Office Copy Machine
This is a very common office appliance for small businesses. This type of machine uses a great deal of energy even when they are in sleep or standby mode. Usually, a copy machine can use 2400 watts while printing, 310 watts while in standby mode, and 200 watts while in sleep mode. So it means if you are not using this machine, it still costs your business a great deal of money.
Monitors are used to running advertisements, promotional videos, information, and every office setup has quite a few monitors. Using lots of monitors in an office is actually a huge energy expense. On average a monitor can consume around 100 watts per day. So if an office is using 10 monitors then it is 1000 watts per day and it’s lots of energy.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.