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The pricing structures for business energy and domestic energy are different. There’s a larger variety of business pricing structures available from UK energy suppliers than for domestic customers. The price you pay is affected by your geographic location, business type, the times of day you use most energy, your contract length, payment method and your company’s credit rating.

The unit price for business energy in many contracts is closer to the wholesale energy market. This means it is usually cheaper, but there are more price fluctuations. Business energy customers also have some additional levies added to their bill, such as the Climate Change Levy (CCL). By contrast, domestic energy bills are much more predictable. Unit prices are fixed for at least a year in advance, and remain stable, but they do tend to be higher than business rates.

The wholesale cost of energy is the price we pay to buy your electricity from wholesale suppliers. Energy providers buy the energy in advance, as a way of guaranteeing the supply and stabilising the price to a certain extent. This is why you are locked into your contract for a certain period.

The UK government provides a number of environmental tax and relief schemes, encouraging businesses to operate in a more environmentally-friendly way. The Climate Change Levy is one of them. It is an environmental tax charged on the energy that businesses use. It’s designed to encourage businesses to be more energy efficient, which reduces their carbon footprint and emissions.

The CCL applies to businesses in the industrial, public services, commercial and agricultural sectors. Some companies are exempt from paying the CCL, depending on the amount of renewable energy they use, although nuclear power - despite having no direct impact on carbon emissions - is subject to the charge. Charities which do not have any commercial activities are exempt from paying CCL, as are businesses that consume very small amounts of energy.

You have to pay the Climate Change Levy at either the main rate or carbon price support (CPS) rate, depending on the type of company. The rate you pay will be on your fuel bill.

VAT on electricity and gas bills for businesses is usually charged at a rate of 20%. This differs from the VAT on energy bills for domestic customers, where VAT on gas and VAT on electricity are both charged at 5%.

Some businesses will be able to pay a reduced rate of 5% VAT on energy bills if they use less than what is known as the ‘de minimis’ threshold. The de minimis business electricity VAT rate is 33 kilowatt hours (kWh) or less of electricity per day, while the de minimis rate for VAT on gas is 145kWh or less of gas per day.

You can also get the VAT discount if at least 60% of your business’s energy is used for domestic purposes, or if you are a charitable or non-profit organisation.

If your initial electricity or gas contract has recently expired, but you didn’t arrange a new contract, your supplier will have automatically put you on “standard” rates. These are also known as “out of contract” rates. They tend to be more expensive than contractual rates.

Give us a call as you may get an even better price by switching to Radius Energy.