How Are my Business Energy Plans Calculated?
Have you ever wondered how business energy plans are calculated? If this is something you have been wondering about, there are a few factors to consider as part of this decision – and we’ll be summarising this today to help you make the most optimal choices for your business.
How Are my Business Energy Plans Calculated?
How are business energy plans calculated? Business energy and gas bills are both calculated in a very similar manner. With that being said, numerous factors go into calculating your business’s energy bills.
Naturally, every firm will have different energy policies, and their plan will reflect this. The exact costs of your business energy plan may also be affected based on the plan you negotiated while taking out the contract; some contracts may be more favourable than others.
Nevertheless, your business must be making the right choices for its energy needs – and to this end, we have summarised some of the different factors that impact how business energy plans are calculated as follows.
The Four Main Factors Influencing Business Energy Plans
Several different factors can influence your business energy plans, but the four most critical that will apply to all businesses are energy consumption and unit rate; standing charges; VAT; and any discounts that have been applied to the price. Understanding each of these may help you understand how your business is paying for energy.
Critically, this can also help you ensure that your business is paying the right price for its business energy. After all, energy companies are still just businesses like yours. There’s every chance they could make a mistake, so we recommend you check every energy bill to be sure.
1. Energy Consumption and Unit Rate
Energy consumption and unit rate are often directly linked together to calculate your business energy plans. Your energy consumption will impact the final price you have to pay over a set period for energy.
However, while using more energy will increase the price, you may get offered a more favourable unit if your energy consumption is higher. For example, some companies offer two different unit rates; the first X kWh is charged at a certain rate, and anything above this minimum is charged at a lower rate.
As such, this is well worth considering for your business; you could potentially save money with higher energy plans. This will also play a substantial role in how the energy provider calculates your business energy plan.
2. Standing Charges
If your business has taken on a new contract, you will have to pay a standing charge; this is a set fee typically and covers factors such as the energy transport and maintenance for the meter. This standing charge will be added to the cost for your energy consumption and unit rate when the time comes to pay your business energy bill.
The price you pay for your standing charge will usually vary depending on your location; rural businesses may have to pay more, for example, as fewer other businesses share the cost of the infrastructure and the like. Nevertheless, your standing charge will never change while you remain on the same contract with your energy provider.
Unfortunately, businesses need to pay taxes on their energy bills. As standard, VAT is charged at 20% (quite a substantial cost for some businesses), although you may be able to cut this.
Some businesses pay as little as 5% VAT; some examples of businesses that can use this rule include charities and non-profits and some healthcare facilities. As such, it may be worth checking whether your business could save money on VAT too.
A saving of up to 15% in VAT for your energy bills (and other aspects of your business) could be quite substantial, after all, so it’s worth checking whether your firm is eligible. And if not, there’s nothing to lose by enquiring regardless.
Who doesn’t love a discount? This is something that many energy companies know well, and to this end, when working out your business energy plan, you may be offered discounts on the calculated price. These discounts are usually offered to draw you in and encourage you to purchase with the chosen team.
There’s a certain appeal that comes with saving money. If you were to compare two plans of different prices, but both ended up at the same price after discounts, you’d likely want to choose the discounted plan. After all, there can be the assumption that you’re getting more for your money when the plan is discounted compared to the normally cheaper plan.
However, we recommend a touch of caution here. Rushing into any business energy policy to take advantage of discounts without considering the other costs could result in you paying more. Moreover, many contracts will offer a discount for part of the contract, but not in its entirety; as such, the discount may only be a temporary matter.
If you’ve been wondering how business energy plans are calculated, you must consider numerous different factors. After all, every business’s energy plan will be slightly different, depending on the points we have covered today. Nevertheless, hopefully, today’s article will shed more light on this topic and helped you optimise your business energy plan calculations and spending.
Other useful links about Business Energy
EDF Business Energy
Deemed Rate Energy Contracts
What is an Energy Performance Certificate
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