You didn’t get into business to wrestle with electricity bills, but knowing what you’re using and how to manage costs is more important than ever.
Volatile prices and uncertainty are hardly ideal conditions for your business to work in, especially if you’re pushed for time and don’t feel confident navigating complex energy markets.
We’re here to explain the fundamentals behind business electricity costs, what makes up your bill, why prices rise and what you can do about it.
In this article:
Business electricity works very differently to household electricity.
The most notable difference is that business electricity users are not shielded by Ofgem’s energy price cap, one of the main protections afforded to domestic users.
That key difference changes so much of your strategy.
Your business is responsible for understanding its bills, exploring its options and weighing up contract types, including the pros and cons of each.
Ultimately, you need to make decisions that could affect your bottom line for years to come.
We know that sounds daunting. That’s why Troo exists: to simplify business energy for you.
Your electricity bill consists of multiple parts that can be broken into two major categories.
Did you know less than half of your typical monthly electricity bill goes towards paying the cost of electricity?
The precise split will vary for different businesses, but the principle remains: you pay for more than just electricity on your bill.
Wholesale electricity is the product itself. It is the physical power that makes your lights and sites operational. You are covering the cost of the electricity purchased by your supplier.
The remainder of your bill covers a range of non-commodity costs and other charges that aren't always immediately clear.
Examples of costs beyond wholesale energy include:
There are lots of moving parts in an energy bill. Some are fixed; others are variable.
Take time to understand what you’re paying as a crucial first step towards managing your costs.
Wholesale electricity prices tend to revolve around the basic principles of supply and demand.
Specific factors that impact supply/demand and pricing overall include:
You can't control everything that influences electricity prices. However, you can control how you respond to those changes and mitigate the impact of volatility.
You can control what you pay for your business electricity by pulling two main levers:
Unlike domestic electricity bills which roll over onto a variable rate limited by the Ofgem energy price cap, businesses could face tough penalties or roll onto unfavourable terms if their contract expires without a renewal or new deal.
Business electricity contracts can have specific renewal and notice periods, so it's important to check your terms well before your current deal ends.
Depending on your contract, you could move onto an unfavourable out-of-contract or deemed rate if you don't agree a new arrangement.
You should understand your usage, current terms and business priorities before your renewal window opens to hit the ground running and give yourself the best shot at securing the right contract.
Business electricity is complex. We get it. We can support you.
Troo exists to help businesses make sense of their energy needs. We simplify information and help you make smart decisions that manage costs and lead to real change.
We are not here to sell you a quick fix. We're here to understand what matters to you, offer clear advice, and take ownership of the hard parts, so energy becomes one less thing to worry about.
Book a free energy health check today for practical advice on business electricity, gas and water procurement, renewable consultancy and our ongoing management services.