Why businesses do not understand their energy bills

New research has revealed that a surprisingly high number of businesses don’t understand their energy bills. Research by UK energy and water consultancy, Utilitywise, has found that around one in five businesses failed to correctly identify elements of their bills, which could land them in hot water in the long run.

More than 20 per cent of SME’s consulted for the research admitted they did not understand their energy statements, while even large businesses (those with between 50 – 249 staff) admitted that the found their energy bills confusing and didn’t always understand all the charges.

Amongst those surveyed were a number of manufacturing firms, an industry which is typically intensive on energy use. Of these, around one third stated that they did not understand what information was provided on energy bills, or how to interpret this information to their benefit.

The poll was taken by around 2,000 SME’s across the UK, and asked questions about their understanding of units, bills and charges commonly encountered on business energy bills. 60 per cent of respondents were unable to correctly identify the commonly seen ‘E’ and ‘A’ on their bills as ‘estimated’ and ‘actual’ usage, and 25 per cent did not understand what a ‘unit rate’ was.

Over 2 million businesses never check their bills

Even more worryingly, the research suggested that as many as 2.2 million businesses across the UK never, or very rarely, check their energy bills for correctness. This is despite worries in the business community about energy price rises this coming year, and the fact that three quarters of SME’s believe they are paying too much for their energy supply.

When asked to give reasons as to why they failed to regularly check their bills, business owners cited lack of time (23 per cent) as the main reason for overlooking this task. One in four commented that they trusted the amount on their bill to be correct, therefore felt no urgency to double check the amount on the bill.

What to check on your energy bill

Understanding your energy bill is key to avoid overpayments or underpayments being made. Being able to read the charges and various pieces of information on your bill puts you in a position to effectively manage this cost, and to choose a better tariff for your business. The important elements to check are:

  • 1.       VAT

Most businesses pay VAT on their energy bills at a rate of 20 per cent. However, those who use a small amount of energy may be entitled to a reduced rate of 5 per cent. Charities should not pay VAT at all. However, it remains the responsibility of the business themselves to alert their supplier if they believe they should be charged at a different rate.

  • 2.       Meter readings

The reading on the bill should match up with the reading on your meter, so check these every time. If the reading is followed by an ‘E’, that means it’s estimated, so you should send in your actual reading as soon as possible.

  • 3.       Standing charge

The standing charge, also known as a fixed charge, is a set rate that does not change no matter how much energy your business uses. Since 2013, all energy bills contain a standing charge, even if they are zero, so check what your supplier agreed to bill you at and make sure it’s the same in all your bills.

  • 4.       Climate change levy

The Climate Change Levy (CCL) is a secondary tax applied to energy bills for bigger users. The amount charged depends on energy used, and rewards those who take steps to reduce their energy consumption. Make sure you’re paying the right level of CCL on your bills, and if you’re not paying it at all, consider if it could save you money.

  • 5.       Tariff and contract information

Although not really a ‘charge’ as such, it’s still important businesses check their contract information and the details of their account and tariff. Check the address, the named person, the meter reference number and billing period are correct to avoid incorrect charges. Also be aware of the date your contract ends, in order to use the brief window available to renegotiate or find a cheaper energy supply.

For more help with energy bills, and with finding a cheaper energy supplier for your business, talk to Simply Business Energy today or call us on 0800 313 4213 for help.

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