Why is my energy bill so high?

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Is your energy bill based on accurate meter readings?

Energy bills are part and parcel of running a business, but it’s never nice to get one that’s higher than expected.

There’s any number of reasons why this could be, but first, it’s important to discount dodgy meter readings as the issue.

Energy suppliers can only bill you accurately if they have accurate meter readings. 

For businesses with half-hourly meters (profile classes 05-08), this is unlikely to be a problem because meter readings are automatic. 

However, businesses with a standard meter (03 class) who don’t have a smart meter could be overcharged based on old meter readings. 

Overestimates are common in the energy industry because they work on a predefined estimated use pattern. They do not account for unseasonably warm weather or you ditching incredibly inefficient old appliances, for instance.

It’s worth double-checking your meter reading with the estimate on your bill. If there’s a discrepancy, you can contact your supplier, and they will update your energy bill at their end. That should solve your issue. 

Have you underestimated the amount of energy you use?

If you have a fixed energy contract with a fixed standing charge and fixed rate per kWh (so your rates don’t go up), your business energy bill may be higher than expected because you are using more energy than expected. 

Just like smartphone contracts have allocated internet data, business energy contracts have an allocated ‘consumption’ in kWh. If you exceed this, you’ll get an increased bill to make up the difference. After all, nothing in life is free. 

When you compare energy deals, you’ll enter your annual consumption for the month, quarter or year and get prices based on that. If you take out a plan that underestimates your use, your energy bill will be higher than expected. 

Are you on a variable tariff? 

Variable tariffs have energy prices that can go up or down. They fluctuate based on wholesale energy costs and market demand. 

They are usually a good option for short-term use, like a 30-day rolling contract, but for long-term use, they always work out more expensive than fixed tariffs. The good news is you can normally switch to a fixed tariff at any time. 

Read our guide to choosing a business energy supplier for more advice. 

Are you on an expensive tariff? 

It’s really important to compare energy prices from multiple suppliers before you take out an energy contract. 

The price differences between suppliers can be as much as 20%. For example, we have helped businesses cut their renewal rate from 14p/kWh down to 11p/kWh. This makes an enormous difference over a year. 

It’s good practice to compare your energy rates to other rates before your renewal period, so you can aggregate the best suppliers and deals.

Are you on deemed rates?

Deemed rates are charged when you move into premises and there is an existing supply from an energy supplier, but no contract between you. 

An example is if you buy an office and move in. If the previous owner had an energy supply, it will still be in place but on ‘deemed rates’. 

Deemed rates are around 40% more expensive than contracted rates. You should switch to a proper energy plan as soon as possible. 

Also, if you’ve received a business energy bill and you don’t understand it, read our guide to what makes up a business energy bill

Are you on out of contract rates? 

Out of contract rates are charged when your energy contract runs out and you fail to renew your contract or switch to another supplier. 

An example is if you forget to renew your contract on June 1 but renew on June 19. You will be charged out of contract rates for this period. 

You should pay close attention to when your contract is due to end and compare prices well before it comes to an end for the best deal. 

Are you leaking heat?

If your premises is leaking heat then your reliance on central heating and small heating appliances in the winter will be huge. 

Pay attention to your windows, doors and glazing, as well as your building insulation and roof. Any place where heat can escape is a potential culprit. You might also like to bring in an expert to conduct an Energy Performance Certificate (EPC). 

Is your boiler efficient? 

Boilers made 10 years ago are only around 60% efficient. This means only 60% of the energy they use gets used to create heat. 

A 24kW gas boiler will cost £1.32 per hour to run at 5.5p/kWh. If you run that boiler 5 hours a day, 7 days a week, it will cost £198 per month. 

Modern condensing boilers can be 89-94% efficient. The most inefficient boilers are non-condensing. Consider upgrading your boiler to reduce your energy bill. It will cost money in the short-term but save you money in the long-term. 

Are you heating expensive fuel? 

Another aspect of heating is the fuel that’s heated. 

Electric boilers are more compact and more efficient than gas boilers, but a standard unit of electricity (kWh) can cost more than three times more than a unit of gas. This means it costs much more to power an electric boiler than a gas one. 

The same applies to electric hobs and gas hobs. If you have a commercial kitchen, gas hobs will be cheaper to run than induction or electric hobs. 

How old are your appliances? 

Electrical appliances like computers, printers, fridges, washers, water coolers and ovens become around 10% more efficient every 2 years, so it will be worth upgrading to newer kit if your appliances are over 10 years old. 

You can reduce your impact on the environment when upgrading by recycling your old appliances, or if they’re in working order, you could donate them. There are charities that will gladly take your older appliances if they are safe. 

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