How to read a commercial electricity bill

A commercial electricity bill separates into two parts: the cost of the electricity itself, shown as a unit rate for each kilowatt-hour used, and a set of charges layered on top of it. The charges cover the standing cost of the connection, the power the site is allowed to draw, the local and national networks that carry the power, the cost of balancing the grid in real time, government policy schemes, and tax. For an energy manager reading the bill for the first time, most of the difficulty is the second part, because the lines carry acronyms, are set by bodies other than the supplier, and together account for a large part of the total.

This guide goes through each line in turn. Several of the charges have their own guide, linked where they come up, so you can read the summary here and follow the detail where it matters for your site.

The energy cost and the standing charge

The energy cost is the part most people expect: a unit rate, priced in pence for each kilowatt-hour, multiplied by the number of units the site used in the billing period. On many contracts the unit rate varies by time, with a separate day rate and night rate, so the same kilowatt-hour costs a different amount depending on when it was drawn. This is the closest line to the wholesale price of electricity, though even here the supplier has usually built some of the network and policy cost into the rate rather than listing it separately.

The standing charge is a fixed daily amount that the site pays regardless of how much electricity it uses. It covers the cost of keeping the connection in place and being read and billed. On a commercial bill it is quoted as a rate per day and multiplied by the number of days in the period.

Capacity charges: the power a site can draw

Larger sites pay for the power they are entitled to draw at any one moment, on top of the energy they use. This is the site's maximum import capacity, agreed with the distribution network operator and recorded in kVA. It appears on the bill as a standing charge for each kVA per day, so a site pays for the headroom whether or not it uses it.

Drawing more power than the agreed level in any half hour brings an excess capacity charge, which in some regions is billed at a higher rate than the standard capacity charge and is usually assessed against the highest half hour in the month, and can appear as a separate line when it is triggered. A site whose peak demand has crept up over the years can find itself paying this regularly.

Distribution charges: the local network

DUoS charges, or distribution use of system charges, pay for the local network of cables and substations that carries power from the transmission grid to the site. They are set by the distribution network operator for the region and collected through the supplier.

For a half-hourly settled site the DUoS unit rate is split into red, amber and green bands by time of day. The red band covers weekday peak hours and carries the highest rate; the amber band covers the shoulder periods at a lower rate; the green band covers nights and weekends at the lowest. The same electricity therefore costs a different amount in distribution charges depending on when the site drew it, which is why the timing of demand matters as much as its size.

Transmission charges: the national network

TNUoS charges, or transmission use of system charges, pay for the national high-voltage network that moves power between regions before it reaches the local distribution network. For a large half-hourly site TNUoS is set partly by a fixed element tied to the site's agreed capacity and partly by demand at the times of national system peak. Drawing less power at those peak times lowers the part of TNUoS that responds to behaviour.

DUoS and TNUoS are separate lines and separate networks: DUoS is the local distribution network in the site's region, and TNUoS is the national transmission network that feeds it. Both are distinct from the wholesale cost of the electricity, and both are regulated by Ofgem.

Balancing and policy costs

Beyond the network charges sit the costs of running and decarbonising the system as a whole. Balancing services use of system, or BSUoS, recovers the cost of keeping supply and demand matched in real time, and is set by the National Energy System Operator and recovered through suppliers.

A group of government policy schemes also reaches the bill through the supplier. These include the Contracts for Difference scheme and the Renewables Obligation, which fund low-carbon generation, the Capacity Market, which pays for firm capacity to be available at times of system stress, and the Feed-in Tariff legacy costs. On some bills these are listed individually; on others they are folded into the unit rate. The government's own guidance on these schemes is published by the Department for Energy Security and Net Zero.

The Climate Change Levy

The Climate Change Levy, or CCL, is a tax charged on each unit of energy a business uses, set by government and shown as a separate line on the bill. Some energy-intensive sites hold a Climate Change Agreement that reduces the rate they pay in return for meeting energy efficiency targets. The current rates and the eligibility rules are published by HMRC.

Reactive power and power factor

Some commercial bills carry a reactive power charge. Reactive power is the part of the electrical load that does no useful work but still has to be carried by the network, and it arises from motors, transformers and similar equipment. A site with a poor power factor, meaning a high level of reactive power relative to the useful power it draws, can be charged for it. Correcting the power factor with equipment on site removes the charge where it applies.

Metering and administrative charges

A half-hourly site pays for the meter itself and for the collection of its readings. These reach the bill as a meter operator charge, for the company that installs and maintains the metering, and a data collection and aggregation charge, for the company that gathers and processes the readings. They are small relative to the energy and network charges, but they are separate lines with their own acronyms.

VAT

VAT is added to the total at the standard rate for most business supplies. A site with low consumption, or one where the electricity is used for certain qualifying purposes, may be charged at a reduced rate instead. The current rates and the qualifying conditions are set by HMRC.

The bill sits on the site's half-hourly data

Behind every one of these lines on a half-hourly bill is the site's underlying consumption record. The half-hourly data is a year of meter readings, one for every 30-minute period, and it is what the time-varying charges are calculated against. The red-band DUoS cost, the TNUoS demand element, the capacity charge and the excess capacity charge all depend on when the site drew power and how high its peaks reached, which the half-hourly data records directly. Reading the bill and reading the data are two views of the same consumption.

How solar and storage change the bill

Because so much of a commercial bill turns on when a site draws power, generating some of it on site or shifting demand in time reduces more than the energy cost alone. On-site solar displaces grid import at the moments the sun is generating, which cuts the energy cost and the network charges attached to those units. A battery moves demand off the most expensive periods, lowering the red-band DUoS cost and the demand-driven part of TNUoS, and it can hold down the peak that sets the site's import capacity.

Lupa takes a site's half-hourly data and its electricity invoice and models each of these charges directly, so the effect of solar and storage is read off the site's own bill rather than assumed. For each combination of solar and battery, the platform shows how the individual lines on the bill change across the year.