Energy Bills and Contracts

Please note: This article is for educational purposes only. Always consult your energy supplier or a qualified energy adviser for guidance specific to your business.

Accurate and regular meter readings form the basis for all energy-saving measures a business might consider. Understanding your meter type, energy contract, and the additional charges on your bill can help you avoid overpayment and identify opportunities to reduce costs.

Contents

1. Why Meter Readings Matter
2. Types of Energy Meter
   1. Analogue Meters
   2. Dial Meters
   3. Digital Meters
   4. Smart Meters
3. Meter Rate Types
4. Business Energy Contracts
5. Additional Costs and Charges
6. VAT Rates
7. Time of Use Charges

Why Meter Readings Matter

Providing your energy supplier with regular meter readings ensures you only pay for the energy you actually use and helps you choose the most appropriate tariff for your consumption. The standard energy billing unit is the kilowatt-hour (kWh), equal to using 1,000 watts for one hour. Gas meters typically measure in cubic metres (m³), which are then converted to kWh. Older meters may use hundreds of cubic feet (hcf), where 1 hcf equals 2.83m³. Always check that the units on your bill match your meter to avoid overpayment or underpayment.

Back to top

Types of Energy Meter

Analogue Meters

Analogue meters come in two types. Single displays feature 5–7 digits in a row, while dual displays have two rows for dual-rate tariffs such as day and night rates. When reading, ignore red digits and focus on the first five digits from left to right. If the pointer sits between two digits, use the lower one.

Dial Meters

Dial meters consist of five or more separate dials, each pointing to a number between 0 and 9. Read the dials from left to right. Take the lower number if a dial sits between two different numbers. Ignore any red dials or dials marked 0.1. If the pointer falls between 9 and 0, write down 9 and reduce the reading on the dial to the left by 1.

Digital Meters

Digital meters display energy consumption directly on screen. If you pay two separate rates for electricity, you may need to scroll through the menu to find both readings. Ignore any numbers after a decimal point. If your building has a solar PV system or other local generation, there may also be a reading showing exported electricity — take care not to mix this up with your import figures.

Smart Meters

Smart meters eliminate the need for manual readings by transmitting usage data to your supplier automatically. While they do not directly save energy, they provide insights into consumption patterns that support informed decision-making. Energy suppliers are required to provide smart meters for most small business customers. Smart meters and some manual meters report usage every half-hour, enabling detailed billing and potential variable tariffs based on usage times.

Back to top

Meter Rate Types

• Single-rate: Charges a single rate for all usage — the cost per kWh is the same at any time of day.
• Two-rate: Meters such as Economy 7 and Economy 10 offer varying electricity rates based on when energy is consumed, benefiting businesses operating outside peak hours.
• Three-rate: Allows businesses to pay peak, off-peak, and weekend rates for electricity.
• Multi-site meters: Common in larger businesses with several buildings. Multiple meters are linked to one main electricity meter, which can monitor usage across all sites and consolidate them onto a single bill.

Back to top

Business Energy Contracts

Unlike domestic users, businesses cannot access dual fuel bills and require separate contracts for gas and electricity. Business energy contracts typically range from 1 to 5 years and offer three main tariff types:

• Fixed: Maintains a set price throughout the contract term, providing cost certainty.
• Variable: Rates fluctuate in line with wholesale electricity prices.
• Flexible: Common among large companies, involving bulk-buying electricity in advance to manage price risk.

Back to top

Additional Costs and Charges

Business energy charges are structured differently from domestic charges. Businesses typically pay less per kWh than domestic users, but bills include additional charges. Business energy bills can be split into three main cost components:

• Commodity (wholesale) costs per kWh
• Government policy costs
• Systems and transmission costs

Back to top

VAT Rates

Most businesses pay 20% VAT on their energy bills. However, a reduced rate of 5% may apply if your business meets certain criteria:

• Non-profit organisations or charities.
• Over 60% of your business energy is used for domestic purposes.
• Your business uses energy for residential purposes, such as care homes or student accommodation (only the proportion used for domestic reasons qualifies).
• Average daily usage does not exceed 33kWh of electricity or 145kWh of gas.

Back to top

Time of Use Charges

Businesses opting for time-of-use tariffs require a smart meter. These contracts benefit large energy users with the flexibility to schedule energy-intensive operations during cheaper periods. Shifting heavy machinery use or adjusting shift patterns to off-peak hours can lead to substantial savings on energy costs.

Back to top