Why Is Business Electricity So Expensive?
Electricity bills for commercial businesses are usually more expensive than the bill you get for your electricity utilization at home. The short answer is that businesses need more electricity for computers, lighting, and machines, etc. There are, however, more than just those factors that come into play when it comes to electricity, so let’s take a look at them.
Information on commercial bills can be of a variety of different types. Information that you wouldn’t usually find on a regular house bill. These include things like VAT (value-added tax), Unit Cost, and Standing Charges, which will be discussed further. What’s most important when it comes to these charges is that they are different from place to place and from business to business.
They can be fixed or variable, and regardless of what kind of business you are running, you have to look into these. One type of business may benefit from a fixed tariff, while another might find variable rate tariffs more suitable.
VATs are government taxes on services and goods, which are added to the price of nearly anything that you can buy. It is compulsory on businesses with an annual income of around £85,000, although it is still possible for a business to voluntarily pay VAT to the government if their turnover is less.
Electricity tariffs automatically add VAT to them, which is why you can’t claim it back once paid. Unit Costs is the price you pay for every kilowatt-hour of electricity that your business uses. Lastly, Standing charges are cost charges for having provided a supply of electricity to your business premise, and it also covers maintenance of the national grid.
To get rough estimates as an answer for this question, we will have to compare business electricity usage based on their size. There are multiple different sizes allocated to businesses according to the number of employees and annual turnover. A small business is one that usually has less than 50 employees with a maximum turnover of £3.26 million.
They are usually charged around 11p for unit cost and 25p per day for standing charges. Micro businesses are those that have less than ten employees, and have to pay higher rates on their electricity bills, 13p for unit cost and 28p per day for their standing charges. Medium-sized businesses, with around 250 employees, get the best deals with 10.5p on unit cost and the standing charges being 22p per day.
Electricity costs change every hour on a given day. This mainly has to do with the demand for electricity in a given time period. For example, 9 am to 5 pm is the time that businesses are most active, and the demand for electricity is higher. At night time, you might see the costs go down. Seasons and weather also have a major impact on a generation.
For example, the amount of electricity required during a long summer day is much less than a short winter day. World events also have a major effect as well. Natural disasters and international conflicts can stop the supply of fuels and oil for long periods of time, making costs higher.
If you’re a business owner, you need to keep an eye on the utilization of electricity. It is important to have an understanding of what and how much you will have to pay.