In this article we will cover everything you need to know about your energy contracts and how you are billed for you energy.

Keep reading to find out more!

How are energy bills calculated?

There are two elements which make up the sum you are charged:

• Standing charge: A fixed daily rate

• Unit charge: Cost for each unit of energy (kWh) that you use

Standing charges vary between suppliers. If the amount collected through standing charges is reduced, then the unit cost will be higher and vice versa.

What are standing charges?

Standing charges need to be paid no matter how much energy you use. They are to cover fixed costs that suppliers have to pay, like the cost of transporting gas and electricity to your business. These costs are collected by energy suppliers through bills and then passed onto the companies that transport gas and electricity to your home (energy network companies).

Why might my standing charges be going up?

Standing charges are a daily fixed amount that varies by region due to the different costs to transport power. The increasing global gas prices, failure of a number of suppliers, and increased costs of maintaining the energy network have all contributed to an increased standing charge.

It is advisable to contact your supplier for personalised information on your tariff as different factors also affect how much suppliers charge. This includes where you live, how you pay (prepayment, Direct Debit, or standard credit) and your type of energy meter.

Why is my bill estimated?

Suppliers may estimate your meter consumption if you have not provided them with an actual read or they haven’t received it from a meter reader or smart/AMR meter. To make sure you are only paying for the energy you use, as a microbusiness, you should request a smart meter upgrade from your supplier, or provide an accurate actual meter reading for billing. Providing regular meter readings helps your supplier to estimate bills more accurately.

When do I need to give a meter reading?

If you don’t have a smart meter or AMR meter, you should submit meter readings monthly to ensure your bill remains accurate.

Why have I received an extra bill?

Unless you have a smart meter or give regular meter readings, suppliers will need to estimate your energy usage. If a supplier has previously estimated usage but then receives a meter reading showing increased consumption which is more than estimated, they will issue a bill to cover the additional energy you have used. If you are a Microbusiness, suppliers cannot ask to recover any energy use if the consumption took place over a year ago and the customer has not been notified before.

You can help your supplier send you accurate bills by:

• Trying to provide regular meter readings

• Tell them if and when you are moving in or out of a property

• Arrange with your supplier a smart meter fitting

If you receive a bill for energy usage that’s for more than a year ago

If your Microbusiness receives a bill for energy used more than 12 months ago, you should contact your supplier and explain that you understand that you are protected by the UK back-billing rules. These rules protect you, and you should not be charged for any unpaid energy use more than 12 months ago if you have not had an accurate bill for this before. This also includes situations where a supplier increases your direct debit if was set too low. However, this does not apply if you have behaved obstructively or unreasonably, preventing accurate billing.

Examples of this could include:

• Blocking meter readings at your property

• Stealing gas or electricity

How are monthly direct debit amounts determined?

Energy companies look at a number of factors including your previous consumption (for existing customers) or expected consumption (calculated by business needs and premise type) to estimate how much they think you will use over the course of the year. They will also take into account the tariff you are on, your payment record, and whether you are in arrears. For monthly payments they will then divide the total amount by 12 for monthly payments, and by 4 for quarterly payments.

Why has my Direct Debit increased?

Factors such as recent tariff changes, high debit balances, or recent meter reads can drive large adjustments to your direct debits. If you have been underpaying for some time and you submit a meter reading, this could be an explanation as to why your direct debit amount has increased. Suppliers are required by Ofgem to ensure Direct Debit payments are reasonable and to also clearly communicate any changes in a way that helps consumers understand their payments. If you are unsure on why your direct debit has increased you should contact your supplier.

What happens if I cancel my Direct Debit or refuse to pay?

For those struggling to pay their bills you should contact your energy supplier in the first instance who may be able to help. There are also other external organisations who can help. Cancelling your Direct Debit could lead to you getting into debt, potentially disconnected, and in some cases may mean the energy supplier switches you to prepayment even if you already have a smart meter. Often a discount for paying by Direct Debit is applied to accounts, so cancelling could also lead to an increase your energy bills.

What should I do if my supplier goes out of business?

If your energy supplier goes out of business, do not panic as your supply will remain uninterrupted. If you already have a switch in progress then you will continue to move to your chosen supplier. The failed supplier will either be put into ‘Special Administration’ or your account will be transferred to a new supplier, referred to as a Supplier of Last Resort (SoLR). If you do get transferred, the regulator Ofgem will automatically move you within a few weeks. Do not try to make any changes until your account is moved to a new supplier. You might find it harder to receive money you are owed if you switch before this happens.

You should wait for your new supplier to contact you and in the meantime:

• Take regular meter readings and a photo of them as proof

• Keep any old bills you have as these can help prove your payment history, credit balance, or debt

• Download any bills from your app or via old supplier’s website if you have an online-only account

• Make a note of your account balance. You will find this on your most recent statement

Your new supplier will contact you to tell you when your new account has been set up. When they contact you, you should immediately ask about the business tariffs available to you. Before you agree to a new contract with them, you can also choose to shop around and switch if this is a better option. You will not be charged exit fees. You should contact your new supplier if you don’t hear from them within two weeks.

Will I be on a different business energy contract with my new supplier?

Your old tariff will end and you will be placed on a different contract. Your new supplier will put you on a special ‘deemed’ contract, meaning a contract you haven’t chosen. This contract will last for as long as you want it to but will likely be more expensive than other contracts. Ask your new supplier about your business energy options when they contact you. Before you agree to a new contract, you can also choose to shop around and switch if you want to and you won’t be charged exit fees.

Will my bills go up?

Your new supplier will place you on a ‘deemed’ contract. This means a contract you haven’t chosen and can be more expensive because the supplier takes on more risk (they may need to buy extra wholesale energy at short notice) so your bills could go up. Ofgem will try to get the best possible deal for you if you’re in this situation. You are not locked into the deemed contract and you can change tariff or supplier once your new account is live.

Should I switch supplier now?

Most likely, no. Our advice is not to switch but wait until the new supplier contacts you. This will make sure the process goes as smoothly as possible and once complete, you will be free to switch to another tariff or supplier.

Will my credit balance be protected?

Business customers’ credit balances aren’t protected under the Ofgem Safety Net, although Ofgem will always try to appoint a new supplier to cover all or some of the failed supplier’s outstanding credit owed. This is not guaranteed. In most cases, you will need to contact your old supplier’s administrator about your credit balance, the same way you would if any of your other service providers became insolvent.

Types of meters

Different types of meters can affect how, when, and how much you pay. These include:

Credit meter – consumers pay for their energy after they have used it, based on estimates or actual use.

Prepayment meters – customers put credit on their account before using energy rather than receiving bills for their usage. Prepayment meters allow customers to manage their energy use and finances more closely. However, they aren’t suitable for all customers, and it’s worth discussing with your supplier if you want to change.

Smart meters – send live readings of energy use automatically to your supplier, so that you receive bills based on actual use, without having to give readings. Both credit and prepayment meters can be smart.

Automated Meter Reading (AMR) meter – only has one-way communication from the meter to the energy supplier, whereas a smart meter has two-way communication between the energy supplier and the meter. The information they provide is also different, AMR meters only provide kWh information and possible peak kW demand for the month. If you are classified as a non-microbusiness, you are able to choose between having an AMR meter and a smart meter

Working with brokers and Third-Party Intermediaries

Third-Party Intermediaries (TPIs) organisations and individuals give energy related advice aimed at explaining buying energy and why you may need your energy managed. These include switching sites, energy brokers, consultants, and any other company that offers support with energy procurement. They are especially helpful in finding new contracts.

Ensure you work with a reputable TPI that you are comfortable with. Whether you approach a TPI directly or they contact you, you should not feel under pressure to use their services. If you do – this is a red flag. Your energy supply contract will always be with an energy supplier and not with the TPI, who does not supply your energy. The TPI industry is not regulated by Ofgem but as of 1^st December, any TPI working with microbusiness customers can only engage with a supplier to secure contracts on the microbusiness’s behalf if they are a member of an accredited ADR scheme.

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Keeping up to date with developing situations and the associated ramifications is a tricky and time-consuming job. It is also one that is not likely a priority for you and your business.          

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