Every month you pay your business’ utility bills, which includes electricity bills. You look at the amount that you owe, and simply make the payment without being entirely aware of how the amount was calculated. How much do you actually know about electricity and the charges on your bill?
Understanding your electricity bill can help your business to lower its electricity costs. One way to do this is to study up on electricity. A simple and effective way of doing this is to learn what watts (W), kilowatts (kW), and kilowatt hours (kWh) mean.
Understanding watts, kW, and kWh will help you to interpret how your energy supplier calculated your bill. This will help you to see where, and on what, you are spending electricity, thereby giving you an idea of where to cut costs. More information on electricity bill calculation and watts, kilowatts, and kilowatt hours can be found on the websites of utility providers such as Utility Bidder.
Understand How Your Energy Supplier Calculates Your Electricity Bills.
Your energy bills consist of a number of costs. These include wholesale costs, network costs, social and environmental obligations, other direct costs, supplier operating costs and margin, and taxes. The total amount on your bill every month depends on the amount of energy you use (kWh), the standing charge, as well as taxes and levies. The amount of energy you use is the number of kilowatt hours (kWh) you use multiplied by the unit rate that you pay on your current tariff. The standing charge is the flat daily rate that you have to pay no matter how much energy you use. The rate will be multiplied by the number of days in the billing period.
Your electricity bill will include the following sections:
1. Bill date, bill number, and VAT number.
2. Account number and supplier contact details.
3. Contract information.
4. Billing period.
5. Your reading types.
Your bill can be based on estimated readings, or actual readings.
6. Outstanding balance from previous bills.
7. Balance from this billing period.
This is divided into two charges. The Unit Rate and the Standing Charge.
8. VAT charges.
9. Total amount owed.
10. MPAN number.
A 21-digit number found on your electricity bill.
11. Breakdown of charges.
This is a detailed breakdown of how the supplier calculated the electricity charges on your bill.
The Unit Rate and Standing Charges can be broken down even more:
· Wholesale costs
The amount that business energy suppliers will pay to get the energy that you use.
· Transmission use of system charges (TNUoS)
Covers the supplier’s expense for maintaining the National Grid.
· Paying for distribution use of system (DUoS)
Covers the costs sustained by your Distribution Network Operator, including day-and-night charges and maximum demand.
· Climate Change Levy (CCL)
A tax raised on every unit of energy that commercial consumers use. It is supposed to encourage businesses to use more energy efficient means. It is possible to become exempt from this charge.
· VAT
This is added to your bill by your supplier. Depending on your electricity usage, this amount can be either 20% or 5%.
· Feed-in Tariff (FiT)
Energy companies are charged a levy by the energy regulator, Ofgem. If your business generates energy on site by using small-scale renewable electricity generation, this charge may be on your bill.
· Renewable obligation (RO)
This is a government initiative to help meet climate change objectives by encouraging the development of large-scale renewable energy generation. Suppliers will add the charge to businesses’ bills as a pass-through cost, appearing as a separate item on their bills. They could also combine it with the overall supply rate that a business pays. In April of 2017 this initiative was replaced by the CfD.
· Contracts for Difference (CfD)
This charge is in the form of a levy applied to energy suppliers, which is then passed on to consumers in the form of the following pass-through charges:
o Operational Costs Levy
This is a fixed rate per kWh that is charged to cover the running costs of the scheme set by the Local Carbon Contracts Company.
o Supplier Obligation Costs
This charge covers the amount of low-carbon electricity funded by CfD, and is based on the subsidy paid to each CfD generator according to the volume of energy generated and wholesale electricity costs. This is a variable charge that is estimated at the beginning of every quarter, and fixed at the end of each quarter.
o Quarterly fixed charges
A fixed fee paid every quarter to help negate the need for multiple reconciliations and complex calculations. It is calculated and revised as needed.
What’s the Difference Between kWh and kW?
The most important difference between kW and kWh is what they measure. kW measures power, while kWh measures energy. Power multiplied by time equals energy. A kW is 1000 Watts, and indicates the amount of power needed to make a device work, or the rate at which something uses electricity. A kWh is the amount of energy that has been used over a period of time, or the total amount of electricity used.
Most electrical appliances are rated in Watts. Watts are a measurement of power equal to one joule of work performed per second. But Watts are small, thus kilowatts are used as a measurement unit. One kilowatt (kW) is 1000 Watts. Kilowatt hours (kWh) are calculated by measuring the amount of energy you would use if you kept a 1 kilowatt (kW) appliance running for one hour.
Conclusion.
When you know more about electricity and how it works, it will help you understand how your energy supplier calculated your bills. Understanding the difference between kW and kWh is important for a business to monitor and manage its electricity usage. Knowing how your electricity bill is calculated will help you to reduce the overall electricity costs of your business.