How to understand your energy bill - demystifying energy jargon

We take a look at a typical bill and break down some of the terms to help you feel more confident about your energy supply.

In the year February 2020 to February 2021 835,000 new businesses were registered as the pandemic drove redundancies, inspired moves and pushed people to start that business idea they’ve been harbouring but previously never considered getting off the ground.

Perhaps many of these will remain work from home businesses even as restrictions ease, but energy is a business cost no one can ignore, whether you’re renting space or just working from the spare room. So, with that in mind, how much attention are you paying to your bills and if you do read them, do you actually know what they’re telling you? Chances are, many businesses don’t – after all, you want to be free to do what you do, not worry about energy, but this lack of understanding could cost you money in the long run.

With that in mind, let’s take a look at a typical bill and break down some of those terms so you can feel confident, informed and primed to get the most out of your energy supply.

What does it all mean? 

Common bill terms and their meanings, broken down to give you a better understanding of how your bills are calculated and what your charges consist of:

Standing charge: You might read this and think it is related to the amount of energy you’re using, but it isn’t. This (usually daily) charge relates to everything your supplier does to keep your energy supply running, it’s more like the line rental you pay your phone company than a usage charge. So you’re paying this all the time whether you’re in high usage season or not.
They cover things like meter readings, maintenance of the supply (keeping your energy on). The amount of standing chargers can vary, as can what they cover, so it’s worth knowing/asking what is included in yours.

Unit Rate: We’ve mentioned the Standing Charge, however that only makes up some of the full charge;  the unit rate is multiplied by the billed usage to create the monetary charge. This is in p/Kwh.

Estimated meter reading: We use these when we do not have up-to-date readings for your property. These can be based on a number of factors, including, but not limited to: historical usage at the property and time of year/seasonality or weather at the billing period. Estimated meter reads should be avoided by ensuring you keep up with regular meter reads, because if you pay only estimated bills, it is likely you could be overpaying for your energy.

Meter reading: This is when you review and submit your meter readings yourself, or have the meter read by a person. This is better than relying on estimates and will make your bill more accurate, but still leaves room for occasional misread information and/or human error.
The most accurate representation of your energy use comes with a smart meter (sometimes referenced as an AMR – Automated Meter Reading) – these remove human error and you can access real-time energy usage data to help identify wastage, inefficiencies and manage your energy as effectively as possible. Ask your supplier about Smart Meters if you haven’t already.

CCL – Climate Change Levy: CCL is a tax imposed by the government to encourage a reduction in energy use/gas emission for all energy used in non-domestic environments. This tax is applied to the units of energy used, once the amount used breaches a prescribed threshold.

AQ – Annual Quantity: This relates to the annual quantity of gas that the site is due to use over the following 12 months.  An average domestic property uses 14,000 kWh per year, a standard pub averages 75,000 kWh and a reasonably sized hotel will be 500,000 kWh plus.  This is calculated using the meter readings taken from the site.

AP – Annual Profile: Each site is expected to use a certain amount of gas per month based on standard temperatures for the time of year.  A house or site that uses most of its gas for heating would be expected to use 16 percent of its AQ in January but only two percent of its AQ in July.  A site that uses gas more for production, such as a bakery, will use a more even amount of gas throughout the year with maybe 10 percent in January and six percent in July.

Correction Factor: This is part of the conversion from units to Kwh. This is the Volume correction factor which is used to consider temperature, pressure and atmospheric conditions at the property. The more common value is 1.02264 unless you are a larger user.

Metric Conversion: If you still have an imperial meter you may see this, in which case, the value is multiplied by 2.83.

MRPN: This number identifies the gas supply to the property.

Calorific Value: This is part of the conversion from units to Kwh. This is the energy content of gas. National Grid supplies this value associated with your area daily and an average is used for the month as part of the calculation.

Don’t forget, if you use an energy broker, they can be really helpful in advising on best ways to save, switch and understand your energy usage. As far as understanding every element of your cost breakdown, it is worth remembering, you’re paying for the gas itself (approximately 60 percent) connections, transportation through the network (approximately 20 percent), brokers and more; it takes a lot to get your energy up and running and into your home, even though for you it’s a flick of a switch or click of a hob!