Guide to Reducing Business Waste Water
Find out how you can reduce business waste water usage to lower your water bills.
March 2021
| Business Advice
Understanding Your Business Water Bill
Understanding your business water bill is the first step toward reducing your commercial water rates. Many companies are still unaware that they can switch business water suppliers since the market was deregulated in 2017.
This means that 1.2 million businesses in the UK are able to switch to a new business water supplier and explore the possibility of paying cheaper water rates. The market helps deliver lower commercial water bills, helps organisations use less water and encourages better service.
We’ve created this guide to help increase awareness in business circles about the possibility of switching commercial water suppliers, and how understanding your water bill can help.
How Is Business Water Charged?
First up, and possibly one of the most important factors, is understanding what you’re actually charged for. We can hazard a guess that you’re going to be charged for your water usage, and you would be correct but there’s slightly more to it than that.
Water
Getting the obvious out of the way first, you will be charged for the supply of fresh water to your business premises. This charge depends on how much water your building uses. If your business premises is unmetered, the charge will be calculated on the rateable value of the premises.
Wastewater
There’s also a charge for the removal of used water that goes into the sewer system. These wastewater charges apply to any premises that have a connection to the sewer system.
How Is Your Business Water Bill Calculated?
We’ve established what charges are involved in your business water bill, and now here’s the breakdown of the charges.
Volume Charge - this is a charge based on the amount of water that has been used by the business. The charge per cubic meter is determined by two things; the location of your business premises and the charges applied by your water supplier.
Fixed/ Standing Charge - you will be charged a standard fee by your supplier to cover the costs of reading and maintaining your commercial water meter.
The calculation for your water charge is as follows: standing charge + (volume of water used x volume rate) = your water charge.
How Is Your Wastewater Bill Calculated?
There’s often some confusion around this charge. There are a couple more elements to be considered in this calculation. We’ll break it down below.
Volume Charge - as you have probably guessed, you will be charged for the amount of water you have returned to the sewerage system. This charge is estimated based on the amount of water that originally entered the premises.
Fixed/ Standing Charge - there’s a charge associated with maintaining the pipes that connect your premises to the local sewerage system. The costs are usually calculated based on the size of the building.
Return To Sewerage Charge - finally there’s an estimated charge of how much water has been removed as wastewater. The factor is assumed at 100% by most water suppliers (what goes in, must come out!).
The calculation for your wastewater charge is as follows: standing charge + (volume of water used x volume rate x return to sewerage charge) = wastewater charge.
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What Other Information Is Included In My Water Bill?
Depending on how your water bill is set up, you could receive separate bills for your water usage and your wastewater. However, in most cases, your commercial water bill will include the following:
- Basic business information - name, address, reference number
- Supply point ID/ waste supply ID - a unique number to help identify your building supply
- Account charges - you’ll get a summary of charges including outstanding payments and any adjustments made
- Charge breakdown - you should receive a full charge breakdown in detail. This is made up of fixed charges to cover maintenance, volume usage charges and any other charges.
Am I Required to Pay VAT on Business Water Bills?
Some businesses in the UK have to pay water VAT. You can find out whether or not you need to pay business water VAT from your Standard Industry Classification (SIC) code. If your business falls under one of the first five divisions set out by the UK Standard Industrial Classification of Economic Activities of 1980, you will have to pay for business water VAT.
- Division 1 - Energy and water supply industries
- Division 2 - Extraction of minerals and ores other than fuels; manufacture of metals, mineral products and chemicals
- Division 3 - Metal goods, engineering and vehicles industries
- Division 4 -Other manufacturing industries
- Division 5 - Construction
Most businesses that pay VAT on water bills are part of the following industries.
- Textiles
- Mining
- Manufacturing
- Engineering
- Utilities
- Chemicals
- Construction
Organisations that fall under the following divisions do not have to pay VAT on business water bills.
- Division 0 - Agriculture, forestry, and fishing
- Division 6 - Distribution, hotels, catering, and repairs
- Division 7 - Transport and communication
- Division 8 - Banking, finance, insurance, business services, and leasing
- Division 9 - Other services such as education and public services
- Division 000 - Diplomatic representation and international organisation
The government decides how much VAT to impose on business water bills. Any business that falls under the correct divisions will pay 20% VAT on their water usage.
What If Your Commercial Water Contract Ends?
Similar to the business energy market, once your contract ends, your business water supplier will place you on a deemed rate contract. These are often the most expensive commercial water rates the supplier offers.
You should make note of your contract end date in a digital calendar so you can switch business water suppliers when you’re approaching the end of your contract.
Who Controls The Commercial Water Market?
You may be wondering how the price of your water is calculated from the beginning, and who controls the market. Even with deregulation, a regulator has been placed to ensure that businesses continue to get a fair deal on their water rates.
The market in the UK is controlled by three organisations:
Ofwat - the most recognisable name out of the three, they are the economic regulator and licencing authority.
Defra - stands for the Department for the Environment, Food, and Rural Affairs.
MOSL - is the market operator and ensures the market remains easy to understand and efficient.
For Scotland, the Water Industry Commission for Scotland (WICS) manages the market.
Where Do I Buy My Water From?
Businesses purchase water from retailers licensed by Ofwat and WICS. These retailers purchase water and wastewater services from wholesalers who are responsible for owning and operating the network pipes, mains, and treatment works. Your wholesaler is dependent on the region your business operates in.
You can switch business water retailers who are responsible for your billing, obtaining meter readings, and providing customer service. This is similar to the energy market.
Business Water Bill FAQs
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What Is Rateable Value?
Relatable value is a charge calculated on the value, size and location of the business premises. The rateable value is used by commercial water suppliers to estimate the consumption of an unmetered business.
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How Businesses Can Save Money On Water?
There are a variety of measures that could help you reduce your business’ water costs. This includes improving efficiency, checking for leaks, monitoring usage and switching suppliers. You can read more about ways your business can save money on water bills here.
It has been reported that smaller businesses can face water bills of up to £1,165 per year, whilst medium-sized businesses can be expected to pay approximately £7,950 annually.