Business Energy Bill Explained: How to Read Your Gas and Electricity Bill

Business energy bill explained: the quick answer

Most business energy bills come down to one sum:

(kWh used × unit rate) + (standing charge × days in the billing period) + Climate Change Levy + VAT

Everything else on the bill, from your account number to your meter readings, is there to show how those figures were worked out.

Unit rate and standing charge

These two lines make up most of your bill.

• Unit rate: the price per kWh. The more energy you use, the more this line matters.

• Standing charge: a fixed amount per day. It covers the cost of keeping your premises connected, so it applies even when your site is closed.

Some deals trade a higher unit rate for a lower standing charge, or the other way round. Which suits you depends on how much energy you use. Our guide to choosing a lower unit rate or lower standing charge walks through it, and you can also look at no standing charge deals.

What's built into your unit rate and standing charge

Your unit rate isn't only the cost of the energy itself. Ofgem lists the costs that go into business energy prices. They fall into four groups:

• Wholesale costs: what your supplier pays to buy the energy. Read more in our guide to wholesale energy.

• Network costs: the cost of moving energy to your door. For electricity this includes transmission charges (TNUoS), distribution charges set by your distribution network operator, balancing charges and an allowance for energy lost along the way.

• Government schemes and levies: for example the Renewables Obligation, Contracts for Difference, Feed-in Tariffs (electricity) and the Green Gas Levy (gas).

• Supplier costs: the supplier's own running costs, meter operator charges and any broker commission.

Some contracts fix all of these for the full term. Others pass certain network or policy costs through at whatever they turn out to be. If you see these costs as separate lines on your bill, check your contract to see which type you're on.

VAT on business energy bills

Most businesses pay VAT at 20% on gas and electricity. The reduced rate applies where your use counts as qualifying use under HMRC rules, including:

• Electricity use of no more than 33 kWh a day on average (1,000 kWh a month).

• Gas use of no more than 145 kWh a day on average (4,397 kWh a month).

• Premises where at least 60% of the energy is for domestic or charity non-business use.

VAT applies to your standing charge as well as your energy, at the same rate.

From 1 October 2026 to 31 March 2027, qualifying electricity supplies in Great Britain are charged VAT at 0% instead of 5%. Qualifying electricity in Northern Ireland stays at 5%. If you pay the standard 20%, nothing changes. For the full rules, see our guide to VAT on business electricity.

Actual vs estimated meter readings

Your bill shows whether each reading is actual or estimated. Suppliers often mark them with a letter, such as E for estimated, but the codes vary, so check the key on your bill.

An estimated bill is your supplier's best guess based on past use. It can leave you paying too much, or build up a shortfall you pay later. Sending regular readings keeps your bills accurate. Smart and half-hourly meters send readings automatically.

How far back can your supplier bill you?

If your business is a micro business, Ofgem rules stop suppliers from back-billing you for energy used more than 12 months ago. The exception is where the customer has blocked access to the meter or acted unreasonably.

Ofgem classes you as a micro business if you have fewer than 10 employees and a turnover or balance sheet of no more than £2 million, or if you use no more than 100,000 kWh of electricity or 293,000 kWh of gas a year.

Business gas bills: from cubic metres to kWh

Gas meters measure volume, but you're billed in kWh. Your supplier converts one to the other using steps set out by GOV.UK:

1. Take the previous reading from the current reading to get the units used.

2. If you have an imperial meter (cubic feet), multiply by 2.83 to convert to cubic metres. Metric meters skip this step.

3. Multiply by the calorific value shown on your bill, usually between 38 and 41.

4. Multiply by 1.02264, a fixed correction for temperature and pressure.

5. Divide by 3.6 to give kWh.

For example, 100 cubic metres at a calorific value of 39.5 works out at about 1,122 kWh.

Worth a check: if your supplier has your meter down as imperial when it's metric, the kWh on your bill will be about 2.83 times too high. Your meter shows its units on the front.

Half-hourly electricity bills: the extra lines

If your site has a half-hourly meter, your bill usually shows more detail. Lines you may see include:

• Capacity or availability charge: for the supply capacity agreed for your site, measured in kVA.

• Excess capacity charge: added if you go over your agreed capacity.

• Reactive power charge: for power drawn by some equipment that doesn't do useful work.

• Time-of-day network charges: distribution costs that change with the time of day you use power.

These lines are where peak demand charges show up. Checking your agreed capacity against how your site runs today is often the quickest saving.

How to check your business energy bill

Run through this list each time a bill arrives:

1. The supply address and MPAN or MPRN match your premises.

2. The meter serial number matches your meter.

3. The billing period has no gaps or overlaps with your last bill.

4. Readings are actual. If they are estimated, send a reading.

5. The unit rate and standing charge match your contract.

6. The Climate Change Levy is at the current rate, or missing if you're exempt.

7. The VAT rate matches your usage.

8. Payments and credits from your last bill are showing.

9. You've noted the date your deal ends.

What to do if your bill looks wrong

1. Take a meter reading. A dated photo of the meter is the strongest evidence you'll have.

2. Contact your supplier. Quote your account and bill numbers and ask for a corrected bill.

3. Escalate if it isn't sorted. Micro and small businesses can take an unresolved complaint to the Energy Ombudsman for free.

For Ombudsman and Ofgem purposes, a small business has fewer than 50 employees and a turnover of no more than £6.5 million or a balance sheet of no more than £5 million, or uses no more than 200,000 kWh of electricity or 500,000 kWh of gas a year.

If your first bill at new premises shows usage from before you moved in, check your opening reading against your change of tenancy date.

Your bill and your next deal

Your bill holds everything you need to compare: your MPAN or MPRN, your usage and the date your deal ends. Compare before that date. If your contract ends without a new one in place, you can end up on deemed rates, which usually cost far more than an agreed deal. Read more about renewing your business energy.