Business Energy and the Climate Change Levy
You’ll probably be familiar with the unit rate and the standing charge elements of your business energy bill, but what about the other fees that affect how much your company pays for its energy?
Your standing charge is partly formed by two amounts called the Transmission Use of System charge (TNUoS) and the Distribution Use of System (DUoS) charge. These are determined by your business’s location and consumption pattern among other things. On top of this, you’ll also pay Value Added Tax (VAT) and a special duty called the Climate Change Levy (CCL).
What is the Climate Change Levy?
The Climate Change Levy (CCL) was brought into effect in April 2001 as a way to encourage business customers in the industrial, commercial, agricultural and public service sectors to use less energy and reduce their greenhouse emissions. It’s charged on ‘taxable commodities’ supplied for lighting, heating and power purposes such natural gas, electricity, petroleum, coal, lignite, coke and hydrocarbon gas in a liquid state. Road fuel and other oils that are already subject to excise duty aren’t subject to the Climate Charge Levy.
Domestic customers, charities that use energy for non-business uses and business customers who consume very small quantities of energy don’t have to pay the Climate Change Levy.
How much is the Climate Change Levy?
Climate Change Levy rates are calculated per kilowatt hour of usage. From the 1st of April 2018 to the 31st of March 2019, natural gas is levied at 0.203p and electricity at 0.583p. This is set to rise from the 1st of April 2019 to the 31st of March 2020 when natural gas will be charged at 0.339p and electricity at 0.847p and follows a pattern of increases since 2015 when natural gas was levied at 0.193p and electricity at 0.544p.
Your energy supplier will calculate the Climate Change Levy and add it directly to your bill. They’ll then pass it onto HM Revenue & Customs. You’ll see the charge listed as a separate line item on your energy bill.
Can you reduce your Climate Change Levy payments?
As the Climate Change Levy is charged according to each kilowatt hour of usage, becoming energy efficient is the key to reducing how much your business will pay. Decreasing your emissions will not only help your company to save money and direct it to where it’s most needed for business growth, it will boost your public image and contribute to a healthier, greener environment as well. Unfortunately, since April 2015 renewable energy no longer qualifies for an exemption from the charge.
To reduce the amount that your company pays for the Climate Change Levy, the most effective thing that you can do is to sign up for a government Climate Change Agreement (CCA). This can reduce the amount you pay by up to a whopping 90%. In essence, it’s a contract that outlines the ways in which your business commits to reducing the amount of energy it uses and the methods you’ll put in place to make your business more energy efficient.
How to make your business more energy efficient
There are usually some very simple things that nearly every company can do to make their operations and workplaces more energy efficient, saving their businesses money and reducing their carbon footprints.
Don’t heat or cool empty spaces
Review your temperature controls regularly to make sure they reflect current conditions and areas of use. Change seating and working arrangements to avoid heating or cooling rooms that are nearly empty and make sure your heating or air-conditioning is set to automatically turn off at night and at the weekends when the building is unoccupied.
Fit light sensors
Fitting light sensors to automatically turn lights on when someone enters a room and switch them off when there’s no activity will help to greatly reduce energy wastage. This can save up to 30% on energy costs.
Switch off at night
Computers and other pieces of electrical equipment continue to use power when left on standby mode. Encourage staff to power down anything not in use off at the end of each working day and consider installing timer switches if this makes little impact.
Stick to 60°C
Make sure your hot water is set to no higher than 60°C. This should be sufficient for most common uses such as bathrooms, kitchen washing and cleaning.
Keep an eye on your energy consumption
Fit a smart meter to help you identify how your business uses the most of its energy. This should let you easily see how and when your energy is used, allowing you to make a plan for reduction.
Switch to energy efficient lighting
Energy efficient bulbs are a great way to both reduce energy wastage from lighting and bulb replacement costs as they last up to ten times longer than standard bulbs. Installing energy efficient lighting can save you as much as 75% on lighting costs.
Lower room temperatures
Adjusting the thermostat by just one degree can really help to reduce your energy usage. Just make sure to stick to a range of between 16 - 19°C to keep everyone comfortable.
Request an energy audit
Conducting an energy audit can quickly help you to identify areas where your business can cut consumption and save money. Your supplier can help you to arrange this.
To hear more about how MoneySuperMarket could help you reduce your business energy costs, call one of our expert energy advisors today on 0800 088 6986.