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Are You Paying Too Much for Your Business Energy?

A huge chunk of your operating expenses is comprised of your business energy spending. If you would like to maximize your profit, you need to make sure that you are not paying too much for the energy you’re using to keep your business up and running. But how do you determine this?

Know How Business Energy Cost Is Computed

The cost of your business energy can be determined mainly by taking the following into account: (1) distribution cost across energy networks, (2) wholesale price of electricity or gas, and (3) the profit margins of suppliers and brokers.

Wholesale energy cost is easy to determine as this information is readily available. However, the opposite holds true for the two other factors. Distribution cost, for instance, is comprised of both variable and fixed components. The only thing that’s absolute here is the fact that the larger the business, the lower the energy distribution cost. As such, if you are the owner of small or medium enterprise, it’s safe to say your energy cost per kilowatt hour is higher than a big corporation. The final factor, profit margins, is a controversial issue. While the pricing set by suppliers is easy to find and understand, there are reports of an unscrupulous partnership between them and brokers that have seen profit margins rise to unbelievable figures.

The fact that there’s no set value for two of the components that make up your business energy cost means it is difficult to determine if you are overpaying. Thankfully data exists which shows that businesses that have non half hourly (NHH) metered supplies should only be paying at most 3pence/kWh for gas and 10pence/kWh for electricity. These businesses include most small offices and retail stores. On the other hand, those with HH or half hourly supplies should be paying around 2.5-3 p/kWh for gas and 6-8 p/kWh for electricity.

Once you’re able to determine even an approximate value of what you should be paying, compare it with the average cost for similar establishments. If it’s higher, you’re being ripped off and you need to report this to the proper authorities.

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