Rising non-commodity costs

By Adam Novakovic January began with a sense of optimism. The new year brought hopes that energy prices could soon return to levels not seen since 2021, wholesale prices were falling and large quantities of new LNG were scheduled to be available for import during 2026. However, events that transpired during the first 31 days of the year have caused prices to rise and have sent waves of fear throughout the energy markets. The month began with a wave of cold weather leading to above-expected gas consumption. An Arctic blast combined with Storm Goretti brought temperatures down to below -10°C and led to gas power stations being needed to make up the shortfall, causing an uptick in wholesale gas prices.

What is the Weighted Average Price (WAP) in energy? In the UK energy market, Weighted Average Price (WAP) refers to the average price paid for electricity or gas over a period of time, weighted by the volume bought at each price point. For those on flexible energy contract, the WAP represents what the unit rate will be when multiple purchases were made for the same period. In other words, it answers the question: “What did we actually pay for our energy once all purchases and volumes are taken into account?” This makes WAP far more meaningful than a simple average, especially in volatile markets. How WAP works in practice Energy prices move constantly. Businesses, particularly those on: Flexible contracts Basket or portfolio products Pass-through arrangements often buy energy in multiple tranches at different times and prices. For example: 40% of energy bought at 10.0p/kWh 30% bought at 12.0p/kWh 30% bought at 9.0p/kWh The WAP reflects the price-weighted impact of each purchase, giving a single unit rate that reflectsthe real cost exposure. Why WAP matters to UK businesses 1. It reflects real procurement performance WAP shows how effective your buying strategy has been, not just whether the market went up or down, but how your timing and volumes performed. 2. It’s essential for budgeting and forecasting Using WAP allows businesses to: Accurately forecast energy spend Compare performance year-on-year Avoid misleading headline prices This is especially important for manufacturers and high-consumption sites where small price differences materially impact costs. WAP vs fixed prices Fixed contracts : WAP is locked in at the point of contract Flexible contracts : WAP evolves over time as more volume is bought This means WAP can improve with smart market timing and deteriorate if exposure is unmanaged. For those on fixed contracts, it can be vital that portfolios are being managed by a person or group with experience and expertise in energy markets. Ultimately, the strategy of when and how much to buy is just as important as the market itself. WAP as part of your purchasing strategy Weighted Average Price is the truest reflection of what your business actually pays for energy. Understanding it is critical to controlling cost risk in volatile markets. For larger SMEs and energy-intensive businesses, having a clear energy purchase strategy and having this strategy communicated through regular reporting can be vital for forecasting future energy costs. If your business would like assistance with understanding the current state of your portfolio, or advice on purchasing and management strategies, contact us today to see how we can help lower your electricity and gas costs and help you See More of the hidden value in your energy portfolio.

Meter types explained (LV, HV and EHV) For many businesses, electricity is treated as a fixed overhead -- something that cannot be changed. But in reality, how your site is connected to the electricity network can significantly influence what you pay , and many organisations are unknowingly on a setup that no longer suits their operations. Whether your supply is Low Voltage (LV), High Voltage (HV) or Extra High Voltage (EHV) impacts network charges, flexibility, and future growth. Understanding the difference could be the key to reducing costs and avoiding any unpleasant surprises. Low Voltage (LV): common, simple — and often overlooked Low Voltage (LV) supplies electricity at up to 1,000 volts and is the most common connection type for SMEs, offices, and retail units. LV customers usually benefit from: Straightforward billing Lower DUOS standing charges Minimal technical involvement However, simplicity can mask inefficiency. As businesses grow, extend operating hours or add energy-intensive equipment, LV sites can find themselves paying disproportionately higher network charges as red and amber unit charges make up a higher percentage of the costs. If your electricity costs have risen faster than your usage, your meter type could be part of the reason. High Voltage (HV): complexity that creates opportunity High Voltage (HV) connections operate between 1,000 and 22,000 volts and are typically used by manufacturers, large warehouses and energy-intensive commercial sites. HV supplies bring: Higher capacity charges Greater exposure to kVA related costs More detailed half-hourly consumption data While this can appear daunting, it also creates opportunity. Businesses that understand how and when they use electricity can actively influence costs, often achieving savings that are simply unavailable at LV. Many HV customers pay for more capacity than they need --or the wrong capacity altogether -- without realising it. Contact us today and we can conduct a kVA review that could potentially save £10,000s annually. Extra High Voltage (EHV): where energy becomes strategic Extra High Voltage (EHV) applies to supplies above 22,000 volts and is reserved for the UK’s largest electricity users. At EHV level: Network charges are highly bespoke Costs are closely linked to site-specific infrastructure Small demand changes can have large financial impacts For these businesses, electricity is not just a utility, it’s a strategic cost driver that requires ongoing oversight. Without regular review and proactive management, EHV sites can sleepwalk into avoidable six-figure cost increases. Why understanding meter type matters Meter type determines: How DUoS and other network charges are applied How much control you have over peak costs Whether your connection aligns with how your site actually operates today Many businesses inherit their meter type and never question it, even when their operations change dramatically. These changes in how a meter operates can require reviews of kVA capacities, meter type, and TCR bands . All of which can help towards reducing energy spend. How we help businesses take control As an energy broker, our role goes far beyond securing competitive unit rates. We help businesses: Understand whether their current meter type still fits Identify inefficiencies hidden within network charges Plan energy strategies that support growth, not restrict it If you’d like to understand whether your LV, HV or EHV supply is working for your business, or quietly working against it, a no-obligation review could uncover meaningful savings and future-proof your energy strategy.

What are Balancing Services Use of System (BSUoS) charges? Balancing Services Use of System ( BSUoS ) charges recover the cost of keeping the electricity system in balance in real time. Electricity must be generated and consumed at the same moment, and BSUoS funds the actions National Grid Electricity System Operator (NESO) takes to achieve this. These actions include: Instructing generators to increase or decrease output Paying for reserve and response services Managing system constraints and frequency control BSUoS is therefore not about building networks (like TNUoS or DUoS ), but about operating the system safely and securely second-by-second. Who pays BSUoS charges? Since April 2023, BSUoS costs have been recovered entirely from electricity demand rather than split between generators and suppliers. In practice: Suppliers pay BSUoS charges to the system operator These costs are then passed through to all electricity consumers, including business customers Most businesses see BSUoS as a pass-through charge in their supply contracts Domestic customers also contribute, although the charge is typically embedded rather than itemised. How do BSUoS charges work in practice? BSUoS is charged on a per kWh basis, based on actual electricity consumption during each settlement period. The BSUoS rate reflects the real-time cost of balancing the system, which can vary significantly depending on: Weather conditions Generator availability Network constraints Levels of intermittent renewable generation Unlike DUoS or TNUoS, BSUoS is not location-specific. The same rate applies across Great Britain for each settlement period. How much is BSUoS (and when are charges set)? BSUoS charges are not fixed in advance. Instead, they are calculated using a forecast-and-reconciliation model. This means the amount originally charged can be reconciled after the fact once actual consumption data is available. In p/kWh terms, BSUoS charges have varied widely in recent years, but for business customers they have typically fallen in the range of 0.6–1.6 p/kWh, with occasional spikes during periods of market volatility. Because of this variability, BSUoS can be a driver of bill uncertainty for large and flexible users. Why BSUoS matters for businesses As the electricity system becomes more reliant on intermittent renewables, balancing actions are expected to increase. This means BSUoS is likely to remain a material and structurally important cost. For sites with half-hourly metering, reducing consumption during system stress periods -- or using on-site generation and storage -- can help limit exposure, although BSUoS is generally less controllable than DUoS or TNUoS. If you would like to ensure that your BSUoS charges are being invoiced correctly. Contact us today and we can review your recent invoices to make sure you aren't paying more than necessary.

What are Distribution Use of System (DUoS) charges? Distribution Use of System (DUoS) charges are fees paid for the operation, maintenance and reinforcement of Great Britain’s electricity distribution networks. These networks deliver electricity from the high-voltage transmission system to homes and businesses via lower-voltage local infrastructure. DUoS charges are set and recovered by the Distribution Network Operators (DNOs), which include companies such as UK Power Networks, National Grid Electricity Distribution, and SSE Networks. Who pays DUoS charges? DUoS charges apply to all electricity customers, including domestic and business users. For most businesses, DUoS charges are recovered by the electricity supplier and passed through as a non-commodity network charge. Larger sites connected at higher voltages (HV or EHV) face more complex DUoS tariffs, while smaller sites at low voltage (LV) typically pay lower rates that are embedded in their standing charges. How do DUoS charges work in practice? There are multiple types of DUoS charge: DUoS Standing charge - charged as p/day similar to the traditional standing charge DUoS Capacity charge - charged as p/kVA/month Red / Amber / Green Unit charges - charges depending on when electricity is used. With the Red, Amber, and Green charges, these are based on whether a unit of electricity is consumed during peak or off-peak network hours: Red – the highest of the three charges occurs during peak network demand periods Amber – is applied during intermediate demand periods Green – the lowest of the three charges is for off-peak periods With the capacity charge, this is based on the kVA capacity assigned by the DNO. This charge can be reduced by agreeing with the DNO to lower your kVA capacity. We recommend conducting regular kVA reviews to ensure you are not paying for capacity that you don't use. Contact us today if you would like assistance in conducting a kVA review and potentially saving £10,000s each year on your capacity charges. How much is DUoS (and when are charges set)? DUoS tariffs are set annually by each DNO and apply for the charging year from 1 April to 31 March. Rates vary significantly by region, voltage level and time of use. For non-domestic customers, DUoS can range from 1–2 p/kWh at Low Voltage sites with limited exposure to red periods, or 3–6+ p/kWh (or higher) for High Voltage customers with heavy peak-time usage. As a result of this variability, DUoS is often one of the largest and most volatile network charges on a business electricity bill. Why DUoS matters for businesses DUoS is one of the few bill components that businesses can actively influence. Shifting consumption away from red periods, optimising agreed capacity, or investing in on-site generation or storage can materially reduce costs. DUoS optimisation can deliver immediate and recurring savings , making it a critical focus area in energy cost management. If you would like to check if your capacity charges can be reduced, or that your DUoS charges are being invoiced correctly. Contact us today and we can review your recent invoices to make sure you aren't paying more than necessary.

What are Transmission Network Use of System (TNUoS) charges? Transmission Network Use of System (TNUoS) charges are fees levied to recover the cost of building, maintaining and operating Great Britain’s electricity transmission network. TNUoS charges ensure that the costs of the transmission system are paid for by those who use it, with larger energy consumers paying the lion's share of the costs. Who pays TNUoS charges? TNUoS charges apply to both electricity generators and electricity users. For most businesses the charge is recovered through their electricity supplier, with TNUoS costs either forming part of the Standing Charge , or being a separate line item. How do TNUoS charges work in practice? The TNUoS charge is a per day amount -- similar to the normal standing charge -- set by the relevant Distribution Network Operator (DNO). The daily rate will vary depending on what TCR band the meter is in, with larger users normally classified as being in a higher TCR band and paying more. However, if you believe your meter has been incorrectly classified and is in the wrong TCR band, it can be reviewed by contacting the DNO. How much is TNUoS (and when are charges set)? TNUoS demand charges are set annually and published ahead of each charging year, which runs from 1 April to 31 March. Unlike policy costs, TNUoS is not charged in p/kWh. Instead, it is levied as a p/day. This can add up to several tens of thousands of pounds per year for high usage meters. With significant investment being made to upgrade the transmission network to accommodate renewable generation, it is likely that TNUoS costs will continue to rise in the coming years, perpetually accounting for a larger proportion of electricity bills. Why TNUoS matters for businesses For high-consumption and flexible sites, TNUoS represents a growing expenditure that is difficult to manage. Some businesses can get relief from the rising TNUoS costs from the Network Charging Compensation mechanism , introduced last year. However, for many businesses, the best they can do is to review that they are in the correct TCR band and are being invoiced correctly by their supplier. If you would like to ensure that you are in the correct TCR band and that your TNUoS charges are being invoiced correctly. Contact us today and we can review your recent invoices to make sure you aren't paying more than necessary.

What is the Climate Change Levy (CCL)? The Climate Change Levy (CCL) is a UK government tax introduced in 2001 to encourage businesses and the public sector to improve energy efficiency and reduce carbon emissions. Unlike RO , CfDs and FiTs , which fund renewable generation, CCL is a direct tax on energy consumption. CCL applies to the supply of electricity, gas and certain solid fuels used for non-domestic purposes. It is charged per unit of energy consumed, regardless of when or how that energy is used. The levy is administered by HMRC and is designed to create a price signal that incentivises lower energy use and investment in efficiency measures. Who pays the CCL? CCL is payable by non-domestic energy users, including businesses, charities and public sector organisations. Domestic consumers are exempt. Energy suppliers are responsible for collecting the levy and passing it on to HMRC, but the full cost is passed through to customers via energy bills, usually as a clearly identifiable line item. Some organisations may qualify for CCL relief or exemption, most notably: Businesses with a valid Climate Change Agreement (CCA) Certain energy-intensive processes Supplies generated from qualifying renewable sources How much is the CCL (and when are rates revised)? CCL rates are set by the government and are typically revised annually, usually taking effect from 1 April each year. Rates are published by HMRC in advance to allow suppliers to update billing. For both gas and electricity, CCL is charged on a pence per kilowatt hour (p/kWh) basis. The current CCL rates are 0.775p/kWh, set to rise to 0.801p/kWh from April 1st 2026, and then to 0.827p/kWh from April 1st 2027. Unlike RO or CfDs : CCL is not forecast or reconciled There is no recycling or levy adjustment The charge is fixed and unavoidable unless a formal exemption applies Why CCL matters for businesses Because CCL is a straight consumption tax, it directly rewards reduced energy use. Efficiency improvements, on-site generation, and CCA participation can all materially reduce exposure — making CCL one of the few policy costs that businesses can actively manage rather than simply absorb.

What is the Feed-in Tariff (FiT)? The Feed-in Tariff (FiT) scheme was introduced in 2010 to support small-scale, low-carbon electricity generation. Unlike the Renewables Obligation -- which targeted large generators -- FiT was designed to encourage households, communities and small businesses to install technologies such as solar PV, wind, and hydro. Under the scheme, eligible generators receive a fixed payment for each unit of electricity they generate, regardless of whether it is consumed on-site or exported to the grid. In addition, an export tariff is paid for electricity exported to the network. The FiT scheme closed to new applicants in March 2019, but existing installations continue to receive payments for the duration of their support term (typically 20–25 years), meaning FiT costs will remain on electricity bills into the 2040s. How does the FiT scheme work in practice? FiT payments are made up of two components: Generation tariff – a fixed p/kWh payment for every unit of electricity generated by an accredited installation. Export tariff – a separate payment for electricity exported to the grid. Tariff levels were set at the point of accreditation and are linked to inflation for the lifetime of the installation. Payments are made by licensed electricity suppliers, who are required to participate in the scheme. Suppliers recover the cost of FiT payments through the FiT levelisation process, which redistributes costs across all suppliers based on market share. These costs are then passed through to electricity consumers and will appear on invoices as a Feed in Tariff (or FiT) charge. Who pays the Feed in Tariff? The cost of FiT is ultimately paid by electricity consumers, including business users, via pass-through charges on electricity bills. Both the British Industrial Competitive Scheme and The British Industry Supercharge r offer the ability for eligible businesses to receive exemptions from paying this charge. For most businesses, FiT appears as a non-commodity policy charge, separate from energy costs and network charges. How much is the FiT? FiT costs are calculated annually through the levelisation process, which reconciles actual payments made to generators against forecast collections. In p/kWh terms, FiT charges are typically around 8.5 p/kWh for business electricity customers, although this varies slightly year to year depending on inflation, total accredited capacity and supplier market shares. Final FiT levelisation amounts are confirmed after the end of each scheme year, with any discrepancy corrected in future charges. While FiT costs are smaller than RO charges , it remains a persistent and unavoidable component of UK electricity policy costs. If you would like to ensure your FiT charges have been invoiced correctly, contact us today and we can review your recent invoices to make sure you aren't paying more than necessary.

What are Contracts for Difference (CfDs)? Contracts for Difference (CfDs) are the UK government’s primary mechanism for funding new low-carbon electricity generation. Introduced in 2014 under Electricity Market Reform, CfDs replaced the Renewables Obligation for new projects and are designed to provide price certainty for renewable and nuclear generators while protecting consumers from volatile wholesale prices. A CfD is a contract between a low-carbon generator and the Low Carbon Contracts Company (LCCC), a government-owned entity. Under the contract, the generator is guaranteed a fixed price for the electricity it produces over a set period (typically 15 years). How do CfDs work in practice? CfDs operate through a payment mechanism linked to the wholesale electricity price, known as the reference price: If the reference price is below the guaranteed price, the generator receives a top-up payment funded by electricity suppliers. If the reference price is above the guaranteed price, the generator pays the difference back to the LCCC. This structure adds stability for generators while ensuring consumers benefit from the extra revenue when wholesale prices are high. During the 2022–23 energy crisis, CfDs resulted in net payments flowing back to suppliers, significantly reducing policy costs on bills. Suppliers fund CfD payments via a levy, which is then passed through to electricity customers. Who pays the CfD levy? The CfD levy is paid by licensed electricity suppliers and recovered from consumers as a non-commodity charge on electricity bills. All business customers contribute unless they qualify for an exemption. Certain Energy Intensive Industries (EIIs) may be eligible for partial or full relief, depending on whether a business can meet the qualifying criteria and have their application approved. Unlike wholesale costs, CfD charges are not influenced by site demand patterns and are therefore unavoidable for most customers. How much is the CfD levy (and when is it revised)? CfD charges are set on a forecast basis and reconciled after the delivery period. Once aquarter has finished and actual data is finalised, the LCCC calculates the true cost or surplus for that period. If suppliers overpaid , a surplus is carried forward and future levy rates are reduced. If suppliers underpaid , the shortfall is recovered in subsequent levy periods. In p/kWh terms, CfD costs have historically ranged from around 0.3 to 1.0 p/kWh for non-domestic customers. However, this figure can fluctuate significantly depending on wholesale market conditions. In periods of high power prices, the levy can fall close to zero or even become net negative, reducing overall electricity costs. Because CfDs are still expanding through successive allocation rounds, they will remain a material and evolving component of UK electricity policy costs for decades to come. If you would like to ensure your CfD charges have been invoiced correctly, contact us today and we can review your recent invoices to make sure you aren't paying more than necessary.