Non-commodity electricity charges
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Non-Commodity Costs

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non-commodity charges

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In order to support renewables generation and other environmental schemes, customers’ bills include a variety of additional charges. Different green charges are applied to gas and electricity bills, renewables subsidies are recovered through only electricity bills. This is because nearly every building in the UK has an electricity connection, but 4mn households are not connected to the gas grid, and many businesses do not have gas connections.

Business electricity bills are subject to the Climate Change Levy (CCL), Renewables Obligation (RO) and Feed-in-Tariff (FIT) Scheme. Gas bills are only subject to the CCL. The RO and FIT Scheme are subsidies paid to large and small renewable generators respectively.

These costs are borne by suppliers who pass them onto consumers’ bills. The CCL is a charge applied to business energy use in order to encourage energy efficiency, and is only set to increase further as more stringent controls over the levels of carbon use is regulated in the UK.

Main Rates of CCL

Energy-intensive businesses are currently able to receive a 90% discount from the CCL on electricity and 65% on gas through climate change agreements (CCAs). CCAs are voluntary agreements containing targets for increased energy efficiency or reduced emissions. Businesses are exempted from the CCL if they fail to meet the de-minimis consumption requirements of the scheme, of 4,397kWh a month of gas and 1,000kWh a month of electricity.

Overall DECC estimates that medium-sized businesses’ energy bills are 18% higher than they would be without government policies. Households face slightly different green charges.

They are not subject to the CCL, but they do have to pay for domestic energy efficiency schemes. In addition to green levies, VAT is charged on both domestic and business energy use. Businesses pay the standard VAT rate, 20%, while households and small businesses only pay 5% VAT on energy use.