Pass Through Charges
Further important information about Pass Through Charges…
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Half Hourly Capacity Charges
Half Hourly MOP Contract
Pass-through Charges
Understanding your business energy bill can be complicated, with various charges beyond just the cost of the gas or electricity you consume. One key aspect to be aware of is Distribution and Transmission Charges, commonly referred to as ‘Pass-Through Charges’. These are costs that energy suppliers do not control; instead, they pass them on to customers as part of the overall bill.
While the energy you use—whether it’s gas for heating or electricity to power your business—makes up a large portion of your bill, it’s not the only cost. In fact, supplier and wholesale energy costs typically account for around 75-80% of your total bill, with the remainder made up of additional charges. These pass-through charges cover a range of necessary expenses within the energy supply chain. Historically, many of these costs were included within standing charges or unit rates, but more suppliers are now listing them separately to provide greater transparency.
What Are Pass-Through Charges?
Pass-through charges are fees paid to companies responsible for operating and maintaining the UK’s electricity and gas networks. These costs ensure the infrastructure required to deliver energy remains efficient and reliable. If your business has a pass-through energy contract, these charges will be itemised in your bill, making them easier to identify.
Some of the key elements of pass-through charges include:
Standing Charge – A daily fixed fee covering the basic costs of supplying electricity to your business, including National Grid maintenance and supplier account management.
Commodity Cost – The actual cost of the energy consumed.
Non-Commodity Costs – Additional expenses such as network maintenance, energy transmission, and government levies supporting renewable energy initiatives.
Distribution Use of System (DUoS) Charges – Fees paid to local electricity network operators to cover the costs of distributing power from the grid to your premises.
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Breaking Down the Costs
Several factors contribute to the non-commodity costs on your energy bill, including:
Wholesale Energy Costs – The price of gas or electricity purchased to supply homes and businesses, making up around a third of your bill.
Network Costs – Charges for maintaining the pipes and cables that transport energy across the UK. These costs are set by Ofgem and charged to suppliers.
Social & Environmental Costs – Levies imposed by the government to fund energy efficiency schemes, support vulnerable customers, and encourage renewable energy adoption.
Third-Party Costs – Includes expenses such as metering services, administrative fees, and industry settlements.
Supplier Costs & Margins – Energy suppliers factor in their operating expenses and profit margins when setting prices.
Understanding Distribution and Transmission Charges
Distribution and Transmission Charges cover the costs of transporting energy from generation sites to businesses and homes. These include:
DUoS Charges – Costs related to running and maintaining the local distribution network.
Transmission Network Use of System (TNUoS) Charges – Costs associated with maintaining and operating the high-voltage transmission system.
The Transportation Charge
For gas customers, the Transportation Charge is an additional fee applied to cover the cost of moving gas from the supplier to the consumer via the National Grid and regional distribution networks. It consists of:
Capacity Charge – Based on peak demand, ensuring the gas network can meet winter energy needs.
Commodity Charge – A volume-based fee depending on how much gas is transported.
Site Charge – Covers the cost of operating above-ground storage facilities (only applicable to certain customers).
Other related costs include charges for meter readings, pipeline maintenance, and infrastructure replacement.
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Common Pass- Through Charges Explained
Several additional charges may appear on your bill, depending on your business’s energy contract:
Availability Charge (kVA) – A fee set by the Distribution Network Operator (DNO) based on the agreed capacity for your site.
Excess Availability Charge – An extra charge if your usage exceeds the agreed capacity.
Reactive Power Charge (kVAr) – Costs incurred when inefficient energy use affects the electricity network.
Data Collection & Aggregation Fees – Covering the cost of monitoring and recording energy consumption.
Meter Operation Charge – For the installation and maintenance of energy meters.
Assistance for Areas with High Electricity Distribution Costs (AAHEDC) Charge – A fee applied to subsidise distribution costs in certain regions.
Settlement Agency Fees – Covering industry costs related to balancing supply and demand.
Distribution & Transmission Losses – Accounting for energy lost as heat when electricity travels through networks.
Pass-Through vs Fixed Contracts: Which is Right for Your Business?
When choosing a business energy contract, you’ll generally have two options: fixed-rate contracts or pass-through contracts.
Fixed Contracts: All costs are bundled into a single unit rate, providing price stability throughout the contract term. These contracts suit businesses looking for budget certainty and protection against fluctuating charges.
Pass-Through Contracts: The non-commodity costs are separated from the energy cost and can vary over time. While this option carries some price risk, it can also offer savings if certain charges decrease during the contract period.
The best option depends on your business’s needs and risk tolerance. If you prefer stability and predictable costs, a fixed contract may be ideal. However, if you’re comfortable with potential price fluctuations in exchange for possible savings, a pass-through contract could be more beneficial.
Maximising Savings and Understanding Your Bill
Having a clear understanding of your energy bill and the breakdown of charges can help you make informed decisions about your business energy costs.
By identifying where costs arise, you may be able to optimise your energy use and explore better contract options. Whether you opt for a fixed or pass-through contract, staying informed is key to managing and reducing your business’s energy expenses effectively.
Get your bespoke Half Hourly quote today
Understanding your half hourly meter and energy usage is key to reducing costs and improving efficiency. Here at WeSave, we can obtain bespoke pricing for your business from our panel of trusted business energy suppliers.
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Alternatively, please call our friendly team on 01872 495 111. We’re here to help you find the best energy solutions for your business.
