UK business energy glossary.

A small levy on all GB electricity demand that subsidises distribution costs in the north of Scotland, where a sparse population over a large area would otherwise make local network charges very high. Charged as a rate per unit of consumption and passed through by suppliers, usually as its own line or folded into a combined non-commodity charge.

The charge that recovers what the system operator spends keeping supply and demand matched in real time, second by second. It covers actions such as paying a generator to turn up or a large user to turn down. Set by the National Energy System Operator, it varies by half hour and is recovered from electricity demand.

The cost of paying generation and demand-side capacity to be available when the system is tightest. Suppliers are charged on their share of demand during winter peak periods, and recover it from customers. It is billed as an interim rate during a delivery year and reconciled once actual costs and volumes are settled.

A tax on business energy use, charged per unit of electricity and gas supplied to non-domestic customers. Rates are set by HM Treasury and change each April. It is a tax rather than an industry charge, so it sits outside the non-commodity charges and is shown separately, with VAT applied on top of it.

The cost of the Contracts for Difference scheme, which guarantees low-carbon generators a fixed price for their output. Suppliers pay a levy per unit of electricity supplied, set as an interim rate in advance and reconciled against actual scheme costs afterwards. Suppliers recover it from customers, which is why it appears on business bills.

The charge for using the local distribution network that carries electricity from the transmission grid to a site. Set by the regional distribution network operator under the Distribution Connection and Use of System Agreement, published a year ahead, and made up of unit rates that vary by time of day, a fixed daily charge, and capacity and reactive power charges for larger sites.

Everything on an electricity bill that is not the wholesale cost of the energy itself: network charges, balancing charges, policy levies and market operation costs. They are set by network operators, the system operator and government rather than by the supplier, and on a typical business bill they are a substantial share of the total.

A charge that funds new nuclear construction during the build, rather than only once the plant generates. Set as a rate per unit of metered electricity and revised quarterly, it is collected from suppliers by the Low Carbon Contracts Company and passed through to customers, typically as a separate line or inside a combined policy charge.

The charge for the high-voltage transmission network that moves electricity across the country. Set by the National Energy System Operator under the Connection and Use of System Code. It has a locational element that reflects where a site sits relative to generation, so the same consumption costs more in the south of England than in Scotland.

The maximum demand a site has contracted with its distribution network operator, measured in kilovolt-amperes. It is charged for daily whether or not it is used, and exceeding it triggers a higher excess capacity rate. Capacity set well above real peak demand is one of the more common recurring overcharges on a business bill.

The licensed company that owns and runs the local electricity network in a region. There are fourteen distribution network areas in Great Britain. The distributor is identified by the first two digits of the MPAN's top line, and it sets the distribution charges for every site connected to its network, whoever supplies them.

The substation where the transmission network hands electricity over to a distribution network. It is the boundary between transmission and distribution charging, the point at which line losses start to be counted, and the geographic unit used to group meter points for settlement purposes.

Metering that records consumption in each half-hour settlement period and sends the readings automatically. It is mandatory above a threshold of maximum demand and optional below it. Half-hourly data is what makes time-of-use charges, capacity charges and any genuine check of a bill possible, because it shows when energy was used, not just how much.

A multiplier that accounts for electricity lost as heat in the distribution network between the grid supply point and a meter. Because a site must be supplied with more than it consumes, some charges are calculated on consumption grossed up by the line loss factor. Values vary by network operator, voltage and time of day.

The industry programme moving every electricity meter point onto settlement from actual half-hourly data, replacing the estimated profiles used for smaller sites. It changes how consumption is allocated and therefore how time-varying charges reach a bill, and it replaces the profile class system with a new set of market roles and data services.

The unique identifier for an electricity supply point, printed on every bill. The bottom line is thirteen digits identifying the meter point; the top block carries the profile class, meter time-switch code, line loss factor class and distributor identifier, which together determine how the supply is settled and charged.

A code in the MPAN that classifies a non-half-hourly supply by the shape of its typical demand, used to estimate when a customer consumed energy when there is no half-hourly data. Classes three and four cover most small businesses. Market-wide Half Hourly Settlement replaces this estimation with actual half-hourly data.

The component of electrical demand that does no useful work but still loads the network, produced by motors, transformers and similar equipment. Distribution network operators charge for reactive units above a threshold set by power factor. Correcting power factor with capacitors removes the charge, which makes it one of the few bill lines a site can directly eliminate.

The half hour that is the basic unit of the GB electricity market. A normal day has forty-eight, numbered from one at midnight. Clock-change days have forty-six or fifty. Consumption, prices, imbalance and most time-varying charges are all recorded and calculated per settlement period.

The auction in which most GB wholesale electricity is traded, clearing the day before delivery for each half hour or hour. Its clearing price is the reference for many flexible contracts and a common benchmark for what energy should have cost, which is why it appears in pass-through and index-linked supply agreements.

The body that administers the Balancing and Settlement Code, which governs how GB electricity is measured, allocated and settled. It calculates imbalance prices, runs the settlement runs that reconcile estimated volumes against actual ones over time, and publishes the market data that any independent check of a bill depends on.

The price applied to the difference between what a market participant contracted for and what was actually delivered or consumed in a settlement period. Calculated by Elexon after the event from the balancing actions the system operator took. It can be far above or below the wholesale price, including negative, which is what makes exposure to it material.

A supply contract in which non-commodity charges are billed at cost as they are incurred rather than being fixed into the unit rate. It removes the supplier's risk premium and can be cheaper, but it moves the risk of charge increases onto the customer and makes checking the bill considerably more important.

The mechanism that redistributes the residual surplus or deficit left over in the settlement process each half hour, spread across parties in proportion to their metered volume. Amounts are small per unit but apply to every settlement period, and they can appear in a fully passed-through supply contract as a separate credit or charge.

The Ofgem reform that changed how the residual element of network charges is recovered, replacing charges that varied with consumption at peak times with fixed daily charges based on a site's assigned band. Its purpose was to stop customers avoiding their share of fixed network costs by shifting demand rather than by reducing it.

The three half-hour settlement periods of highest national demand between November and February, separated by at least ten clear days. They set the locational part of transmission demand charges for half-hourly metered sites, which is why many businesses cut demand on winter evenings. The Targeted Charging Review moved the separate residual part onto fixed daily bands, but the triad basis itself is still in use.

A voluntary agreement between an eligible energy-intensive sector and the Environment Agency to meet energy efficiency or emissions targets in exchange for a substantial discount on the Climate Change Levy. It reduces a tax rather than an industry charge, and it is separate from, and can be held alongside, the Energy Intensive Industries exemption.

A certified relief that removes a proportion of four policy levies from a qualifying manufacturer's electricity bills, and opens compensation for a share of network charges. Eligibility turns on making a product in a listed sector and on electricity being a large enough share of gross value added. It is applied for, certified per meter, and renewed.

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The closed scheme that paid small-scale renewable generators for what they produced and exported. New applications ended in 2019, but existing installations continue to receive payments for the length of their agreements, and the cost is levied on suppliers by market share and recovered from customers.

The scheme that supported large-scale renewable generation by requiring suppliers to present certificates for a set proportion of the electricity they supply, or to pay into a buy-out fund instead. Closed to new generation, but suppliers still meet the obligation each year and recover the cost from customers, so it remains a live bill line.