Indigo Swan helps businesses to take control of their energy supply by understanding third party charges.

2. Business bills for both electricity and gas are made up of two main parts -
Non - Energy Costs
Non-energy costs pay for running the
UK’s gas and electricity networks and
comprise a variety of obligations,
levies and taxes set by the
government.
These costs are effectively those
elements of a bill which are outside
of the supplier’s control. This is the
reason why they are referred to as
“Third Party Charges”.
Energy Cost
Unit Rate
including the wholesale
commodity rate, the
supplier’s operational
costs, and profit margin.

3. During 2008–09 to 2012–13 there has been a 50%
increase in Third Party Charges, with a further rise
on the way for 2013–14.
1st April is an important date in the energy year as
it is when many of these charges change.
When compared to this year, figures for 2013–14
suggest medium-sized businesses could see
further rises of over 10% in their electricity bills
and 2% in their gas bills purely as a result of
higher Third Party Charges.

4. The transmission networks act like the
motorway system and enable the bulk transfer
of high-voltage electricity (direct from power
stations) and high-pressure gas around the
country.
Electricity Transmission Charges (TUoS)
account for around 8% of non-domestic
electricity bills. This element has seen double-
figure percentage rises as a result of a new
price control.
By contrast, gas transmission charges are set to
fall.
Electricity and gas distribution networks are
regional grids that branch from the national
grid. They are essentially the A-roads
delivering power and gas to industrial,
commercial and domestic users.
Electricity Distribution Charges (DUoS)
makes up around 16% of total electricity
bills. These regional charges have increased
8%–15%. The DUoS charge covers the cost
of receiving electricity from the national
transmission system and feeding it directly
into homes and businesses through regional
grids.
Gas transportation charges are rising due to
higher costs for regional distribution (11%
averaged across Britain, but with regional
variations). Gas distribution costs are
offsetting reductions in national gas
transmission charges.

5. We have published 3 separate guides which provide further
explanations about these individual Third Party Charges.
Renewables Obligation – requires UK electricity suppliers to
supply an increasing proportion of electricity from renewable
sources. Risen by approximately 33% this year & will add 1.5% to
elecricity bills.
Feed-in Tariff – the scheme launched in 2010 and offers
guaranteed cash payments to households and businesses who
produce their own electricity using ‘microgeneration’. The cost
is increasing by at least 15%.
Climate Change Levy (CCL) – a Government tax, introduced in
2001, on the use of electricity & gas by businesses, agriculture &
the public sector. The aim of the levy is to encourage businesses
to improve energy efficiency and reduce carbon emissions.
The cost increases each year in line with the Retail Price Index
(RPI) & equates to approximately 6% of bills over the year.

6. Business customers are charged indirectly through
their suppliers for their usage of the energy
networks and taxes.
“All Inclusive” fixed-price offers, where the cost to
the customer will be the same throughout the
contract, include a premium to cover the supplier in
the event of an unexpected rise in third party costs.
The alternative of “Pass Through” contracts see
third party charges billed to the customer at the rate
faced by the supplier.
Typically, the amount of Third Party Charges a
business energy supplier builds into a quote is not
fixed, but based on forecasted rates. Each quote will
represent these charges in a different way and the
amount varies depending on supplier.
Make sure you understand the implications of a rise
in third party charges and its effect on your business
energy bills.

7. All businesses can save money on the majority
of these charges by cutting energy use. The best
way to work out how to do this is to monitor your
energy use. From here you can target the quick
wins and work out where best to improve the
energy efficiency of your operations. Encouraging
other members of staff to get involved can also
help implement sustained behavioural change in
your organisation.
Businesses on half-hourly meters should also
monitor their demand during “triad” charging
periods (transmission) and red, amber, green
times for distribution as a way of cutting costs. If
you are able to shift your energy use away from
early evenings on weekdays you could make
significant savings on your bills.
To minimise the scope for unexpectedly large bills
customers should carefully read all documents
sent by your energy supplier. When looking at
your bill try and understand which third party
charges are “all-inclusive” in your contracts and
which are “pass through”. It is likely that some of
your third party charges will be pass through even
if you think you have an “all-inclusive” electricity
contract.

8. As well as Third Party Costs increasing, they have
also become more unpredictable. Charges for
distribution and transmission are especially
sensitive to wider market changes. These cost
elements can change significantly owing to
changes in demand in localised areas. Even if your
usage stays the same, if another business alters
their consumption, your charges could be
affected.
This has made it more complicated for suppliers
to forecast what future Third Party Costs will be
when they prepare their offers. This is especially
the case when contract periods run over 1 April
and into a new third party charging year.

9. About Indigo Swan
We believe everyone is entitled to the truth about
their energy and shouldn’t be penalised because
they don’t have the knowhow.
The information in these guides has been
prepared in conjuction with Cornwall Energy who
provide strategic energy market intelligence.
If you have any questions please get in touch.
hello@indigoswan.co.uk
0333 320 0475
Indigo Swan Limited
2 Millennium Plain
Norwich
NR2 1TF