Understanding Non-Commodity Charges on Your Energy Bill
When reviewing your energy bills, it’s easy to focus only on the unit rate – the price you pay per kilowatt-hour (kWh) of electricity or gas.
However, for Scottish businesses, non-commodity charges can make up a significant portion of total costs. Understanding these charges is essential to accurately comparing suppliers, spotting savings opportunities, and ensuring your business isn’t overpaying.
At Edinburgh Energy Hub, we specialise in helping Scottish SMEs, charities, and industrial businesses navigate energy bills. We break down complex invoices, explain charges in plain language, and identify opportunities to reduce costs without compromising service.
What Are Non-Commodity Charges?
Non-commodity charges, also called “standing charges” or “network charges,” are fees applied on top of the energy commodity cost. Unlike the unit rate, which is based on how much electricity or gas you consume, these charges cover infrastructure, regulatory, and service costs that suppliers must recover. They are set by network operators, regulators, and sometimes the supplier itself, and can vary depending on location, meter type, and business size.
For example, Scottish businesses may pay for maintaining the local electricity grid, gas distribution, balancing services that match supply with demand, and policy obligations such as energy efficiency schemes. While these costs are not under the direct control of your supplier, understanding them allows you to make smarter choices when comparing tariffs and negotiating contracts.
Typical Non-Commodity Charges
The main types of non-commodity charges on Scottish business energy bills include:
1. Distribution Network Charges These cover the cost of maintaining and upgrading the electricity or gas network that delivers energy to your premises. In Scotland, charges differ between regions — for example, areas served by Scottish and Southern Electricity Networks (SSEN) may have different rates than those served by SP Energy Networks. Distribution charges are usually calculated based on maximum demand or agreed capacity and are reflected in your standing charge or per-unit rate.
2. Transmission Network Charges Transmission charges recover the cost of moving energy from power stations or gas terminals to local distribution networks. These costs support high-voltage infrastructure, such as substations and high-capacity pipelines. Transmission fees are regulated by Ofgem and included in your bill as a separate line item or built into unit rates.
3. Balancing and Settlement Charges Electricity suppliers pay fees to the system operator to ensure supply matches demand in real-time. These costs are passed on to consumers through non-commodity charges and cover services like demand forecasting, imbalance settlement, and managing unexpected outages. While typically smaller than network charges, they are recurring and impact overall costs.
4. Policy and Environmental Costs Certain levies fund government-mandated programs such as renewable energy incentives, energy efficiency schemes, and carbon reduction initiatives. In Scotland, businesses may see charges supporting renewable subsidies, smart meter rollout, and climate policy obligations. These costs are required by law and included in all commercial tariffs.
5. Metering and Service Charges Suppliers may include fees for maintaining your meter, billing services, and customer support. For larger businesses with half-hourly meters or complex metering arrangements, these charges can be significant. Understanding what you are paying for helps identify potential savings, for example by consolidating meters or negotiating better terms.
Why Non-Commodity Charges Matter
Non-commodity charges can account for 20–40% of your total energy bill, depending on your business type, consumption patterns, and location in Scotland. Ignoring these fees when comparing tariffs may lead to misleading conclusions. A supplier with a low unit rate but high standing charges could end up costing more overall than one with a slightly higher per-kWh price but lower non-commodity fees.
Understanding these charges also helps with budgeting and cash flow planning. By knowing the fixed and variable components of your energy costs, you can forecast bills more accurately, plan energy efficiency measures, and avoid unexpected spikes.
How to Identify and Analyse Non-Commodity Charges
Start by carefully reviewing your energy invoices. Look for line items labelled “standing charge,” “network charge,” “distribution,” “transmission,” or “policy cost.” For gas, similar items may be listed as gas transportation or balancing fees. Compare these against the supplier’s published tariff documentation to ensure accuracy.
Next, consider your business’s energy profile. Distribution and transmission charges often depend on maximum demand, meter type, and connection category. For example, a small office may pay lower network fees than a manufacturing site with high peak demand. Identifying which charges apply to your premises allows you to target potential reductions or alternative arrangements.
Engaging a local energy broker can simplify this process. At Edinburgh Energy Hub, we review every component of your bill, highlight unnecessary fees, and identify suppliers offering lower network-related costs in your area. Our Scottish market expertise ensures you compare like-for-like and avoid hidden surprises.
Reducing Non-Commodity Charges
While some non-commodity charges are fixed by law or network operators, there are strategies to reduce their impact. Reviewing your tariff structure can reveal options better aligned with your energy usage. For example, businesses with consistent daytime consumption may benefit from demand-based tariffs that reduce peak-related charges. Consolidating multiple meters, where feasible, can also lower standing costs and simplify billing.
Investing in energy efficiency measures, such as LED lighting, efficient heating, and process optimisation, can reduce peak demand and therefore distribution-related charges. Combined with proactive contract review and switching at the right time, these measures enhance overall savings without compromising operations.
Next Steps for Scottish Businesses
Understanding non-commodity charges is crucial to controlling energy costs and making informed switching decisions. Start by collecting your recent bills and identifying all standing charges. Then, review your consumption patterns, meter types, and peak usage times. Engaging an independent broker ensures your analysis is accurate and tailored to your business needs.
At Edinburgh Energy Hub, we provide a comprehensive review of your energy bills, highlighting non-commodity charges and comparing suppliers across Scotland. By clarifying every component, we help businesses make confident decisions that reduce costs, improve budgeting, and maximise efficiency.