Non-Commodity Charges Explained: What’s Really on Your Business Energy Bill

When a business switches energy supplier, the assumption is often that the new deal will be cheaper because the new supplier is charging less for energy. That is sometimes true — but it misses the more important reality. Roughly 60–70% of what appears on a typical business electricity bill has nothing to do with the wholesale price of energy. It is made up of network charges, policy levies, and government-mandated costs that your supplier collects on behalf of third parties. Switching supplier does not change a single penny of these non-commodity costs.

Understanding what you are actually paying for — and where genuine savings opportunities exist — requires breaking down the bill into its component parts. This guide does exactly that.

The Commodity vs Non-Commodity Split

The “commodity” element of your energy bill is the cost of the energy itself: the electricity or gas your supplier buys on the wholesale market and sells to you at a margin. In a straightforward fixed-price contract, the commodity element is what you are negotiating when you fix your unit rate.

The “non-commodity” element covers everything else. On a business electricity bill, this typically includes network charges (the cost of transporting electricity to your premises), policy levies (government-mandated costs that fund renewable energy, capacity, and other policy objectives), and environmental taxes. On a gas bill, the non-commodity element is smaller in proportion but still significant.

In recent years — particularly during the 2021–2023 energy price shock — the non-commodity share of bills has varied considerably. When wholesale energy prices spike, the commodity element grows as a proportion of the total, and non-commodity charges appear smaller by comparison. When wholesale prices fall back, non-commodity charges — many of which are relatively fixed — become proportionally more significant again. As a rough guide, non-commodity costs represent around 60–70% of a typical SME electricity bill in normal market conditions.

Breaking Down Non-Commodity Charges on Electricity Bills

There are a substantial number of distinct charges embedded in a business electricity bill. Your supplier may present these consolidated into a single “non-commodity” line, or may itemise them separately. Understanding what each one is helps you assess whether there are any avoidance opportunities.

DUoS — Distribution Use of System. This is the charge for using the local distribution network — the cables, transformers, and substations that deliver electricity from the national transmission system to your premises. DUoS is charged by your Distribution Network Operator (DNO), but collected by your supplier. The rate varies by DNO region (there are 14 DNO regions in Great Britain) and by time of day. DUoS rates are structured into three bands — Red, Amber, and Green — reflecting the cost of providing capacity at peak times. Red zone periods, which typically run from around 16:00 to 19:00 on winter weekdays, carry the highest DUoS unit rates. If you are on a Half Hourly (HH) metered supply and your supplier passes through DUoS on a time-of-use basis, there is a genuine financial incentive to reduce your consumption during Red zone hours.

TNUoS — Transmission Network Use of System. This charge funds the national transmission network — the high-voltage lines and pylons managed by National Grid. For smaller business customers on Non-Half Hourly (NHH) meters, TNUoS is typically embedded in a fixed annual charge or a flat unit rate. For larger customers on HH meters, TNUoS is calculated partly based on consumption during Triad periods (see below). TNUoS rates are set annually by Ofgem and have been increasing in recent years as the network is upgraded to accommodate large-scale renewable generation and new interconnectors. Location matters too: TNUoS varies significantly across Great Britain, with sites further from large generation sources paying more — a business in the south of England on a large tariff can pay three or four times the TNUoS rate of an equivalent business in Scotland.

BSUoS — Balancing Services Use of System. BSUoS covers the cost of balancing supply and demand on the electricity system from moment to moment — the reserve capacity, frequency response, and other ancillary services that National Grid procures to keep the system stable. BSUoS charges are passed through by suppliers, usually as a variable cost that fluctuates with system conditions. They are relatively small compared to DUoS and TNUoS but can add up over a year.

RO — Renewables Obligation. The Renewables Obligation was the primary mechanism for supporting renewable electricity generation in the UK until Contracts for Difference (CfD) replaced it for new projects. Generators holding Renewables Obligation Certificates (ROCs) present them to Ofgem, and suppliers must purchase a set number of ROCs per MWh of electricity they supply, or pay a buy-out price into the Obligation fund. This cost is passed on to business customers as a per-unit levy.

FiT — Feed-in Tariff. The Feed-in Tariff scheme, now closed to new applicants, supported small-scale renewable generation (rooftop solar, small wind, and similar) through guaranteed payments to generators. The cost of those payments is spread across all electricity consumers, including businesses, through a levy embedded in the unit rate. The FiT levy is in terminal decline as legacy FiT contracts expire, but it remains a line item on bills for now.

CfD — Contracts for Difference. CfD is the current primary mechanism for supporting new low-carbon generation, including offshore wind, nuclear, and large-scale solar. Generators with CfD contracts receive a guaranteed “strike price” for their output. When the market price is below the strike price, consumers pay the difference; when the market price is above the strike price, generators pay money back into the system. In recent years, with high wholesale prices, CfD has actually been a negative cost for consumers — generators paying in. This reverses when prices fall.

CM — Capacity Market. The Capacity Market ensures there is sufficient generation capacity to meet peak demand, particularly in a system with growing amounts of variable renewable generation. Generators (and, increasingly, demand-side response providers and storage operators) receive capacity payments in exchange for being available when needed. The cost is recovered from suppliers based on their share of system demand at peak times, and passed on to consumers as a levy.

CCL — Climate Change Levy. The Climate Change Levy is an environmental tax on energy supplied to non-domestic consumers. It applies to electricity, gas, LPG, and solid fuels. For 2024/25, the CCL rate for electricity is 0.775 pence per kWh, and for gas it is 0.672 pence per kWh. These rates have been rising steadily in recent years as the government shifts more environmental cost recovery onto the tax mechanism and away from the scheme-based levies described above. CCL appears as a separate line on business energy invoices and is a significant cost for energy-intensive businesses. Importantly, there are exemption routes that some businesses can access — see the section on Climate Change Agreements below.

AAHEDC — Assistance for Areas with High Distribution Costs. A small charge that cross-subsidises the network costs of distribution areas with dispersed populations — in practice, northern Scotland. It is minor relative to the other charges, but it is listed separately for transparency.

Supplier operational costs and margin. Not strictly a regulated non-commodity charge, but layered onto the delivered rate to cover the supplier’s billing, credit, customer service, and profit margin. It is opaque by default — the only way to verify it is to compare quotes across multiple suppliers with equivalent product structures.

Non-Commodity Charges on Gas Bills

The non-commodity structure of a gas bill is simpler than electricity, but the same basic principle applies.

Gas UoS (Use of System). Gas transportation charges cover both the high-pressure national transmission system (operated by National Grid Gas) and the local distribution network (operated by regional gas distribution network operators). As with electricity, these charges are set by Ofgem, collected by your supplier, and vary by region.

CCL. As noted above, gas is also subject to the Climate Change Levy at 0.672p/kWh for 2024/25. For heavy gas users — industrial sites with large boilers, care homes with extensive heating loads, food manufacturers with process heat requirements — CCL on gas can be a material annual cost.

Storage and balancing. Gas has physical storage (the UK’s underground gas storage facilities) and system balancing costs, which are recovered through transportation charges.

Why Non-Commodity Costs Keep Rising

Beyond short-term volatility, four structural drivers are pushing the non-commodity side of the bill upwards.

Network investment. The GB electricity grid is undergoing its largest rebuild since nationalisation, driven by the need to connect new renewable generation (usually in the north, west, and offshore) to demand centres (usually in the south and east). TNUoS and DUoS charges reflect the capital costs of this build-out.

Balancing complexity. The higher the share of variable renewable generation on the system, the more balancing services the system operator needs to procure. BSUoS has risen accordingly.

Policy subsidies. The cumulative cost of the RO, FiT, and CfD schemes has grown as more generation capacity has been commissioned. Some of this will unwind as the RO expires, but CfD obligations are layering on top.

Capacity Market clearing prices. The auctions that set Capacity Market payments have cleared at progressively higher prices in recent years, as older generation retires and replacement capacity commands premium strike prices.

The net effect: commodity prices are volatile but tradeable; non-commodity costs are structurally rising and are not competitively negotiable. You can shop around on the wholesale component. You cannot shop around on TNUoS.

Why Switching Supplier Does Not Reduce Non-Commodity Costs

This is the single most important point in this article, and it is one that many businesses — and some brokers — do not make clearly enough.

When you get competing quotes from energy suppliers and compare unit rates, you are comparing commodity prices plus the supplier’s uplift. Non-commodity costs are the same for every supplier because they are set by regulators and network operators, not by the energy company. A cheaper unit rate quote is cheaper on the commodity element only — the DUoS, TNUoS, RO, CfD, CCL, and all the other levies will be identical regardless of which supplier you choose.

This does not mean procurement is not worthwhile — it absolutely is. But it does mean that procurement alone cannot address 60–70% of your bill. The only way to reduce non-commodity costs is to reduce consumption (which reduces the per-unit charges applied to a lower volume), shift when you consume (to avoid peak-period charges), or access specific exemptions.

Triad Avoidance: Is It Still Worth Pursuing?

Triads are the three Half Hourly settlement periods of peak electricity demand between November and February each year, that are furthest apart in time (at least 10 days apart). Historically, a significant portion of the TNUoS charge for large HH-metered consumers was calculated based on their demand during these three half-hours. A business that successfully reduced its demand during Triad periods — through load shedding, backup generation, or demand flexibility — could achieve substantial TNUoS cost reductions.

Triad avoidance is still relevant for very large consumers, but it has become less financially attractive for mid-sized businesses over recent years, as TNUoS charging reform has redistributed the charge across a wider number of settlement periods (through the move to forward-looking charges). If your site has a maximum demand of 1 MW or more and you have a genuinely flexible load that can be reduced at short notice during winter afternoons, Triad avoidance is still worth modelling. Below that scale, the administrative burden and the cost of demand-flexibility measures often outweigh the saving.

DUoS Red Zone Avoidance: A More Accessible Opportunity

For many HH-metered businesses, avoiding DUoS Red zone consumption is a more accessible opportunity than Triad management. Red zone hours typically run from approximately 16:00 to 19:00 on winter weekdays (the exact hours and specific days vary by DNO region — your supplier or broker should be able to confirm the profile for your area).

If your business can shift energy-intensive processes outside these hours — running machinery earlier in the afternoon, charging forklifts overnight rather than in the early evening, or deferring non-urgent refrigeration defrost cycles — the unit cost savings on DUoS during those avoided hours can be meaningful. The actual saving depends on your DNO region and the volume of load you can shift, but for businesses with flexible industrial or logistics operations, it is worth quantifying.

Climate Change Agreements: A Significant CCL Exemption

A Climate Change Agreement (CCA) is a voluntary agreement between an energy-intensive business sector and the Environment Agency. Businesses that hold a valid CCA and meet their agreed energy efficiency or carbon reduction targets receive a substantial discount on the Climate Change Levy: 90% off the CCL rate for electricity and 65% off for gas.

On a 2024/25 basis, that means CCA holders pay an effective CCL rate of 0.062p/kWh on electricity instead of 0.775p/kWh, and 0.128p/kWh on gas instead of 0.672p/kWh. For an energy-intensive manufacturer consuming 10 million kWh of electricity and 5 million kWh of gas per year, the CCL saving from holding a CCA would be in the region of £71,000 per year on electricity and £27,000 per year on gas — nearly £100,000 annually.

CCAs are available to businesses in eligible energy-intensive sectors: food and drink, chemicals, glass, ceramics, paper, textiles, printing, and several others. If your sector is eligible and your business is not currently enrolled in a CCA, this is one of the highest-return compliance actions available. The CCA scheme was extended to 2025 and the government has indicated it intends to continue it — taking advice on eligibility is worthwhile.

How Telnergy Can Help

When we work with a new client, one of the first things we do is perform a full bill analysis — not just looking at the commodity unit rate, but mapping every element of the bill and quantifying what the client is currently paying across all non-commodity components.

That analysis often surfaces opportunities that have been missed: a DUoS time-of-use structure that the client was unaware of, a CCL charge on a supply that should be exempt, or a Triad avoidance strategy that was worth testing given the site’s load profile. Because non-commodity charges change multiple times a year, and several are regional, supplier calculation errors are genuinely common — the wrong DNO region applied, an old TNUoS rate carried over, or CCL not stripped for a CCA holder. Line-by-line bill validation catches these. We also help clients model the value of demand-shifting initiatives, so that investment in load flexibility or automated controls can be evaluated against a realistic saving estimate.

And because we understand both the commodity and non-commodity sides of the bill, we can give a complete picture of total cost of energy — not just the rate that appears on the headline quote.

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Frequently Asked Questions

Is CCL charged on all business energy supplies?

CCL is charged on electricity and gas supplied to all non-domestic end users, unless a specific exemption applies. The main exemptions are for supplies used in eligible CHP (combined heat and power) schemes, supplies backed by renewable energy levy exemption certificates (LECs), supplies to domestic consumers (which are not subject to the non-domestic rate), and supplies to CCA holders (who receive the discounted rate rather than a full exemption). Charities operating certain facilities also have some CCL exemption access.

Does being on a fixed-rate contract protect me from non-commodity cost increases?

It depends on how your contract is structured. Some fixed-price contracts include non-commodity costs in the fixed unit rate (meaning you are protected from increases in levies during the contract period, but you also cannot benefit if they fall). Others pass through non-commodity charges at their actual cost, leaving you exposed to changes in levy rates. Pass-through contracts are common for larger HH-metered consumers. It is essential to understand which structure your contract uses before signing.

What is a Half Hourly meter and who has one?

A Half Hourly (HH) meter records electricity consumption in 30-minute intervals and transmits the data automatically to the supplier and to the market. Any business with a maximum demand above 100 kW is typically required to have an HH meter. Many sites with lower maximum demand have now been migrated to HH settlement via the P272 mandatory HH settlement process. HH metering is the prerequisite for time-of-use DUoS charging and for Triad management.

Can I claim back CCL I have overpaid in previous years?

If you have been incorrectly charged CCL on supplies that should have been exempt (for example, because your CCA was in place but your supplier was still charging the full rate), you can in principle make a claim for overpaid CCL. The claim process goes through your supplier, who reclaims from HMRC. There are time limits on back-claims, and the evidence required can be substantial, so act promptly if you believe this applies to you.

My supplier shows a single “unit rate” on my invoices. Are non-commodity charges hidden within it?

They may be. Some suppliers bundle all charges into a single unit rate for simplicity, particularly on Non-Half Hourly (NHH) contracts. Others itemise them separately. If you cannot see the non-commodity breakdown on your invoice, ask your supplier for a full bill analysis — they are required to provide this information, and it is useful for understanding where your costs actually lie.

We have solar panels on our roof. Does this affect our non-commodity charges?

Solar generation reduces the volume of electricity you draw from the grid, which reduces the total non-commodity charges you pay (since most are levied per kWh consumed). However, it does not exempt you from the levies on the grid electricity you do consume. There are also specific rules around whether on-site generation qualifies for any levy exemptions — this is an area where taking specialist advice is worthwhile if your generation capacity is significant.

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Telnergy is an independent commercial energy consultancy (Ofgem registered TPI, ADR Ref E3561). We’ve helped UK businesses reduce energy costs since 2002. Get in touch to discuss your energy strategy.