Half Your Electricity Bill Isn't Electricity

Ask most finance directors what they're buying when they sign an electricity contract, and the answer is fairly obvious: electricity. It's priced in pence per kilowatt-hour, negotiated against the market, fixed or left flexible depending on the organisation's appetite for risk.

All of that is true.

It's also less than half the story.

For many UK businesses, the wholesale electricity itself represents somewhere around 35% to 45% of the eventual bill - Ofgem uses roughly 40% as a broad guide, though the real proportion varies considerably by customer, contract, region and consumption profile. Put the other way round: on that same broad guide, well over half of a typical bill - commonly approaching two-thirds - has nothing to do with the electricity itself. The rest is made up of network charges, balancing costs, government schemes, taxes, metering, supplier operating costs and risk.

In other words: you negotiate the electricity price, and then a sizeable supporting cast arrives on the invoice. Here's what those other charges are actually paying for, which ones you may be able to influence, and which ones turn up regardless of how sternly you look at the bill.

The bit everyone negotiates: wholesale electricity

Wholesale energy is the commodity itself - the electricity your supplier buys to meet your expected consumption. It's the part that moves visibly with gas prices, weather, generation availability and geopolitics, and it's normally given the most attention during a procurement exercise. That makes sense.

What makes rather less sense is comparing contracts using only the wholesale rate, when it may represent under half the total cost. A supplier offering an attractive headline energy price can still produce an expensive overall contract once network charges, policy costs, risk premiums and supplier fees are added.

The high-voltage network: TNUoS

Transmission Network Use of System charges - TNUoS - recover the cost of building, maintaining and developing Great Britain's high-voltage transmission network: the major infrastructure that moves large quantities of electricity around the country and connects new generation.

Worth being precise here: NESO operates the national electricity system and administers the TNUoS charging arrangements, but it doesn't own the pylons and substations themselves. The physical network is owned and maintained by three regional Transmission Owners - National Grid Electricity Transmission, SP Transmission, and SSEN Transmission.

What happened to Triads?

Historically, half-hourly customers could reduce a meaningful part of their TNUoS exposure by lowering demand during three national system peaks each winter, known as the Triads. Businesses with flexible equipment, generators or batteries could sometimes make real savings by anticipating those periods and pulling back.

The Targeted Charging Review changed that. From April 2023, the residual part of demand TNUoS moved largely to a fixed daily charge set by each customer's charging band, rather than actual behaviour at peak times. Triad management didn't disappear entirely, but it went from being a genuine commercial strategy to something considerably less exciting.

Is TNUoS really rising 60% this year?

NESO's final tariffs for 2026/27, published 30 January 2026, confirm a volume-weighted average rise of around 64% year-on-year in the demand residual charge - a real, finalised increase, not a draft estimate. It isn't, however, one flat number applied evenly to everyone: individual site increases range from roughly 28% up to 116% depending on charging band, region and agreed capacity. "TNUoS is rising 60-plus percent" is a fair description of the average. It isn't a promise about any one site's actual bill.

Because most of TNUoS is now a fixed charge rather than a behavioural one, there's very little a site can do to reduce it directly. It shows up as a bigger number regardless of how well the load is managed.

The local network: DUoS

Distribution Use of System charges - DUoS - pay for the regional network carrying electricity from the transmission system to your site, run by your local Distribution Network Operator. Unlike TNUoS, DUoS genuinely does vary by region, voltage, charging class, agreed capacity and time of use - commonly split into Red, Amber and Green bands, with Red periods corresponding to when the local network is typically under the most pressure.

DUoS remains one of the clearest network-cost areas where the timing and nature of a site's demand can still matter - though it isn't the only one; Capacity Market exposure and agreed-capacity decisions can also be influenced in the right circumstances. A business that can shift meaningful load out of expensive time bands can lower its DUoS exposure - through an operating schedule change, controlling flexible equipment, or a properly sized and dispatched battery. But "meaningful" is doing real work in that sentence: moving one dishwasher by half an hour won't transform the economics. Shifting a large industrial process, a refrigeration load or fleet charging might. Any battery proposition should be tested against the site's actual half-hourly data and tariff structure - batteries are useful pieces of equipment, not magic boxes that invoices are frightened of.

The cost of keeping the system balanced: BSUoS

Balancing Services Use of System charges recover the cost of NESO balancing supply and demand across the system, minute by minute, as forecasts inevitably drift from reality. Historically this charge could be genuinely volatile. Since April 2023, BSUoS has been recovered from final demand using a fixed, pre-set volumetric tariff rather than moving in real time - the underlying balancing cost can still swing substantially, the customer-facing number simply doesn't bounce around every time a wind forecast turns out optimistic.

Government schemes and low-carbon support

A further part of the bill funds government energy and low-carbon policy - depending on the contract, this can include costs associated with the Renewables Obligation, Contracts for Difference, and similar mechanisms, on top of two worth knowing by name:

Climate Change Levy (CCL) - a tax on most electricity supplied to businesses and public-sector organisations, charged per kWh. There are exemptions: qualifying energy-intensive businesses in a Climate Change Agreement can currently receive a 92% reduction in the electricity CCL rate, with further reliefs for certain mineralogical, metallurgical and CHP uses. Agricultural or industrial activity alone doesn't create an automatic exemption - it's worth checking properly, particularly across multiple sites, rather than assuming.

The Nuclear RAB levy - from January 2026, electricity consumers began contributing towards Sizewell C's construction through the Regulated Asset Base mechanism, which recovers part of the financing cost during construction rather than waiting until the plant is generating. It's currently a small line - the government estimates around £1/month for a typical domestic customer, with the commercial equivalent depending on consumption and how the supplier passes it through - but it's a reminder that this part of the bill doesn't stay static. New charges appear, and names nobody outside the industry has heard of start quietly costing real money.

Insurance whether you claim on it or not: the Capacity Market

The Capacity Market pays generators and other capacity providers to be available when the system needs them, even if they're never called on - insurance against a cold, still, dark evening with high demand and thin supply. It's recovered from suppliers according to their share of demand specifically between 4pm and 7pm on working days, November to February, which means it isn't purely a fixed, unavoidable charge: reducing demand during those specific winter windows can genuinely lower the underlying exposure, though whether an individual business sees that benefit depends on how the supplier has structured the pass-through.

The bit that's genuinely yours to negotiate: supplier costs, risk and margin

The remainder covers the supplier's own operating costs and commercial risk - metering and data services, imbalance risk, shape risk, credit risk, finance and collateral costs, certificate costs, and margin. These components aren't always shown transparently; a supplier doesn't typically write "our profit" as a standalone invoice line, it's built into the overall pricing structure instead. This is exactly where the quality of a properly run tender shows up - two suppliers can quote the same headline unit rate while pricing risk completely differently, and end up costing very different amounts once everything is included.

So where does a typical bill actually go?

There is no single percentage split that applies to every UK half-hourly business - the ranges above are a deliberate illustration, not a measurement. A small site with modest consumption can have fixed costs representing a far greater share of its bill than a large industrial user. A site renewing just after a wholesale price spike can see the wholesale share jump even though its actual consumption hasn't moved at all.

The one defensible, general conclusion: non-wholesale costs now commonly represent more than half the electricity bill for many UK businesses, and they're too large to treat as a rounding error on the energy rate. The only genuinely accurate breakdown for your own site is the one built from your own contract, invoices and consumption data - anything else is an illustration, however attractive the pie chart.

Non-wholesale costs now commonly represent more than half the electricity bill for many UK businesses - too large to treat as a rounding error on the energy rate.

Why this matters

A procurement exercise that focuses only on the wholesale unit rate may be optimising less than half of the eventual cost. The rest is a mix of charges that are largely fixed, charges tied to agreed capacity, charges that respond to timing, and reliefs some businesses are entitled to and simply haven't claimed.

That doesn't mean every line is worth chasing. Quite often the right conclusion is that a charge is legitimate, correctly calculated and unavoidable - not exciting, but useful to know, because it stops a business spending six months pursuing a saving that was never there. The real value is in knowing which costs can be influenced, which can be challenged, and which just need to be priced in properly when comparing offers.

Understanding where the money goes doesn't reduce the bill on its own. It does mean you can focus your time and investment on the parts that are actually worth changing.

Sources and further reading

• Ofgem - Understand your electricity and gas bills
• NESO - Transmission Network Use of System (TNUoS) charges
• NESO - Balancing Services Use of System (BSUoS) charges
• GOV.UK - Climate Change Levy
• GOV.UK - Capacity Market
• Ofgem - Sizewell C economic guidance

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Somerford reviews commercial electricity contracts, quotations and invoices to establish what a business is actually paying, whether competing offers have genuinely been compared like-for-like, and where real opportunities to reduce cost exist - not by pretending network charges will disappear or that every battery pays for itself, just by working the bill out properly. If you want a second set of eyes on yours, get in touch.