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Non Commodity Costs

Understanding Non-Commodity costs

Your energy bill is made up of costs from commodity and non-commodity costs. This includes the cost of electricity or gas, the transmission and distribution costs, and charges associated with government schemes and levies.

The last two are known as Non-Commodity Costs or NCCs, and these obligatory third-party charges currently account for more than 60% of electricity and nearly 45% of gas bills for business consumers.

Breakdown of energy bills

 

 

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A sustainable infrastructure for everyone

It’s in everyone’s interests that the UK’s electricity infrastructure is well-maintained and energy is available even when demand is at its very highest. The job of running and maintaining the network is carried out by transmission and distribution companies, and the costs are recovered via business and household energy bills.

The UK government is also keen to encourage energy efficiency, support renewable energy generation, and meet carbon reduction targets. The cost of these measures also impacts on the overall cost of the energy we supply.

How NCCs have been changing

Most NCCs are charged at fixed rates according to your consumption. So when wholesale energy prices rise, they make up a smaller proportion of your invoice. When energy prices drop, the reverse happens. NCCs themselves can also rise over time, making their contribution more noticeable.

Network and distribution NCCs have increased substantially in recent years, but the cost of government schemes and levies is rising much faster. This is mostly due to the expansion of carbon reduction and energy efficiency measures.

How do the costs change?

Costs may increase during the lifespan of your contract. The below graph shows the changes in commodity and non-commodity costs for electricity.

How can I manage the costs?

The charges, levies and schemes themselves are mandatory, but there are still effective cost control measures you can take, depending on your usage profile and your appetite for risk. These including reducing your consumption at peak times, and talking to your SSE Business Energy advisor about fixed price contracts and combined fixed and flexible pricing.