A guide to commodity costs

Keep an eye on your non-commodity costs with the EIC’s guide to the taxes, costs and expenses that make up your energy bills

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The cost of electricity has fluctuated considerably in the last few years, for many reasons. During the multiple national lockdowns, prices started to rise considerably and have since reached all-time highs. And due to unforeseen events around the world following COVID-19, the markets have remained incredibly volatile. One of the reasons for this is a rise in non-commodity, or ‘third-party’, costs.

The term ‘non-commodity’ costs has worked itself into many conversations throughout the past few years, within the energy industry. But understanding what non-commodity costs are, and how they could impact you and your business can be difficult to understand.

So, we have broken it down for you. Here is our guide to the different types of non-commodity costs.

What are non-commodity costs?

Essentially, the amount we pay for energy includes three different expenses. The first, is the wholesale price of the actual amount of power we use (the commodity). Secondly, we have the cost of transmission and distribution across the network. And finally, a variety of government levy and taxes. The energy companies pay these fees, and pass the cost onto their customers.

In 2011, non-commodity costs accounted for around 36% of energy prices. In 2022 this has already risen to around 70% and is predicted to reach 80% over the next decade and continue to ascend.

Transmission and distribution costs

Each supplier incurs expenses to run and maintain the power network. These vary from provider to provider, and largely depend on the type of power plant. For example, solar and wind generators are less consistent in output, as compared with gas or nuclear power. With a move towards renewable energy, the cost of balancing the system is likely to increase. The main expenses are:

Government levy and taxes

These taxes fund various government initiatives and green energy programs.

Controlling your expenses

With the increases in non-commodity costs set to continue, it is important to keep an eye on your bills. Proper monitoring, and tracking monthly changes, will ensure you aren’t overpaying.

With such turbulence in the market, there is less control over the wholesale cost of electricity. What can be controlled, however, is how we use energy. At EIC, we can help you plan your usage around annual Triad periods. This can make a significant difference to your energy bills. Our daily traffic light warnings will help you avoid any unnecessary fluctuations, and keep costs low.

Whether you prefer the stability of a fixed price, or the control of a flexible contract, we can help. Setting up an energy contract can be a long process, especially if you want a good price. We have the experience to negotiate with your provider, to make sure you are not paying more than you should be.

Our service is tailored to your needs. To find out what we can do for your business, get in touch today.