Glossary
The UK commercial energy glossary.
Plain-English definitions of every term, levy, mechanism and acronym worth knowing in UK business energy. Curated by the TUS consultancy and trade desk.
Contracts and procurement
- Flex contract
- A flexible energy purchasing contract where volume is bought in tranches across the term, rather than fixed on a single day. The trade desk acts inside agreed risk parameters (triggers, caps, default trade days). Suits portfolios from ~5 GWh upwards. Aim is an average price closer to the market average and less exposure to single-day price spikes.
- Multipurchase contract
- A fixed-term commercial energy contract with flexible purchasing inside it. The customer signs one supplier contract but the price is set through tranches traded over multiple periods (monthly, quarterly, seasonal or annual). Typically suits 1–5 GWh portfolios. Combines the simplicity of a fixed contract with the discipline of flex.
- Fixed-price contract
- A commercial energy contract where the unit rate is fixed for the entire term on a single day. The supplier bakes a hedge into the price to protect themselves against wholesale movement. Simple to budget against but concentrates timing risk on the day of signature.
- Take-or-pay clause
- A volume-tolerance clause in a commercial energy supply contract. The customer must consume within a forecast band (typically ±10%) or face penalties. If actual usage falls below the floor, the customer is charged for the unused energy. Can sabotage solar PV and other efficiency projects that reduce grid import below the band.
- D-5 default trade
- On a flex or multipurchase contract, the default trading day — five working days before delivery. If a tranche has not been traded by D-5, it is traded automatically at the prevailing market rate to avoid the customer rolling onto default supplier out-of-contract rates.
Non-commodity costs
- Non-commodity costs
- The portion of a UK business electricity unit rate that is not the energy itself. Typically around two-thirds of the bill. Includes grid use-of-system charges (DUoS, TNUoS, BSUoS), policy levies (RO, FiT, CfD, Capacity Market), the Climate Change Levy (CCL) and the E11 nuclear charge.
- DUoS (Distribution Use of System)
- A non-commodity charge on UK electricity bills that recovers the cost of operating the regional distribution network operators (DNOs) — the wires between the transmission grid and the customer's meter. Set on long regulatory cycles. Generally rising in real terms as the grid is upgraded for net zero.
- TNUoS (Transmission Network Use of System)
- A non-commodity charge that recovers the cost of operating the UK high-voltage transmission grid. Historically recovered partly via half-hourly settled Triad periods and now via a flatter charge structure following Ofgem's reforms.
- BSUoS (Balancing Services Use of System)
- A non-commodity charge that recovers National Grid ESO's real-time balancing costs. Tends to be more volatile than DUoS or TNUoS because it reflects same-day operational decisions. Often passed through to customers rather than fixed.
- CCL (Climate Change Levy)
- A per-kWh UK environmental tax on commercial energy use. Eligible energy-intensive industries can claim partial relief through a Climate Change Agreement (CCA). Currently charged at separate rates for electricity, gas and other fuels.
- RO (Renewables Obligation)
- A UK non-commodity charge that recovers payments to renewable generators commissioned before April 2017. Closed to new entrants but the legacy obligation continues to be funded via consumer bills for the remaining contract lengths (typically 20 years per project).
- FiT (Feed-in Tariff)
- A closed UK scheme that paid small-scale renewable generators an export tariff for electricity fed back to the grid. Recovered via a per-kWh levy on all consumers. Replaced by the Smart Export Guarantee for new installations from January 2020 but the legacy levy continues.
- CfD (Contracts for Difference)
- The current UK scheme for funding new low-carbon generation. The generator is paid the difference between a strike price set at auction and the prevailing wholesale price, recovered via a non-commodity levy on consumer bills.
- Capacity Market
- A UK auction mechanism that pays generators to be available during winter peaks. The cost is recovered via a non-commodity charge on consumer bills. Businesses with onsite generation or batteries can themselves bid into the market for revenue.
- E11 charge
- A new non-commodity component added to UK electricity unit rates from April 2025, funding the development and operation of new UK nuclear generation capacity. Charged per-kWh and applies to virtually all commercial electricity consumers.
Market mechanics
- Half-hourly settlement
- The UK electricity market settlement model where consumption is reconciled with the wholesale market in 30-minute blocks (48 per day) rather than via monthly profile-based estimates. Became the default for almost all UK meters from April 2025 under Ofgem's Market-Wide Half-Hourly Settlement (MHHS) reforms.
- MHHS (Market-Wide Half-Hourly Settlement)
- Ofgem's 2025 reform programme that made half-hourly settlement the default for almost all UK electricity meters. Enables time-of-use tariffs, more accurate billing, and richer demand-response opportunities.
- MOP (Meter Operator)
- A contracted provider responsible for installing, maintaining and certifying a half-hourly commercial electricity meter. Required for any UK half-hourly settled site alongside a Data Collector.
- DC (Data Collector)
- A contracted provider that collects half-hourly consumption data from a commercial electricity meter and passes it to the supplier and central settlement systems. Works alongside the Meter Operator on half-hourly settled sites.
- EAC (Estimated Annual Consumption)
- A forward-looking estimate of a commercial site's annual electricity or gas consumption. Used to size supply contracts and quote tariffs. The accuracy of the EAC drives whether take-or-pay clauses become a problem.
- kVA / agreed capacity
- On half-hourly UK electricity sites, the agreed maximum demand a customer can draw from the grid. Set by contract and charged as a separate capacity charge regardless of actual usage. Over-declared capacity can be a hidden cost; under-declared capacity triggers excess capacity charges.
- Standing charge
- A fixed daily charge on UK energy bills that covers the cost of being connected to the grid, regardless of consumption. Distinct from the per-kWh unit rate and from capacity charges.
On-site generation and efficiency
- Voltage optimisation (VO)
- A technology that reduces the incoming voltage to a UK commercial site to a stable optimal level for the connected equipment. For candidate sites this typically delivers 5–15% electricity savings with a 2–3 year payback, plus longer equipment life and lower maintenance costs.
- Solar PV
- Photovoltaic solar installation on a commercial roof or ground-mount, sized to a site's half-hourly load. Combined with proper export metering, REGO-backed grid top-up and a zero-volume-tolerance supply contract, delivers both displaced grid import savings and export revenue.
- Battery storage
- A commercial battery system that stores electricity for later use. Revenue stacks typically include time-shifting solar, peak-tariff avoidance, demand-side response, capacity market participation and resilience for critical loads.
- CHP (Combined Heat and Power)
- A single on-site unit producing both electricity and useful heat from one fuel — typically gas. System efficiency can reach 70–90% versus around 40% for grid electricity alone. Suited to UK sites with continuous high thermal demand.
- PPA (Power Purchase Agreement)
- A contract where a third party funds, installs and maintains an on-site or off-site renewable generation asset, and the customer agrees to buy the power generated at a fixed rate (usually below market) for 10–25 years. No upfront capital from the customer.
- EaaS (Energy as a Service)
- A funding model where an energy services provider supplies, installs and operates energy infrastructure (e.g. VO, solar, battery) and the customer pays a service fee or shares in the resulting savings. No CapEx from the customer; performance accountability rests with the provider.
- SEG (Smart Export Guarantee)
- A UK government scheme that obliges large electricity suppliers to pay small-scale generators (under 5MW) for surplus electricity exported to the grid. Replaced the Feed-in Tariff for new installations from January 2020. Tariff rates vary materially by supplier.
- REGO (Renewable Energy Guarantee of Origin)
- A UK certificate issued for each MWh of electricity generated from renewable sources. Suppliers use REGOs to match consumer electricity demand with renewable generation, allowing a credible 100% renewable claim. Audited via the Ofgem REGO register.
- DSR (Demand-Side Response)
- A revenue mechanism where a commercial site is paid to reduce, shift or generate electricity at the request of National Grid ESO during periods of grid stress. Run via aggregators or directly via suppliers, with payments for both availability and delivered response.
Carbon and reporting
- SECR (Streamlined Energy and Carbon Reporting)
- A UK regulation requiring most large companies and LLPs to disclose energy use and Scope 1 and 2 greenhouse gas emissions in their annual reports. Qualifying thresholds are two of: 250+ employees, £36m+ turnover, £18m+ balance sheet.
- Scope 1 emissions
- Direct greenhouse gas emissions from sources owned or controlled by an organisation — combustion in boilers, furnaces, vehicles, etc. Defined by the GHG Protocol. Required for SECR disclosure by qualifying UK businesses.
- Scope 2 emissions
- Indirect greenhouse gas emissions from the purchase of electricity, steam, heat or cooling. Defined by the GHG Protocol. Required for SECR disclosure; can be reported under location-based or market-based methods.
- Scope 3 emissions
- Indirect greenhouse gas emissions across a business's value chain — purchased goods and services, business travel, commuting, transportation and distribution, use of sold products and end-of-life. Typically the majority of total footprint for most businesses.
- CDP
- The Carbon Disclosure Project — a voluntary global disclosure system for environmental impact (climate change, water security, deforestation). Increasingly required by major corporate customers as a procurement gating step.
- EcoVadis
- A B2B sustainability ratings platform widely used in supplier assessments. Scores cover environment, labour and human rights, ethics, and sustainable procurement. Often required in tenders by larger UK corporates.
- Net Zero
- A state where total greenhouse gas emissions from an organisation, sector or economy are balanced by removals, leaving no net contribution to atmospheric concentrations. The UK is legally committed to economy-wide net zero by 2050.
UK water market
- Water market deregulation
- The 2017 reform that opened the UK business water market in England (Scotland deregulated earlier). Wholesalers still operate the regional pipe network; retailers — who bill customers, manage accounts and handle disputes — are now in competition. Allows business customers to switch retailer.
- Ofwat
- The economic regulator for the water sector in England and Wales. Sets wholesale price controls, monitors retailer conduct, and confirms annual price changes. In December 2024, Ofwat confirmed water costs will keep rising until at least April 2029.
Regulatory and policy
- Ofgem
- The UK government regulator for electricity and gas markets. Sets network price controls, runs market reforms (e.g. MHHS), publishes industry codes, and supervises supplier conduct. Independent of the Department for Energy Security and Net Zero (DESNZ).
- DESNZ
- The UK Department for Energy Security and Net Zero. Sets national energy and decarbonisation policy, publishes the UK Energy Statistics, oversees the Smart Export Guarantee, and runs CfD auctions for new low-carbon generation.
- GB Energy
- A UK government-owned vehicle created to invest in renewable generation and stabilise the energy market. Operates upstream of supply contracts, investing in capacity, infrastructure and (where market-stabilising) intervening in wholesale procurement.
- ECA (Enhanced Capital Allowances)
- A UK tax relief that allows businesses to claim 100% first-year capital allowances on investments in qualifying energy-saving or environmentally beneficial equipment, accelerating payback by reducing the post-tax cost of installation.
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