Electricity can be a large and recurring expense for many companies. It is essential for business owners to budget their monthly electric bills as accurately as possible, since costs can represent a significant portion of a business’s operating expenses. As with all major expenses, a budget should be developed to improve efficiency and help forecast and manage expenditures.
However, many businesses struggle to budget for their electricity because the invoices can be very complicated. This is because the cost of electricity is a split commodity cost from the all-in energy rate and there are many factors that depend on an individual companies and their different needs, which make up an electricity bill. Some of these factors include how much energy a company uses and how efficiently it is used, the time in which is used, facility size, and regionally set energy rates.
Charges on an electricity bill are not limited to the actual cost of electricity, which and they are not charged at a fixed price. This means that even if a company’s electricity usage and rates remain consistent during a certain period, it does not necessarily mean that their bill will be the same from month to month.
There are additional components that affect an electricity bill, often forgotten or unknown, which makes it more difficult for a business to accurately budget for energy costs. These costs include:
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