Why is your energy bill increasing? Understanding non-commodity costs

Organisations across the UK may begin to notice changes in their electricity bills from this month.

While wholesale energy prices often receive the most attention, a growing proportion of costs now come from non-energy costs, also known as non-commodity costs – and these are on the rise. In this article, we explain what’s changing, why it’s happening, and what it could mean for your organisation.

What’s happening?

The UK energy system is undergoing a major transformation as part of the government’s Clean Power 2030 ambitions and longer-term net zero targets. Electricity demand is expected to double by 2050, driven by increased electrification across transport, heating, and industry. To support this shift, significant investment is required in the UK’s electricity infrastructure.

These changes are leading to rising non-energy costs, which suppliers may pass on to customers now and in the coming years.

What are non-energy costs?

Non-energy costs are charges added to your electricity bill that don’t relate directly to the wholesale price of energy. Instead, they fund essential parts of the UK’s energy system, including:

• Transmission and distribution charges – These cover the cost of maintaining and upgrading the electricity grid, enabling it to handle increased demand and connect new renewable generation sources.
• Network expansion and reinforcement – Investment is needed to expand capacity and modernise infrastructure as more renewable energy projects come online.
• Policy and regulatory levies – This includes schemes designed to support the UK’s transition to a low-carbon economy.
• Nuclear Regulated Asset Base (RAB) levy – A newer charge supporting the development of nuclear projects such as Sizewell C, helping ensure long-term energy security and stability.

Why are these costs increasing?

Several key factors are driving the rise in non-energy costs:

• Transition to renewable energy – Connecting offshore wind, solar, and other renewables requires significant grid upgrades.
• Aging infrastructure – Parts of the UK’s grid need modernisation to remain reliable and efficient.
• Energy security and diversification – Investment in nuclear and other stable energy sources helps reduce reliance on imported fuels.
• Rising electricity demand – As businesses and households electrify operations, the system must scale accordingly.

Together, these pressures are increasing the overall cost of maintaining and developing the electricity network.

How will this affect your electricity bills?

Energy suppliers are responding to these rising costs in different ways:

• Some suppliers may absorb the additional charges, at least temporarily
• Some suppliers may pass costs directly onto customers through updated tariffs or new line items
• In some cases, these costs may already be factored into existing contracts, depending on when agreements were signed

Supplier update

Here is what we know now.

What should you do next?

While unexpected cost increases can be challenging, it’s important to understand that these changes reflect a system-wide shift in how electricity is generated, delivered, and funded in the UK.

Stay informed and prepared by reviewing supplier communications carefully. Meanwhile, we remain on standby for any specific questions our clients have about their contract and how these changes impact them.