How to prepare an electricity invoice breakdown report?
Electricity bills could be challenging to understand for a regular user. Not only electricity bill structures are different from a market to market and a utility company you work with, but there can also be multiple line items in an electricity invoice that make it difficult for corporates to control their energy budget.
Also, many businesses worldwide use SAP software as a centralized system for spend tracking, accounting and reporting. Thus, the system is primarily designed for Purchase Order (PO) based spending, while non-PO based spend, such as energy, is not well suitable for SAP.
Therefore, corporates wishing to understand and better control their energy bills need to procure additional 3rd party software solutions and/or develop in-house reporting capabilities and energy market data intelligence.
This article will teach you how to design a supplier invoice breakdown report in Excel to collect the energy spend and consumption data directly from your utility suppliers. First, however, let’s understand what costs a typical electricity bill is made of.
- Commodity costs. The commodity is pure energy generation costs from underlying fuels such as gas, coal, nuclear or renewables plus all supplier service costs associated with delivering the electricity from a production to a final consumption site. The commodity cost represents on average about 40-50% of the total electricity bill. Only commodity cost is a negotiable part of an electricity bill because the other costs are usually regulated. Commodity Cost = negotiated unit price /MWh * volume consumed in MWh.
- Grid Costs. Distribution and transmission network costs excluding energy taxes and levies to deliver electricity from a power plant to the final consumer.
- Taxes. Different non-negotiable energy market taxes and levies are paid by final consumers.
- TCO excl. VAT. Total Monthly Invoiced Amount including all the commodity & non-commodity energy costs except VAT, e.g. the final retail bill.
You can check average bi-annual electricity prices for non-household consumers by country here.
So to have a monthly electricity billing overview, a corporate can request its electricity suppliers to fill out the invoice breakdown form (Excel file) attached to this article.
This file contains the main billing data: consumption (volume in MWh), total monthly invoice amount VAT excl., grid costs (transportation costs without electrical taxes), and commodity costs. The information requested should be provided on a monthly basis by electricity suppliers. The monthly values shall mirror the information in the actual invoice for payment. If there are multiple invoices per multiple consumption sites, an aggregated value should be provided.
Also, in case any reconciliations are coming from previous months’ consumption, you should request your suppliers to inform you of this matter in advance and provide details. And don’t forget to provide contact details to your supplier where this data needs to be sent.
Of course, the process described above is not fully digital, and other automated solutions exist in the market. However, as a temporal solution and if you don’t wish to spend extra money on 3rd party energy software, this can help you to better control your energy spend. Needless to say that the entire supplier invoice breakdown reporting process is subject to you being able to agree and negotiate it with your utility company, so they do it for and on your behalf. Most of the utility companies already have the energy data you need.
I hope this article was helpful. If you liked it, please leave your comment below. And if you wish to learn more about energy, please visit my blog here. I also provide weekly energy market updates, including electricity price evolution, energy market fundamentals, and a technical forecast for the week ahead. Please subscribe to my newsletter to stay on top of the energy market trend.