Understanding Your Business Water Bill

Small business owners don’t need to be told that times are tough at the moment. The winter of 2022/23 brought astronomical energy prices, with a staggering 400,000 businesses having  said that they may be forced to shut down or downsize as a result of increasing bills. 

Water was largely left out of that particular crisis, but following deregulation in 2017 more than 1.2m businesses now have the option to switch their water supplier to one that better suits their needs, and the first step towards knowing whether making that switch is right for you is to properly understand your business water rates. 

Key Components of a Business Water Bill

With more than twenty different licensed water suppliers for commercial uses, even understanding your own business water bill isn’t uniform. The good news here is that the way in which they charge is regulated and therefore predictable, which also means that there are common items which will be common across all suppliers. 

Usage Charges

Most non-household customers are charged based on the amount of water they receive through a meter. A small number of non-household customers do not have a meter and are charged based on the rateable value of their property. The amount that you pay for your water and sewerage services each year will depend on where you live and how your water company charges you. These bills will be made up of fixed charges, which change relatively little with each billing cycle, and variable charges, most importantly your level of water consumption. 

Fixed Charges

The fixed charge may also be known as the ‘standing charge’. This is usually based on the rateable value of the property concerned. As well as this, most businesses pay for the water that they use through a variable charge according to the amount of water that they use. 

Sewerage and Drainage Fees

The charges in your bill are always split between the water coming in, and that coming out of your property. Wastewater charges are for the removal of used water from your business premises into the sewer system. These charges will apply to any premises that have a connection to the sewer system. Do be aware that it is possible to receive your water service and your sewerage service from different suppliers, so you may receive two bills – one from each company.

Taxes and Additional Fees

The standard fee made by the supplier to cover its costs for billing and customer service, for reading and maintaining your water meter, should not change too much. 

Then there’s tax. Is there VAT on water? Whether you pay VAT on your business water rates or not is dependent on your Standard Industrial Classification (SIC) code, which is used by many government bodies, including the Office for National Statistics and Companies House, to identify and categorise a limited company’s business activities.

The most straightforward way to establish whether you should be paying VAT is to check your code. If your SIC code is incorrect and you are unnecessarily paying VAT on water, you can change this by contacting Companies House. If your water supplier has it incorrectly noted on their bill, contact them to get it changed. 

Decoding Water Consumption Measurement

• Where water is paid for through metered use, the calculation used is called a ‘volumetric rate’. This charges per cubic metre of water used, using readings from your meter readings. The charge per cubic metre of water will depend on the location of your premises and the charge scheme of your business’s water supplier. 

• The water meters installed at both commercial and residential properties use a positive displacement chamber to measure the volume of water passing through them. Inside the meter, the water flow physically moves mechanical components in the meter that rotate the dial on the front. Water meters are calibrated so that the front dial accurately measures and records each cubic meter of water passing through. More modern water meters have a digital dial on the front, but use a similar analogue mechanism behind the scenes.

• It is, therefore, extremely important that your meter readings are being both reported and recorded accurately. Different suppliers use different types of meter, but each should be able to advise on the quickest and easiest way to read yours. It is strongly recommended that you check them against the amount recorded on your bill, and also that you contact the company should readings be unusually high, as this could be a sign of a leak that needs to be repaired. Your meter readings should be taken every six months.

How Are Commercial Water Bills Calculated?

All water companies have slightly different charges for businesses (or non-household companies) for their water and sewerage. You can find out who your supplier is by checking your most recent bill or calling any water retailer. 

Wastewater charges, which can occasionally come from a separate provider, are calculated through consideration of the volume of wastewater typically produced on the property and the strength of the trade effluent. Trade effluent is liquid waste other than surface water and domestic sewage. 

Water companies have a range of approaches to calculating charges for highways and surface water drainage; businesses that can prove they don’t produce any of these types of wastewater may be able to apply for a reduction in their bills.

Most water providers will send you either an annual or six-month statement which will detail future charges to be taken monthly. There are some suppliers that bill monthly, and will take the direct debit 14 days after billing.

Factors Affecting Business Water Bills

No business owner really wants the hassle of having to check and double-check everything relating to their water bill, but checking your business water rates can certainly benefit you to do so and there are several variables which can affect how much you’re paying. 

Can Water Leaks Significantly Impact my Business's Water Bill?

If water leakage occurs on your property after the water has passed through your meter, then your business will be directly paying for it. The leak will result in significantly increased volumetric water and wastewater charges on your water bill. Detecting a leak can save your business thousands in unnecessary water charges.

How do Seasonal Fluctuations Affect my Water Charges?

Water use fluctuates throughout the year according to the heat and the weather, with higher usage being common in the summer. Businesses which experience a great deal of seasonal fluctuation in the volume of water they use may consider a seasonal tariff. These seasonal tariffs charge more for a unit of water in the summer than in the winter.

Identifying Inefficiencies and Cost Reduction

What Should I do if my Water Bill Seems Unusually High?

A tap that drips once every second can waste up to 21 litres every single day. A single leaking toilet can waste up to 400 litres. Contact your supplier if your bill seems unusually  high. There is usually a straightforward explanation and leaks can have serious effects far beyond swollen water bills, so it is best to get anomalies checked.

How can I Reduce Water Consumption in my Business?

Using less water isn’t just about reducing your own bill. It’s also good for the environment, while stable water bills allow for better forward planning for your budgets. You can reduce your company’s water consumption with easy steps such as updating your plumbing fixtures (replacing taps within your premises with spray taps or replacing toilets with dual-flush toilets), encouraging the sustainable use of any onsite laundry, dishwasher or shower facilities, and of smarter water habits with the use of reusable water bottles. People increasingly care about environmental protection; you may find getting your staff on board with reducing water consumption to be easier than ever. 

Are There Any Government Rebates or Incentives for Water Conservation?

Competitive water efficiency grants are available to arable and horticultural businesses in England, with the Rural Payments Agency (RPA) scoring applications and awarding grants to the highest scoring. Water efficiency grants allow businesses to write off the entire cost of any plant and machinery that qualify under the Enhanced Capital Allowance scheme, against taxable profits in the year of purchase. These water efficiency grants can bring significant financial savings for reducing your business’ impact on the environment.

So you can see that there are many benefits to understanding your water bill. Not only can you save a substantial amount of money each year by knowing your tariffs and having one which best suits your needs as a business, but you’re also doing the right thing by the environment in doing so. Make sure you check yours, the next time it comes in!