2. Non-commodity costs and exemptions

The standard electricity unit rate has several components. The wholesale cost, which will vary depending on the wider market, accounts for the largest individual portion.

The additional charges, or non-commodity costs are applied by a licenced supplier who manages the transfer of energy. This includes VAT, network costs such as Distribution Use of System (DUoS) and Transmission Network Use of System (TNUoS), policy costs to support schemes such as the Renewables Obligation (RO), Feed-in Tariff (FiT), Contracts for Difference (CfD) and the Capacity Market as well as money towards the Climate Change Levy and costs for the admin work being done by the supplier.

Table 1. Non-commodity energy charges (Source: Brownlow Utilities, Non-commodity energy costs Q1 2024).

Supplier operating costs, profit and VAT are also recouped via energy bills, which should be factored in for any sleeved PPA arrangements. VAT makes up roughly 5% of the total cost, with supplier operating costs and profit accounting for approximately 15% – although this varies between suppliers, over time, and between consumers depending on meter type etc.⁴

These costs are paid by all consumers who purchase their electricity through a licenced supplier. However, some of these costs can be exempt from the unit price under certain circumstances, which can allow community energy generators to sell their energy for a greater return:

⁴ Ofgem, 2025. Energy price cap.

Table 2. Indicative exemptions for private wire PPA arrangements.

How these exempt costs are shared between parties will vary depending on the model used. Under a private wire scenario, the community energy organisation and off-taker can agree how when they set a cost that shares the saving between the two parties. In a sleeved or virtual PPA arrangement, a licenced energy supplier facilitates the arrangement, and so the cost saving will generally be shared between three parties: the community energy generator, licenced supplier and the end consumer.