How to forecast business energy costs for next year's budget
Finance teams need a defensible energy line. Here's a practical framework for forecasting unit rate, standing charge, non-commodity and consumption drivers.
Split the forecast into four components
A defensible forecast separates unit rate (p/kWh), standing charge (p/day), non-commodity charges (CCL, CM, DUoS, TNUoS where visible) and consumption volume. Bundling them together makes variance analysis harder later and hides the drivers.
Unit rate — use your contract, not a market forecast
If you're on a fixed contract, use the contracted rate for the months in scope; you already know the price. Only forecast the market for months after contract expiry — and where you do, use a supplier-provided or broker-provided quote rather than a headline wholesale price.
Non-commodity — build in policy risk
CCL, CM and other non-commodity components are announced ahead by Ofgem, HMRC and the ESO. Use the published figures for the year, add a modest contingency (2-3%) for late adjustments, and note the assumptions in a footnote so a rebuild is straightforward.
Consumption — reflect the business plan
The biggest single driver of next year's bill is next year's activity. Reflect known changes — new sites, seasonal expansion, efficiency projects, hybrid-working patterns — rather than defaulting to last-year-plus-inflation. Ask operations for expected shift patterns and occupancy, not just headline turnover growth.
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