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What our Nerds say about Business Gas
Businesses across the UK need a good supply of energy to operate effectively. Along with electricity, gas is a main source of energy, which your company can sign up for with a business gas contract.
Designed for companies rather than domestic households, contracts for business gas can last up to five years. Typically, business gas tariffs are single fuel. This means that you’ll have to pay for it separately even if your electricity is supplied by the same provider. Most gas suppliers do not offer their business customers a cooling-off period, so once you sign up you won’t be able to change your mind and cancel the contract.
Switching to a new business gas deal could help you save money. You’ll be able to switch once your business gas contract comes to an end or if you move to new premises.
Before searching for a new provider, it’s important to know exactly how much gas your business uses and what you pay. Once you have checked your gas bills – gas is measured in kilowatt hours (kWH) or you can look at your annual expenditure – and have those figures to hand, price comparison tools are a great starting point and can help you identify the best deals for your business.
How much should I pay for business gas?
Generally speaking, the cost of business gas rates is affected by the type of contract you sign up for.
Fixed-rate contracts may be cheaper because the price you pay per unit of energy is locked for the duration of your contract, so you are protected against price rises. However, you won’t benefit from price decreases either.
Variable rate deals are linked to the market, which means that they fluctuate throughout your contract.
How are business gas rates calculated?
The underlying cost of business gas is driven by the price of purchasing energy on the wholesale market. This itself is informed, among other things, by the weather, global demand, and geopolitical issues such as international conflicts and trade disputes.
On top of that, there are a number of other charges that come bundled with your unit rate, i.e. the amount you pay per kilowatt hour (kWh) for your business gas. This includes VAT, the Climate Change Levy, your standing charge, and, potentially, independent gas transporter fees.
Business gas charges
Your business gas bill will be made up of a number of charges. These can include:
Your unit rate is how much you pay per kilowatt hour (kWh) of gas, typically expressed in pence per kWh. This rate, multiplied by your usage, will make up the bulk of your business gas bill.
On top of your unit rate, you will likely pay a daily standing charge. This charge isn’t affected by usage.
Can I get a business gas supplier with no standing charge?
It is possible to move to a business gas tariff that does not have a standing charge attached. The same is not true for business electricity.
Climate Change Levy (CCL)
The Climate Change Levy is a government levy charged on the energy your business uses.
Independent gas transporter (IGT) fees
These are the fees paid if your gas is supplied by an independent gas transporter. Your gas will not always be supplied by an IGT.
Average UK business gas prices per kWh
The below table reflects the average price per kWh, including the Climate Change Levy, as published by the Department for Business, Energy & Industrial Strategy (BEIS) for Q4 2022.
|Business size||Price per kWh|
|Very large business||5.09p|
Average UK business gas usage in the UK
Although gas usage will vary greatly from industry to industry and organisation to organisation, the following figures can act as guidance:
|Business size||Annual usage|
Sources: Bionic and UK Power
Types of business gas tariffs
There are several types of business gas tariffs:
With a fixed-rate tariff, the price you pay per unit of gas is fixed for the term of your contract. Your bill may still vary depending on how much energy you use.
If you have a variable rate tariff, the price of gas per unit varies during your contract because it is linked to market activity.
A deemed rate usually applies when you take over a new property or have been moved to a default contract after a fixed-term contract ends.
If you don’t find a new contract before your fixed-term deal ends, you may be moved to a rolling business gas tariff.
Which tariff is best for me?
Whether you choose a fixed or variable tariff is largely down to your approach to risk. With a variable tariff you may benefit from falling energy prices; but at the same time, you have no protection against rising costs.
You need to weigh these risks carefully before deciding on which tariff to choose.
Why is business gas so expensive?
While prices have fallen recently, domestic and business gas has become more expensive over the last couple of years due to suppliers passing on rising wholesale costs to consumers.
Wholesale costs themselves increased due to demand outstripping supply, a problem exacerbated by the conflict in Ukraine, and Russia cutting shipments of the Nord Stream gas pipelines to Europe.
» MORE: UK energy crisis?
Are business gas prices capped?
One of the additional contributing factors to business gas becoming more expensive is that, unlike domestically, there is no Ofgem energy price cap for businesses.
However, due to rising energy costs, the government has introduced various schemes to help businesses cope with their bills. From 1 October 2022 to 31 March 2023, wholesale gas costs were reduced thanks to the Energy Bill Relief Scheme (EBRS). The Energy Bills Discount Scheme then replaced the EBRS on 1 April 2023, offering a lower level of support.
What is the Energy Bills Discount Scheme?
The Energy Bills Discount Scheme runs from 1 April 2023 to 31 March 2024, and replaces the Energy Bill Relief Scheme.
Eligible businesses will have their per-unit cost automatically discounted if their wholesale price crosses the set price threshold, up to a maximum discount. In Great Britain and Northern Ireland, the maximum discount for gas is £6.97 per MWh, with a price threshold of £107 per MWh.
For businesses that are ‘particularly vulnerable’ to higher energy prices, there is a greater level of support available. These businesses are classed as Energy and Trade Intensive Industries (ETII), and will need to apply for this higher level of support. For ETIIs, the maximum discount for gas is £40 per MWh, with a price threshold of £99 per MWh.
The full list of Energy and Trade Intensive Industries – including a selection of manufacturers, as well as libraries and museums, for example – can be found here.
Why do gas prices fluctuate?
Business gas prices fluctuate due to changes in the wholesale costs of buying gas. Various geopolitical and weather-based factors can cause changes to the wholesale price of gas, which is then passed on to the consumer, whether that’s a business or a household, by the energy supplier.
How much VAT should I pay on business gas?
The rate of VAT on business gas is normally 20%. However, there is a reduced rate of 5% available for eligible organisations. This includes if:
- you are a charitable or non-profit organisation
- 60% or more of your energy usage is for domestic purposes
- you use less than 145 kWh or 5 therms of business gas a day
How much should small businesses pay for their gas?
There is no set number you should aim for when it comes to your annual business gas bill. A shop will have different needs to a restaurant, as will an office to a hotel.
However, if you use annual usage estimates, and the average figures provided by the Department for Business, Energy & Industrial Strategy, a small business that uses 22,500kWh in a year could expect to pay £819, including the Climate Change Levy but before other fees are added.
It is important to note that this is just an example and may not reflect your annual business gas bill.
What about micro businesses?
Micro-business gas tariffs are designed for companies that meet the following criteria:
- fewer than 10 employees
- yearly turnover or yearly balance sheet of less than €2 million
- uses less than 293,000kWh gas a year
A micro business can switch gas suppliers in exactly the same way as a larger business. However, they are entitled to specific rights, including:
- a shortened notice period of 30 days
- a 14-day cooling-off period if you change your mind
- a renewal cap of 12 months if you let your contract rollover
As with small businesses, there is no target figure for a micro-business gas bill. However, again using annual usage estimates and price per kWh averages, a micro business that uses 10,000 kWh a year could end up paying £540. This is including the Climate Change Levy, but before other charges are added.
Should I renew or switch business gas suppliers?
Whether you renew or renegotiate with your existing provider, or switch to a new supplier, depends on how happy you are with your service, the rates on offer, and the overall estimated cost of your new contract.
You can switch to a new business gas provider if:
- Your contract ends: Your business gas supplier will normally contact you when your energy switching window opens. It is usually 90 days before the end of your contract. The switching window is the earliest point that you can start comparing new prices and arranging a new business gas deal.
- You’re on a default contract: This usually occurs when you take over a new property or have been moved on to a default or ‘deemed’ contract after a fixed-term contract ends.
Unlike domestic gas, many business gas contracts don’t offer a cooling-off period. This is a period of 14 days in which you can decide to cancel a service and get your money back. So it’s important to understand the terms and conditions of your tariff before signing up.
The exception to this are micro businesses, which have their own set of rules that includes a 14-day cooling-off period. As defined by Ofgem, to qualify your business will need to have fewer than 10 employees, and an annual turnover or balance sheet of less than €2 million. It will also need to use no more than 100,000 kWh of electricity and 293,000 kWh of gas a year.
If anything is unclear about your business gas contract, get in touch with the supplier to clarify the details.
Why should I switch business gas suppliers?
Switching to a new business gas deal or provider could help you save money on business running costs. That is why it is so important to compare suppliers, and select the best option for your business.
Cost isn’t the only reason to switch business gas suppliers, however. Better service, better contract terms, and greener energy are all things to potentially consider when weighing up whether to change providers.
How much can I save by switching suppliers?
How much money you could save by switching business gas suppliers will, in part, be determined by:
- the cost of your original tariff, versus the deals currently available
- the size, and energy usage, of your business
- the length of contract you choose to sign
- what type of tariff you choose
- what type of energy you buy, i.e. whether it is renewable or not
When can I change business gas suppliers?
You will be able to switch business gas suppliers at the end of your current contract, but you can inform your provider of your intention to switch during your specified notice period. You should be able to find the end date of your contract on your business gas bill. If not, you may need to contact your provider directly.
How do I know when my contract ends?
You should be able to find the end date of your contract on your business gas bill, or your original contract. If not, you may need to contact your provider directly.
If you are a micro business, your supplier is required to put your contract end date on every business gas bill you receive.
What are automatic renewals on my business gas contract?
An automatic renewal is what sometimes happens if you fail to contact your supplier by the time your contract ends. They are also known as rollover contracts. These are typically more expensive than a standard fixed rate tariff.
Rollover contracts for micro businesses must not last longer than 12 months.
How to switch business gas suppliers
There are five steps you should follow when looking to switch business gas suppliers:
- Find the name of your current business gas provider.
- Check your contract to find out when you can switch suppliers.
- Get the details of your business gas contract, including yearly usage.
- Compare business gas providers to find the best deal for your organisation.
- Finalise your new business gas contract.
How long does it take to switch business gas providers?
It can take up to 21 days to switch to a new business gas supplier.
What information do I need to switch business gas?
You’ll need the following details to hand when looking for a new business gas contract:
- your supply type
- your energy usage in kWh or annual expenditure
- the date when your contract ends
These will usually be in your most recent business energy bill. If you can’t find a bill, it is possible to use estimates – but your quotes might not be as accurate.
You can use these details to compare quotes from different suppliers. Most suppliers let you sign up for a business gas deal online. You will also need to provide details about your business, such as its name and business type.
Can I switch business gas suppliers if my gas is supplied by an independent gas transporter?
Yes. The process to switch business gas suppliers is no different whether your organisation uses an independent gas transporter or not.
Should I use a broker to get the best business gas rates?
A business energy broker can help you with the entire switching process, including negotiating your contract and managing the changeover. However, you should be aware that these services are not free – even if your bill doesn’t show any costs, you will be paying some form of commission. If you do not receive a full written disclosure of your energy broker costs, you may be able to make a business energy claim.
» MORE: Business energy brokers
What happens when I switch my business gas supply?
Sometimes suppliers may stop or object to you switching to a new deal or business gas providers. This usually happens for one of the following reasons:
- You haven’t given enough notice.
- You are still under contract.
- There is an outstanding balance on your account that is more than 28 days old.
- You have just moved to a new location and need to register a new account before the old one is closed.
- Suppliers have incorrect details on file.
Your energy supplier has to explain why you can’t switch, and your options, as soon as possible. In some cases, you may be able to switch to a new business gas deal with your existing supplier if you’re unable to move to another supplier.
What if I run my business from home?
It is possible to get business gas, and business electricity, if you work from home. However, you will likely need to meet a minimum usage requirement for your business gas versus your domestic gas to be eligible.
What if I’m moving my business premises?
If you’re moving to new premises, you can choose to transfer your business gas supplier or end your contract.
If you would like to move your business gas supply to a new property, you will need to give your provider at least one month’s notice. Business gas contracts can be agreed upon years or months in advance, so you could arrange for the switch to be put in place much earlier too. The supplier will arrange your final bill, and you’ll need to set up a new business gas contract for your new premises.
If you don’t set up a business gas contract before you move to the new property, you will be transferred to a deemed rate tariff with the building’s current suppliers. These tariffs tend to be more expensive, so it’s worth having a deal ready to go for when you move in.
Have any business gas suppliers gone bust?
In late 2021, and early 2022, a number of energy suppliers went bust due to rising wholesale gas prices.
Should I switch to green business gas?
While there are fewer renewable options for gas when compared to electricity, there are a number of providers claiming to supply ‘green’ business gas. Often this will be a combination of renewable biogas (around 10%), and carbon-offsetting to help ‘neutralise’ the remaining gas generated by other means. It is possible, however, to find providers offering 100% green gas.
You should look out for mention of a Renewable Gas Guarantees of Origin (RGGOs) certificate to confirm the status of the supplier’s ‘green’ gas.
How can I save money on business gas?
If you want to try to reduce your business gas bill, there are a number of steps you can consider taking.
Insulate your business premises
One way to cut your gas bills is to better insulate your business premises. This will help make your workplace warmer in winter, lessening the need for your heating system to be on, and therefore reducing your spending.
Install a smart meter
There are a number of different meters available, which will suit different energy needs. You might want to consider a smart meter for businesses, so your readings are submitted automatically, therefore ensuring more accurate bills.
What is an MPRN number?
Your Meter Point Reference Number, or MPRN, is used to help identify your unique gas meter. If you cannot find your MPRN, the Meter Point Administration Service’s ‘Find My Supplier’ tool can be of assistance.
» MORE: What are MPRN and MPAN numbers?
Educate your staff on energy consumption
Your staff can play a big role in cutting down on energy consumption. Carrying out a business energy audit, and then sharing the results with your employees, can help reduce wasteful behaviours when it comes to business gas usage.
Compare business gas prices regularly
One potential way to get cheaper business gas rates is by comparing providers when you come to the end of your contract to see if you can get a better deal.
Factors that affect which rates you can access include where your business is based, your energy consumption, the length of your contract, and your business credit rating.
While you might not be able to change where you work, and how large your business is, you could consider a longer contract in order to get a cheaper rate.
Similarly, you can try to take steps to improve your business credit score in the run-up to you seeking a new business gas contract.
Business Gas FAQs
There is no one set example for how much you should pay for business gas. It depends, among other things, on your industry and the size of your business.
When trying to decide whether to renew your existing contract, or switch business gas suppliers, you should ask yourself:
- What business gas rates are currently available?
- Am I happy with my current service?
- What am I willing to pay for my business gas?
- How much can I afford to pay for my business gas?
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