Business Gas Guide 2021

Now that we have covered the ins and outs of water and electricity for your business, it’s time to consider gas. Just like the rest of your utilities, it is just as important to keep up with the best deals and rates from suppliers that stand out to you, in order to ensure that your business is getting what it needs for a reasonable price; there is a range of thing that will influence the rates you will be given by suppliers, and in order to understand this, we have to consider each influence individually when you are looking to switch.

Understanding your contract

Understanding the business gas contract given to you before making the change is critical to ensuring that you are making the right decision. To do this, we will first focus on a variety of key terms that may pop up as a part of your contract.

The billing period is the time period negotiated for between each payment date, for example, monthly, quarterly, or yearly. Smaller businesses may prefer shorter billing periods to keep a close eye on their spending each month, whereas larger businesses may have the ability to wait longer to focus on these details.

The unit rate is a rate that you will be expected to pay per kilowatt-hour (kWh) of gas that your business consumes. Making this rate as low as possible is where you are likely to find the most savings; a unit rate will vastly depend on your business, whereas the suppliers will differ on what they can offer you dependant on this information.

Household Vs Business tariffs

Unlike what you may find with electricity tariffs, business gas rates will usually be cheaper than domestic ones due to being based on larger, commercial demands. In contrast to this, though, businesses are expected to pay a 20% VAT that homeowners are not, alongside a series of levies and charges in order to comply with regulations. These levies and charges are laid out in the table below.

Usually, tariffs offered to you by the suppliers will be more tailored to your needs, especially if you are a big business. Your contract will be influenced by a range of factors including usage and the business sector. This means that it can be hard to compare tariffs, and instead, you will need to contact each supplier individually. Your supplier may also use your credit profile to consider whether your business will be able to keep up with the expected payments, which is not available for domestic gas.

For businesses, it is likely that the tariffs offered are longer than the likes of domestic gas, and can often last up to five years. Because your energy will be bought in bulk, it is likely to be cheaper, but means that you will also have to wait until your contract is ending to shop for a better deal;

Once you sign a contract with a supplier, there is no cooling-off period in place in case you change your mind. This means that you must be certain before making these decisions and know the details set out within your contract in full. Otherwise, you may find yourself locked in a contract that does not suit your business needs.

What will happen once your contract ends?

By the end of your contract, you will be entered into a renewal period with your provider. They will send you a letter of renewal offering a deal to continue the contract, but you do not have to accept this, and may instead shop around for better options depending on your situation. Going to other suppliers is likely to bring you a more competitive deal elsewhere and lead to saving yourself money.

You will then relieve a final bill based on your current tariff, and may be asked t provide a final meter reading to ensure that it is accurate. If you fail to communicate with the supplier’s renewal or their attempt to contact you, you are often automatically opted into a contracted expensive out-of-contract tariff. It is critical that you inform your supplier of your plans to continue your contract or switch in order to avoid overpaying on your business gas.

Understanding your bill

Your bill will be made up of both your account information, and a more detailed breakdown of your charges as follows:

Account information

  • Account number – an account number unique to you 
  • Your details – your business name and address
  • Contract details – what tariff you are on, its end date
  • Bill date – when your bill was sent 
  • Billing period – the time period you’re being charged for
  • Bill number – a unique reference number 
  • VAT number – a unique VAT number registered to you 
  • Type of charge – whether accurate or estimated
  • MPRN (Meter Point Reference Number) – a unique 11-digit number used to identify your gas supply point
  • MSN (Meter Serial Number) – a unique number that identifies your meter
  • Contact details – a phone number to contact your supplier should anything go wrong

Breakdown of charges

  • Billing period charges – the price for the period
  • Outstanding charges – the amount owed from past bills
  • VAT charges – the amount added for VAT 
  • Total amount due – the above combined 
  • Cost breakdown – a run down of your charges

What costs are included on a gas bill?

Your gas bill is made up of at least two charges, but also includes other levies and charges that are expected to be paid by all businesses.

Charge/LevyWhat is this?
Unit rate per kWhAs explained above, this is the amount that you are paying per unit of gas that you use. The total of this will vary between billing periods depending on what you use.
The rate of this is fixed on a fixed term contract but may vary on a variable contract. This means that it could drop or rise depending on market price.
A daily standing chargeSimply put, the daily standing charge is a charge that covers the management and upkeep of your supply and your account each day.
The Climate Change LevyBusinesses are taxed automatically with a climate change levy with the intention of discouraging carbon emissions. This extra charge is in place to encourage less waste and inefficiency in businesses.   In contrast to this, businesses that consume high amounts of gas but have signed the Climate Change Agreement (CCA) will be given a reduction on the levy.
20% VAT (if applicable)While some businesses might be offered a cheaper rate due to the amount of gas that they consume, if they are over a certain size, they will be subject to paying 20% VAT. Charities that offer residential services are no charged VAT.

What aspects influence the cost of my businesses gas plan?

The business sector

Where a real estate agent will just need gas for heating and hot water, a restaurant will rely on gas to cook for each individual customer. Because the restaurant will use a lot more gas, it is likely that they will be offered cheaper unit rates to make up the vast amount of usage.

Location

The area in which your business is located will influence the unit rates you are offered because some suppliers only operate in limited areas, restricting the gas tariffs you will have access to.

Size

The size of your business is a good way to indicate how much gas it may use. The bigger your business, the cheaper a rate you will be offered as you will be consuming a lot more than a smaller business would.

Usage

The amount of gas your business expects itself to use will affect the supplier’s offer. Often, the more gas you use, the cheaper the unit rate will be, though this may make the standing charge much higher.

Credit Score

Your business will have its own business credit score, that demonstrates to suppliers that you will fulfil the entirety of your billing contract. You will be offered better deals if your credit score is high, whereas poorer scores will limit what you may be offered. You can find out more about how to improve your score and get access to better deals here.

Contract Type

A fixed term contract is a secure contract set to ensure that you will pay a certain amount each month, even when gas prices fluctuate. A variable contract is the opposite, your prices may rise or fall depending on the current market rates. 

Timing

This is something you cannot control but can consider when making your decisions. The market prices for gas will change often throughout the year, and this influences the unit rate for the tariffs that you are initially offered, so prices offered by your ideal supplier is likely to change daily. Timing your negotiations with a supplier can make a big difference on how much you will pay, even on a fixed tariff.

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