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Explore Business Gas Prices
Explore business gas prices in the UK with our comprehensive guide. At Docalla we understand that gas being one of the fundamental resources for businesses across the country, it is essential to secure the best business gas prices in order to maintain operational efficiency and profitability.
In this volatile energy market, understanding the intricacies of business gas pricing can be quite challenging. That’s where we come in. Our mission at Docalla is to empower businesses of all sizes to make the right decision about their gas supply ensuring they get the best value for their money.
Whether you’re a small local enterprise or a large corporate entity, finding the right gas supplier at the right price is crucial. With our expert insights and user-friendly tools, we’ll guide you through the process, helping you navigate the complexities of the UK gas market with confidence.
From comparing leading suppliers to exploring cost-saving strategies, Docalla is your go-to resource for everything related to business gas prices. We will uncover opportunities for saving and efficiency that could transform your bottom line and unlock the potential for your business to thrive in the competitive landscape of the UK gas market.
Gas prices affect virtually all sectors. Combined with other factors, gas prices influence business bottom line, profit margin and strategic decision-making. In recent times, the soaring cost of gas has posed challenges for businesses in the UK, necessitating novel approaches to risk management and capitalising on opportunities. Managing these fluctuations and its implications for industries, building resilience and promoting growth is essential for business sustainability.
Business Gas Prices Explained
Gas prices are influenced by a complex set of global and domestic factors. While traditional supply and demand dynamics have a significant impact, geopolitical tensions, environmental regulations, and technological advancements all play important roles. Understanding these dynamics is critical for businesses hoping to navigate the volatile terrain of gas prices effectively. Deciding on an appropriate business gas supplier and tariff is critical for entrepreneurs because it impacts how much you pay for your business gas bills.
Compared to the household energy market, there is no price cap on business gas rates. If your company uses a standard variable tariff, gas rates could be twice as high as the fair market price for each kilowatt per hour.
Factors Affecting Business Gas Prices
Global supply and demand: economic growth, political stability, and technological advancements all have an impact on global gas prices. Emerging markets, particularly in Asia, are putting increasing pressure on global supply, contributing to price fluctuations. Furthermore, major oil-producing countries make production decisions which are usually influenced by geopolitical considerations and affiliations which can in turn affect the price. With the reduced supply of gas from Russia since the war in Ukraine began, the demand for gas in Europe has surpassed the supply resulting in higher prices.
Political Tensions: conflicts between governments in key oil-producing regions, such as the Middle East, can disrupt supply chains and increase prices. Conflicts, sanctions and trade disputes among nations can cause uncertainty in the oil market, affecting businesses that rely on gas for their operations. For instance, since Russia began its war on Ukraine in early 2022, they have limited their abundant and cheap supply of gas to the rest of Europe.
Environmental Regulations: with many countries taking climate action to mitigate the effects of global warming, strict environmental policies are established to reduce carbon emissions. This is gradually reducing the demand for fossil fuels as more businesses seek renewable energy sources. Businesses that operate in regions with stringent environmental regulations may face higher compliance costs or incentives to transition to cleaner energy alternatives.
Innovations in technology: advances in extraction technologies such as hydraulic fracturing and horizontal drilling have transformed the energy landscape, leading to an increase in the domestic production of some countries. Similarly, developments in renewable energy technologies, such as wind and solar power, are reshaping the energy mix and influencing gas prices.
High cost of LNG imports: to replace the importation of gas from Europe, the UK now brings in most of its liquefied natural gas from the United States and the Middle East. This gas is then fed into the national gas grid via three regasification ports off the British coast. Natural gas imports by sea are significantly more expensive than transporting them by land using pipelines. This system results in a substantial increase in the price of gas for both households and businesses in Britain.
How Business Gas Rates are Determined
Business gas prices are fees that businesses pay to gas suppliers who provide them gas via a dedicated network. The main components of business gas prices include:
The unit price: the consumption of gas is measured in kilowatts per hour (KWh). Business gas tariff specifies the amount paid for each kilowatt of gas. This cost can be either fixed or varied depending on the terms of the contract and market forces.
Daily charges: Business gas prices usually include a fixed daily rate that is charged by the supplier as a maintenance fee for the connection to the local gas network, metre readings, and other related charges. The average standing charge fee is calculated in pence per day.
Climate change levy: also known as CCL, is a fixed government environmental tax imposed on businesses to promote the efficient use of gas. Introduced in April 2001, the ultimate aim of this levy is to encourage businesses to adopt environmentally friendly approaches in their operations and reduce the impact of climate change. The CCL is levied on businesses for every kilowatt of gas consumed.
Value added tax: business gas prices are subject to Britain’s VAT laws. Small businesses pay a VAT of 5%, while all other businesses are expected to pay the stipulated standard rate of 20% in addition to the earlier mentioned charges.
How much does Business gas cost per KWh?
The price of a kilowatt of gas per hour varies depending on factors such as supplier, tariff, location, and market conditions. The cost of a KWh of business gas ranges from 6-12 Pence
The Effects of Business Gas Prices Across Industries
Gas prices affect a wide range of industries, impacting operational costs, consumer behaviour, and market dynamics. Some industries benefit from lower gas prices, while others face significant challenges in managing the rising costs. Comprehending these implications is critical for businesses to tailor their strategies accordingly.
Transportation and logistics: Businesses that have to move their goods from one point to another are especially vulnerable to fluctuations in gas prices. Rising gas costs can reduce profit margins, and force businesses to reconsider their pricing strategies or supply chain logistics. Lower gas prices, on the other hand, can help businesses save money and improve competitiveness among transport companies.
Manufacturing and production: fluctuations in gas prices have a direct impact on industries that rely on gas as their primary input, such as chemicals, plastics, and agriculture. Increased gas costs can drive up production costs, resulting in a higher price for the finished goods. Manufacturers can explore alternative energy sources as well as research suppliers to determine what option is best for them.
Retail and consumer goods: gas prices have an impact on consumer behaviour, particularly in the retail and hospitality industries. Higher gas prices can reduce discretionary spending, affecting businesses that rely on consumer purchasing power. Lower prices, on the other hand, may encourage consumer demand, opening up opportunities for growth in specific sectors of the retail industry.
Energy and utilities: gas price fluctuations have a direct impact on companies in the energy sector. Lower gas prices may reduce the revenue of traditional energy companies but may also increase the demand for cleaner energy alternatives. Renewable energy providers face stiff competition as gas prices fluctuate, influencing investment decisions and altering market dynamics.
Why are gas prices for small businesses higher?
According to the quarterly report by Ofgem, microbusinesses pay more for each kilowatt of gas used than larger businesses. This is attributed to a lack of accessibility to information about pricing and the complexity of the energy market. In view of this, microbusinesses are encouraged to conduct research and gain a better understanding of the gas suppliers/providers available and the deals they offer.
Source: Opening Statement – Strategic Review of the microbusiness retail market | Ofgem
Strategies for Managing Business Gas Prices
n light of the unstable nature of gas prices, businesses must take proactive steps to manage risks, build resilience, and capitalise on opportunities. From ensuring efficiency in their operations to forming strategic alliances, a multi-pronged approach is required to navigate the challenges posed by fluctuating gas prices.
Sustainability and conservation
Businesses must invest in sustainable practices and technologies in order to reduce their gas consumption and operational costs. There are several ways to do this, ranging from equipment upgrades to process optimisation.
Diversification of energy sources
Businesses can gain more flexibility and resilience in dealing with gas prices by diversifying energy sources. Considering renewable energy options such as solar, wind, and hydro will help reduce dependence on fossil fuels and reduce the effect of gas price volatility
Risk management
Long-term gas contracts can protect businesses in the event of sudden price changes. This will help them reduce the risk of price fluctuations and unexpected cost increases. Businesses will be able to stabilise cash flows by locking prices at favourable rates or establishing price caps
Supply chain optimisation
Improving supply chain logistics can help businesses reduce the impact of gas prices on transportation costs. Combining shipments, integrating routes, deploying appropriate software, and using alternative modes of transportation can all help to reduce gas consumption and increase cost efficiency
Strategic partnerships
Working with suppliers, customers, and industry partners can help businesses gain access to the best deals, shared resources, and expertise for managing gas price risks. Strategic collaborations can help to strengthen resilience and competitiveness by facilitating research and development, knowledge sharing, and technology transfer initiatives
Investing in infrastructure
Investing in sustainability and renewable energy infrastructure can result in long-term cost savings and environmental benefits, as well as reduced exposure to unstable gas prices. Businesses can integrate renewable energy into their operations through a variety of methods, including on-site solar installations.
Business gas prices remain a critical indicator of profitability, competitiveness, and sustainability. High business gas prices can present both challenges and opportunities for businesses across industries, requiring innovative risk management strategies and proactive measures to take advantage of the dynamic nature of market forces. Businesses can confidently deal with the complexities of the gas market, research suppliers, explore offers, and chart a course for long-term success by gaining an in-depth understanding of gas pricing, assessing the implications for their business operations, and implementing targeted resilience and growth strategies
How to Calculate Business Gas Rates
One of the major perplexing aspects of calculating business gas rates is that gas suppliers base their pricing on each kilowatt of gas used, while the gas metre measures gas volume in cubic metres or cubic feet.
Not to worry, there is a way to help you monitor your gas usage by converting your metre readings to KWh.
To calculate your gas consumption in metric metres,
Difference in gas metre reading (m3) x Volume correction factor x Calorific value ÷ conversion factor = KWh.
To calculate gas consumption using an imperial metre,
The difference in gas metre readings (ft3) x conversion factor to cubic metres x volume correction factor x calorific value divided by the conversion factor equals KWh.
Note that:
- The volume correction factor, usually around ~1.02, is an industry standard for adjusting atmospheric pressure.
- The calorific value accounts for changes in the composition of gas when burned. It may differ slightly depending on the supplier. Usually, ~39.2Mj/m3 is a reasonable estimate
- To convert joules to KWh, use the conversion factor of 3.6.
- The conversion value to convert from cubic feet to cubic metres is ~0.028
Which is Better- Fixed or Variable Business Gas Prices?
Microbusinesses usually opt for fixed-rate gas tariffs because they offer some form of stability and allow them to lock in cheaper gas rates. Fixed rates are usually cheaper than variable rates because suppliers tend to offer their best prices on fixed tariffs to attract new customers.
Benefits of fixed-rate business gas prices
For microbusinesses, a fixed-rate business gas tariff is the most feasible option. The major benefits of opting for a fixed price tariff include:
- Simple projections: fixed-rate business gas tariffs are simple to understand and easy to predict. Fixed gas rates are definite and provide certainty for businesses about the price of each kilowatt per hour of gas consumed. This empowers businesses to plan and make predictions about the future. When budgeting for your business gas bills, fixed rate helps you make projections for your estimated monthly usage.
- Protection from price increases: when small businesses subscribe to a fixed rate gas supply, it protects them from future price increases from the supplier within the duration of the supply contract.
- Access to cheaper gas rates: by switching gas suppliers and opting for a fixed-rate business gas tariff, most businesses can save money. Fixed rates are typically less expensive when compared to the standard variable tariff, as your business is tied to a particular gas supplier for a period of time.
Business gas suppliers and gas prices per kWh
| Supplier | Price Per kWh | Daily Standing Charge | Monthly cost | Annual Cost |
| British Gas | 7.8p | 48p | £177.69 | £2,123.32 |
| EDF | 6.7p | 45p | £153.27 | £1,839.25 |
| BG Lite | 7.1p | 46.1p | £162.77 | £1,953.29 |
| ScottishPower | 7.1p | 35.1p | £158.17 | £1,898.07 |
| Smartest Energy | 6.9p | 144.6p | £188.68 | £2,264.15 |
| Valda | 7.3p | 42.1p | £164.18 | £1,970.13 |
Rates are accurate as of April 2024. Note that tariffs differ based on your region and supplier, and are subject to change at any time. This table shows prices for a business using 25,000 kWh of gas on a two year contract.
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What Factors Affect Business Gas Prices?
There are several factors that influence the rate of business gas. These include:
Importation: previously, the UK was self-sufficient in gas, but due to population expansion, the gas available in the country is no longer enough to meet the needs of everyone. This has necessitated the importation of gas from other European countries and the United States of America to fill this gap.
Storage: The United Kingdom has very limited gas storage capacity, as it can only store 4 days worth of gas. This lack of storage facilities makes the price of business gas more unstable.
Demand and supply: demand for gas usually increases during the winter months, and this in turn causes the prices to rise. Ultimately, changes in demand and supply will affect the gas budget for your business.
Are all Business Gas Rates Subject to a Standing Charge?
No, not all business gas rates include a standing charge. If you are sent a quote with a standing charge, you can approach your supplier to discuss gas rates without a standing charge. Nevertheless, this can be offset by an increased unit rate.
A gas rate without a standing charge is not always the cheapest option; this, however, depends on the amount of gas that your business uses. It is important that you compare prices from different suppliers to determine what suits you based on your budget and consumption
Are Business Gas Prices Capped?
The UK government does not implement price restrictions in the business gas market. On the contrary, Ofgem regulates gas suppliers for households through an energy price cap, which ensures that suppliers do not overcharge customers as there is a standard rate they cannot go above.
Because there is no price cap for business energy, business gas rates that are non-contractual are usually higher than traditional fixed gas rates available to new customers. In order to prevent defaulting on the variable gas rates, it is advisable to regularly check the gas market for current fixed rates.
How can I Get Lower Business Gas Rates?
Gas consumption is charged per kWh of gas consumed, hence, reducing your usage is one of the simplest ways to lower your gas spending. Some tips to help you reduce your usage include:
- Reducing the temperature of your water: the higher the temperature of your water, the more gas you require to heat it up. So lower the temperature of your water and lower your business gas prices.
- Invest in heating timers; there are smart heating timers that automatically turn off the heat when no one is in the room. This will ensure that the heaters are not left on when your employees have gone home after work.
- Replace old boilers: replace your old boilers with newer models, as they have been proven to be 90% more effective than older models. You can also engage in sustainability measures to slowly reduce your reliance on gas.
Can Suppliers Increase Prices in the Middle of a Contract?
If you have a variable contract rate, you will be subject to arbitrary increases as the price of gas fluctuates. You may sometimes have to pay more for the gas you use. However, if you are on a fixed rate tariff, your supplier can not increase the price of gas mid-contract.
How Do I Get the Cheapest Gas Rates?
Determining which business gas supplier offers the cheapest rate is usually not easy due to the unstable nature of gas prices. Gas prices are often determined by your location, consumption, tariff band, and a variety of other factors. You can research different suppliers and use a comparison tool to determine which company offers the cheapest gas rates.
Why are Business Gas Standing Charges so High?
Is Gas Cheaper for Businesses?
How Do I Read my Business Gas Metre?
Will I Need a New Gas Metre if I Make a Switch?
What if I Have Multiple Locations?
What is an MPRN Number?
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