How Are Business Gas Prices Calculated?
Looking over your business gas bill can raise several questions and one of the most common ones we come across is ‘How is the cost of business gas calculated?’
Two costs require attention when reviewing your business gas, and these makeup most of the cost of a business gas quote.
- Unit rate - this is your business gas charge. This is displayed in pence per kWh of gas used. For example, if your agreed fixed unit rate is 8.2p per kWh and you use 15,000 kWh of gas annually; you can calculate your annual business gas cost by multiplying 0.082 by 15,000 (£1,230). You will need to add additional costs to this figure.
- Standing charge - a daily fee paid to your business gas supplier for the management costs of delivering the fuel to your premises. Initially, this may seem like a high number, but the costs remain unchanged regardless of how much gas you use. For example, with a standing charge of 30.2p per day, you’ll be paying £116.80 annually.
- VAT - a flat % standard rate of 20% will be applied to your business gas bill. Discounts are available for charities and non-profits who may be eligible to pay only 5%.
Understanding Your Business Gas Quote
Business gas prices change daily, and there are a multitude of factors that impact the price a gas supplier offers you. The main factors include
- The current wholesale price of gas
- Your business gas contract length
- Your annual business gas consumption
- Your local gas distribution network
Wholesale prices
Wholesale prices fluctuate daily, so a fixed contract needs to factor in expected rises and falls in the market for the duration of your contract. A good deal shouldn't result in a business being caught over-paying due to low wholesale costs.
Contract length
The length of the contract impacts the level of risk the supplier and the customer take on. A one-year contract is easier to predict than a three-year contract.
Annual gas consumption
Larger consumption businesses can benefit from bespoke prices.
Local gas distribution network operator (DNO)
A business’ location impacts the price of gas they pay as the DNO must transport the gas to the location.