Looking to find the lowest business gas prices? We can help you compare gas suppliers. Plus, we have the latest data on how much an average UK business pays per kWh for their gas.
You can start your comparison here.
Business Gas Price Comparison By Business Size
|Business Size||Average Business Gas Unit Price (excluding CCL)|
|Average Business Gas Unit Price (including CCL)
The business gas prices above above are the most recent figures (Q3 2018) available from GOV.UK.
They reflect the average price paid per kWh by businesses of various sizes (based on consumption levels). It includes the prices with and without Climate Change Levy (CCL) of 0.203 p/kWh, but excludes VAT.
Businesses were grouped based on their annual gas consumption as follows:
- Very Small – Under 278,000 kWh per year.
- Small – 278,000 – 2,777,000 kWh per year.
- Medium – 2,778,000 – 27,777,000 kWh per year.
- Large – 27,778,000 – 277,777,000 kWh per year.
- Very Large – 277,778,000 – 1,111,112,000 kWh per year.
To put those numbers in perspective, a ‘Large’ business using 277,777,000 kWh of gas per year would end up paying £9 million more for gas if it paid the price paid by the average very small business (5.174 p/kWh) vs the average large business (1.886 p/kWh).
Business Gas Price Trends
Below you can see how gas rates with and without CCL have changed over the past decade.
Business Gas Prices Without CCL
Business Gas Prices With CCL
Source for both charts is GOV.UK.
Small Business vs Micro Business
According to Ofgem a non-domestic consumer is defined as a micro business if they meet one of the following criteria:
- employs fewer than 10 employees (or their full time equivalent) and has an annual turnover or balance sheet no greater than €2 million; or
- uses no more than 100,000 kWh of electricity per year; or
- uses no more than 293,000 kWh of gas per year.
The main benefit of being defined as a micro business rather than a small business is that you can give a termination notice at any time during your contract which means you can always shop for the best deal.
Gas Unit Cost vs Standing Charge
Business gas prices are made up of two things: the unit price and standing charge. It’s important to understand the difference when comparing suppliers.
Unit Price: This is how much you pay for the gas you use. It is charged in terms of pence per kWh. It is a variable charge, so the more you use, the more you pay. To get an idea how much you should be paying, please see the tables at the top of this article.
Standing Charge: The standing charge is a fixed cost. Normally it’s charged as a fixed price per day (although sometimes per month or quarter). The difference with the unit price, is that you pay the same amount regardless of how much or little gas you use.
And unlike unit prices, standing charges vary widely from supplier to supplier sometimes as low as 30p per day all the way up to £85+ per day.
Generally speaking, most price comparisons should focus on the unit price rather than the standing charge as this will determine the bulk of what you’ll pay. However, if you do see an abnormally low unit rate it’s worth your while to double check the standing charge.
Tariffs For Different Gas Meters
Unlike electricity, business gas meters are pretty simple. You’ll either have a standard one or one capable of automatic meter readings. Basically, if you’re a small gas customer (up to 732,000 kWh depending on supplier), you’ll have a standard meter, but if you use a lot of gas you’ll be asked/required to choose an AMR or simialr smart meter.
Overall, the type of meter does not really affect the price you pay. Instead the price you pay and the meter you use are detemrined by your overall usage level.
Deemed & Out-of-Contract Gas Prices Explained
Business gas customers do not currently benefit from Ofgem’s price cap. This means customers not under contract can end up paying a lot more for their gas than those under contract.
However, it’s actually quite difficult to end up in this situation as most suppliers will at least try to roll you over onto a variable rate contract when your expires.
While these are often poor value, they can still be better than paying deemed or out-of-contract rates.
Deemed rates: are what businesses taking over a new premises will pay until they enter into a gas supply contract. The amount is paid to the existing energy supplier of the premises until a contract can be arranged with them or another supplier.
The prices are very high, but are never meant to be paid for long. Just be aware the deemed unit prices can easily be 200%+ more than in-contract rates, so there’s a big incentive to switch quickly.
Out-of-contract rates: The amount charged is usually very similar to deemed rates but usually arises when a contract ends and a new contract has not been put in place. The problem with out-of-contract rates is that you may not realise you’re on them unless you’re checking your bill regularly.
Once again if you find yourself paying out-of-contract rates, you should either contact your supplier to be placed under contract or better yet compare prices to get a much better deal.
You can sometimes save up to 70% off the rates you’re paying.
British Gas Deemed Rate Example
To get an idea just how much these rates can be, let’s have a quick look at British Gas‘ Deemed Rates.
|Customer Type||Unit Rate (p/kWh)||Standing Charge (p/day)|
|Small Non-Daily Meter||6.41p||96.07p|
|Large Non-Daily Meter||6.27p||1,983.20p|
Note data comes from British Gas Deemed Rates, last updated 23 April 2017. Small Daily users, use less than 732,000 kWh per year, Large Non-Daily Meter use more than or equal than 732,000 kWh per year but are on non-daily meters.
Business Gas Contracts: Fixed vs Variable
While both fixed and variable gas contracts are available, most suppliers to steer customers towards fixed price contracts, unless they are very sophisticated buyers.
Here are the key things you need to know about both types:
Fixed Tariff Business Gas Contracts:
- Can now be for as long as 5 years, although 1-3 years is more typical
- Fixes your unit price paid per kWh and standing charge for the duration of the contract (but usually excludes changes to CCL)
- The price you pay per unit may increases with contract length because of the risk of price increases
- Fixed price often only applies to estimated usage, which means you could pay more if you start using more energy
- Very difficult to get out of the contract early
Variable Tariff Business Gas Contracts:
- Price you pay varies based on wholesale gas prices and can go up or down
- Cheaper than deemed or out-of-contract rates
- Not usually locked into a long term contract, so can switch suppliers at anytime
- Offers far less certainty than a fixed term contract in terms of rates
- Prices can sometimes be higher than fixed term contracts
Most small businesses will probably be better going with a fixed price contract as it offers peace of mind and is one less thing to worry about.
Wholesale Gas Prices
The chart above shows the whole gas price per therm over the past 8 years. We’ve converted it to an annual average price per kWh below.
Generally speaking, business gas prices tend to track pretty closely to the wholesale cost. Which means in the short-term, gas prices look set to increase slightly from where they are today.
Other costs for commercial gas contracts
While the wholesale price of gas makes up the bulk of what your business will pay. There are a few other costs to be aware of.
- VAT: Most businesses will pay the standard VAT rate of 20% for their commercial gas. However, if at least 60% of your business’ energy is used for domestic purposes, you are a charity or non-profit, and/or you use less than 145 kWh of gas per day (4,500 kWh per month) you may be able to pay only 5%.
- CCL: From 1 April 2019 the Climate Change Levy is 0.339 p/kWh for gas.
- Local Distribution Zone (LDZ) charges: Levied by Gas Distribution Network (GDN) operators in order to recover their regulated allowed revenue as determined through the RIIO-GD1 network price control.
Who is the cheapest business gas supplier?
Unfortunately, there’s no single “cheapest” business gas supplier. Each company has different types of customers it likes to deal with and will price accordingly.
You can use a service such as Love Energy Savings to help you compare suppliers that are right for you. Plus, they are one of the only sites that allow you to buy your business gas online.
Brokers & Gas Prices
Energy brokers remain the most popular way for businesses to engage in the energy market. And for good reason. There are dozens of gas suppliers out there, so finding the best deal can be tricky if not impossible.
However, it’s important to understand how brokers make money, especially since most don’t charge an upfront fee. Basically, energy companies will work with brokers to attract new customers. They may offer them special rates to encourage people to switch.
What brokers will then do is turnaround and offer this rate to their customers, plus a small per kWh price uplift. The amount will vary from broker to broker, but can quite high if dealing with an unscrupulous one.
Here’s a hypothetical example: British Gas runs a promo offering brokers a deal on gas of just 2 p/kWh. The broker will then turnaround and offers that deal to you at 2.2 p/kWh. They pay British Gas the 2 p/kWh and then keep the 0.2 p/kWh as their profit.
While the broker market is extremely competitive, there is still the possibility of paying too much.
That’s why we recommend Love Energy Savings since they’re focus is on recurring business (86% of businesses use them again). Moreover, they don’t just focus on finding you the cheapest supplier, but also one that’s not going to be a pain to deal with.
You can of course also approach the suppliers themselves, but just be aware you may not be able to get a better deal as many suppliers prefer dealing with brokers as they handle a lot of the admin costs associated with setting up a new contract.
How To get Cheaper Gas For Your Business
- The single best way to get the lowest price is to compare suppliers. Services such as Love Energy Savings make this process easy and they even allow you to buy online.
- Know how much gas you use each year and when, as this make comparisons easier and may make it easier to negotiate a discount.
- Have your MPRN (Meter point reference number) ready as this can also help you make a better comparison.
- Consider how you pay your bill. For example, suppliers like EON and EDF may offer up to a 7% discount if you pay by monthly direct debit.
- Check your company credit rating. Bad credit can mean you’ll pay more for your gas supply.
- Look into when you use your gas. For example, if your business is seasonal you may be able to benefit from lower summer prices.
- If you have multiple business locations you may be able to negotiate a lower unit price by buying in bulk.
- Energy suppliers don’t offer dual fuel contracts or discounts like they do for domestic customers. This means you may find it cheaper to buy your gas and electricity from separate suppliers.
- Look into installing better insulation in your property. Most gas is used for heating, which means you could reduce your consumption and bills simply by wasting less.
- Look into how efficient your gas boiler is. Older boilers can be real energy hogs, which means upgrading to a brand new one can pay off more quickly than you’d think.