Are Business Gas Rates Cheaper Than Domestic?

by | Jul 15, 2021

As businesses across the UK contemplate a post-COVID economic reality, understanding opportunities for cost savings should be front of mind. One area where businesses can look to maximise on cost savings is through auditing their gas contracts. So, how much are business gas rates?

Business gas prices are not calculated in the same way as domestic gas, and identifying whether your business could benefit from switching plans is the first step to finding cost-saving solutions. In a difficult economic climate, auditing your current plan will help you determine whether your business gas costs are really cheaper than domestic gas prices.

When it comes to assessing rates for business gas, you first need to take a look at your business gas contract. If you have not checked your business gas contract recently, the first thing that you’ll want to do is determine whether you’re on a fixed term or variable rate plan.

How much are business gas rates?

business gas costs
Business gas rates are normally lower than domestic gas rates – but the final price you pay will depend on the size of your business, monthly gas consumption and how your rate is calculated.

Businesses are tied to gas contracts, and gas can be charged for in three different ways; namely fixed rates, variable rates and deemed rates.

Understanding your business risk profile and the volume of gas required by your business will go a long way to determining whether or not you will benefit from fixed rate or variable rate contracts, while deemed rates are reserved for businesses that are negotiating a new contract and should be kept to a minimum, as they are more expensive than both fixed and variable rate plans.

quotation for business gas

What happens when my gas contract expires?

If you’ve just realised that the contract you signed up for expired many months ago, you may already be paying more than you need to for your business gas.

Businesses that signed up for fixed term contracts are usually automatically switched to variable-rate plans when their contracts expire – and any contract that has expired will be billed for on a rollover contract that may not be best suited for your business needs.

Businesses that cancel their contract without having found a new supplier will be charged deemed rates, which are typically more expensive than you would pay for any contract. It is important that you find the right deal for your business before looking to cancel any contracts with existing suppliers.

There is no difference in the gas and electricity that powers your home to that of your business. But how suppliers treat the supply of gas and electricity differs between domestic users and business users. This includes business gas prices and business electricity prices.

We’ll help identify areas in which your business can determine whether a new contract would work for your unique business needs, and highlight how you could make the most of the potential savings that business gas contracts can offer.

small business gas suppliers

How do business gas contracts differ?

Businesses can choose to purchase their gas by either fixed rate contracts or variable rate contracts – and finding the right contract for your specific business will depend on your unique circumstances.

Generally; flexible tariffs will fluctuate throughout the duration of your contract, and because they are subjects to the gas market, costs can rise and fall by substantial amounts over the duration of your contract period.

Fixed tariffs will apply the same rate throughout the duration of your contract, but you miss out on the opportunity to benefit from any dips in the market during your contract’s duration.

Fixed rate gas contracts generally benefit those who want to accurately forecast business expenses month ahead of time. For any business that has consistent energy use, a fixed rate gas tariff will ensure that your bills will hover around the same cost every month.

Flexible tariffs help to ensure that businesses can take advantage during periods where gas prices are lower, but are susceptible to fluctuations in energy, and that will show in your monthly gas bill.

There is an inherent risk in any tariff that fluctuates with the market, but businesses that do take flexible rate gas contracts could end up with significant savings if they are willing to take that risk.

It is important to note that businesses generally use significantly more gas than the average household – so finding the right contract and supplier for your business gas needs could save your business hundreds or even thousands of pounds annually.

What other factors contribute to the price of business gas?

Many factors will determine the price that you pay for business gas. Some of the factors contributing to the price of business gas include:

  • Geographical location: cheaper gas tariffs are usually found in major cities due to economies of scale and transport costs.
  • Credit rating: the better your credit rating, the more likely a supplier will offer you cheaper tariffs.
  • Business size and consumption: the more gas that your business uses, the more likely you are going to be able to negotiate for a rate that suits you.
  • Contract length: while not always the case, the longer the duration of your contract – the cheaper your gas ends up being.

How do I find the right gas supplier for my business?

Finding the right supplier may seem like a daunting task that falls outside your comfort zone, but there are savings to be found in a period where every penny saved is so important.

Before signing up for a new gas contract, consider whether you’re looking to bundle your electricity and gas tariffs for the sake of convenience; and make sure that you explore the option of fixed and variable rate contracts before signing up for your next contract.

Ultimately, in a competitive space such as this – there is always a better deal lurking around the corner. The trick is to understand how your business uses gas to make the most of your business gas contract to maximise savings.

Sometimes, finding a partner with industry expertise is your best option.

Find an expert energy partner

Finding an independent consultancy firm with no bias to any particular supplier is your best way to save money on gas contracts. At Smarter Business, our team of experts will help you find gas deals that cater to your specific circumstances, and help you save money in the long run.

We’ll also use technology to help you understand how you’re currently using your gas and electricity, and identify areas where energy is not being used efficiently.

We have helped hundreds of businesses take their first steps towards net zero carbon goals – and provided insight into how technology can revolutionise workflows.

More than just an energy brokerage, at Smarter Business we’re looking to a sustainable future for business across the United Kingdom. From small business gas suppliers to some of the country’s largest organisations, it’s our job to get you the best business gas rates.

Get in touch with us to get a quotation on business gas and find out more about how we can save you money.

FREQUENTLY ASKED QUESTIONS

Is business gas more expensive than domestic?

Business gas is typically less expensive than domestic gas, but many factors play a role in determining whether your business will save money on business gas.

Unit prices are generally more expensive for domestic users, but they are spared price fluctuations, stringent criteria and a 20% VAT charge.

Businesses, on the other hand – are subject to long term contracts and levies, and are required to share more information to receive quotes.

Ultimately, business owners who do their research will pay less for gas than home-owners.

What is a good price for gas?

According to quarterly energy prices published by the Department for Business, Energy & Industrial Strategy in March 2021, the average price for gas in the non-domestic sector stood at just under 2.5 pence per kWh by the end of 2020 – with very small businesses paying around 4.5 pence per kWh and very large businesses paying under 2 pence per kWh.

How much do you pay for gas per month?

Your business gas prices will depend on a number of factors – including consumption, location, credit rating, company size and contract length.

The best way to calculate whether your business is paying above the norm is to calculate how much you’re paying per kWh currently, and comparing that cost against the national average.

As of March 2021, very small businesses paid in the region of 4.5 pence per kWh, small businesses paid over 2.5 pence per kWh, medium sized businesses paid just under 2.5 pence per kWh, large businesses paying just under 2 pence per kWh and very large businesses paying just over 1.5 pence per kWh.

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