Business Gas Prices and Business Electricity Prices in the UK
How much are business gas prices in the UK? And what about business electricity prices? How do you find the cheapest electricity and gas prices?
Although it can be frustrating when business energy prices go up and down, the reasons behind fluctuating business gas prices and electricity prices in the UK are numerous and varied.
If you’ve received a higher-than-expected business electricity bill, this may be due to unavoidable changes in the market. That being said, it’s a well-known fact that many businesses are paying too much for their electricity and that moving to a different supplier or cheaper energy contract will mean lower business energy prices.
Business Gas Prices UK
Changes in business gas prices can be attributed to a number of issues both within the energy industry and due to several external factors.
Business Electricity Prices UK
What are the factors that affect business electricity prices and business electricity bills?
- Gas storage – The closure of a key gas storage facility in 2017 prompted a spike in the price of gas due to the additional market demand, particularly in the winter months.
- Wind generation – The UK is increasingly reliant on electricity-generating wind turbines. During windy periods, demand for gas decreases as less gas is required to produce non-renewable electricity.
- Temperature – Warm temperatures cause a reduction in gas demand, thus lowering gas prices. The opposite is also true – when temperatures cool, demand and business gas prices increase.
- Gas availability – Suppliers buy gas in vast quantities, so the amount of readily-available gas will impact wholesale gas prices. When UK gas supply outweighs demand, the wholesale gas price can ease.
- Gas flow – The UK imports and exports gas to Europe through pipelines. The rate at which gas flows through these pipelines can impact supply and demand. Gas flow can also be restricted through faults and maintenance.
- Liquified Natural Gas (LNG) – LNG exporters can ship large volumes of gas around the world relatively quickly. This can drive short-term wholesale gas prices, because the sheer volume that can be delivered by the vessels can lead to an abundance of supply. Thus, a large cargo of LNG arriving in the UK is likely to send wholesale gas prices down due to an oversupply of the commodity.
Gas prices in the UK are affected by both the short-term factors mentioned above as well as a range of long-term issues, including:
- Currency movement – The performance of the pound can have a knock-on effect across several markets and drive the price of gas.
- Crude oil prices – The price of crude oil is linked to long-term changes in the UK gas price.
- Coal power station closures – When coal power stations close, natural gas is expected to replace coal in the production of electricity. This causes a greater demand on the network, and could cause business gas prices to increase.
- Regulatory pressures – Gas supply is often restricted or limited or restricted following the passing of new regulations and environmental policies.
Business electricity prices in the UK fluctuate for a number of reasons. Like any market, business electricity rates are affected by supply and demand.
Here are some of the factors that impact business electricity rates in the UK:
- Destructive weather – Your business electricity supply can be disrupted by damaged power lines and distribution systems due to extreme weather conditions. Prolonged or extensive destruction means that energy suppliers incur massive costs, which could be passed down to the consumer and increase business energy tariffs.
- Extreme weather – Like business gas prices, UK electricity prices are affected by hot and cold weather conditions. When it’s very hot, you turn up the air-conditioning; when it’s very cold, you turn up the heating. The more you consume, the higher your business energy bill. However, extreme weather can also have a positive effect on electricity prices in the UK. For example, windy conditions mean more renewable wind energy is generated.
- The UK energy mix – The energy mix in the UK is becoming more diverse as more electricity is generated by renewable sources, leading to a decrease in the cost of this type of energy. On the other hand, there is a limited supply of more conventional sources of business electricity such as crude oil and other fossil fuels. The more limited these resources become, the higher the energy cost will be.
- Energy infrastructure – Each energy supplier’s power plants incur a range of costs which affect business energy prices in the UK. Associated costs include operating costs, maintenance, and construction. If these overheads increase, then so could your business energy tariffs.
- Energy market reforms – New industry regulations instilled by governing bodies like Ofgem (such as new regulations on energy efficiency and climate change) impact business electricity rates.
- World events – If a natural disaster or war occurs in a country that produces oil and gas, this will likely affect their ability to produce and transport fuel, reducing supply and creating more competition, which, in turn, drives UK electricity prices up.
A number of costs go into your overall energy bill – non-commodity costs, tax, levies etc. The price you pay for your actual electricity and gas can be split into two distinct parts:
- Unit rate – The business electricity prices per kWh. This cost will fluctuate according to your energy use in a given timeframe. The price per kWh can also differ depending on the type of contract you’re on (fixed or flexible business electricity prices).
- Standing charge – The standing charge is a fixed cost that you will pay regardless of how much electricity and gas you use.
When your supplier calculates your business electricity prices for the month, they will monitor how many kilowatt hours (kWh) of gas and electricity your business uses over a certain period of time (using a meter). The number of kWh is then multiplied by the energy price per unit set in your contract to give you your energy usage cost for the time period.
The next step is to multiply the number of days covered by the billing period by the contract’s daily standing charge cost.
Your supplier will then add the two figures to give you a total business energy cost for your bill.
Gas consumption is measured in kilowatt hours (kWh). The gas unit rate you pay varies depending on your region and your business energy price plan.
On average, the cost per kWh of gas is 3.80p.
Electricity consumption is measured in kilowatt hours (kWh). The electricity unit rate you pay varies depending on your region and your business energy price plan.
On average, the electricity cost per kWh of gas is 14.37p.
How to get accurate business electricity prices
The best way to get the latest UK energy prices is to conduct a whole-of-market comparison to get the latest rates.
There are two main ways to reduce your business electricity bills and business gas bills:
- Compare contracts and change providers to get the best electricity prices.
- Implement energy management tactics to reduce your energy consumption and bring down your business gas and electricity bills.