How do business gas tariffs work?

What is business gas?

It is a type of energy tariff designed for commercial use. Business gas works differently to domestic contracts for the following reasons:

• Prices change more often: The cost of business gas can change on a daily basis, unlike domestic energy which stays the same for several months at a time.

• You get individual quotes from suppliers: You can usually negotiate the price with suppliers who look at the circumstances of your business.

• Contracts are fixed for longer: You can be tied into tariffs for up to four years, and cannot switch suppliers if you have less than 30 days left on your contract.

• You pay more VAT: Business gas VAT is 20%, unlike domestic gas which is only 5%. Some businesses also have to pay extra fees based on their size.

Which suppliers offer business gas?

The Big Six energy companies supply businesses in the UK. They are EDF, E.ON, British Gas, SSE, npower and Scottish Power.

However, many smaller suppliers specialise in business energy and you could save money by going with a lesser known energy company.

Who can get it?

You can get a business gas deal if you run any of the following:

• A small, medium or large business

• A business from home

• A micro business

• A hotel or B&B

• A school, college or university

• A charity

You can choose your tariff even if you rent your business premises, as long as you are responsible for paying your energy bill.

What is a micro business?

Your company is classed as a micro business if you meet one of the following criteria:

• You have fewer than 10 employees

• Your annual turnover is no more than €2 million

• You use less than 293, 000 kilowatt hours (kWh) of gas each year

If you are a micro business, you should be given more flexibility to switch your energy service from your supplier.

You can read more about energy rules for micro businesses on the Ofgem website

How much does it cost?

The price of your business gas is made up of two factors:

• Standing charge: This is the daily fee for your supplier managing your service.

• Unit cost: This is the price of each unit of gas (kWh) your business uses.

The total price you pay will be affected by:

• The credit rating of your business

• The size of your business

• Your postcode

• Your business type, e.g. limited company

• Your business sector

• Your annual energy use

Give suppliers accurate information when you get quotes, and compare as many as you can to get the best price.

What is The Climate Change Levy (CCL)?

The CCL is a government tax which aims to reduce emissions and encourage better energy efficiency in UK businesses.

Businesses must pay a charge for each kWh of energy used, but you do not have to pay the CCL if you are:

• A business that uses small amounts of energy

• A domestic energy customer

• A charity performing non-commercial activities

You can read more about the CCL on the GOV.UK website

What types of tariff can you get?

The four main types of business gas contract are:

• Fixed term: This lets you agree a unit rate for your gas and fix it for the length of your contract, usually 1-4 years. You cannot switch supplier until you are in your renewal window, usually 6 months before the end of your contract.

• Rollover: This type of contract is automatically renewed until you cancel it, and is usually the most expensive option. Your supplier should write to you 120 days before your contract is due to renew, and you will have a 1-2 week window in which to cancel.

• 28 day: This means the price of your energy changes with the rise and fall of the market. It is not the best way to save money on your business gas, but it does give you the flexibility to switch after giving 28 days' notice.

• Deemed rates: This is the rate of your gas when you are in between contracts. The time between the end of your old contract and the start of your new one is charged at a higher rate, and you must give 28 days' notice to switch to a better deal.

Some suppliers also offer green energy tariffs, which use more renewable energy than standard services.

Here is how to choose the right business gas deal

What is the Green Deal?

It was a government scheme set up in 2013 to help businesses install energy saving measures and reduce energy bills.

The Green Deal closed in 2015 and is no longer accepting new applications.

You can still get help with the cost of installing renewable energy technology from the Carbon Trust.

How to switch

You can use our comparison to get as many quotes as possible with a range of energy companies.

Switching your business gas could save you money on your energy bills, but it is important that you time it right to avoid being tied in with your current supplier.

Here is more information about how to switch and manage your business gas