There are a number of different types of energy contracts that a business could be on, with different contracts being better suited for different businesses. The type of contract you can opt for will depend on the type of business you are, your consumption levels and a range of other factors. The following are some of the most common types of business energy contracts.
With a fixed rate contract, businesses will be given a specific price that they will pay for their energy over a set period of time, often one or two years. However, fixed rate contracts can sometimes be longer, running up to five years. With a fixed rate contract, the unit price and daily standing charge will remain the same for the duration of the contract.
With a variable rate contract, the cost paid per unit can fluctuate based on a number of different factors. This means that businesses could see the price they pay increase or decrease throughout the course of their contract.
With a time of use contract, the price paid per unit will vary depending on the time of day. This means that businesses could save money if the majority of their energy consumption occurs during off-peak hours, for example. An advanced meter or smart meter is required for any business on a time of use contract.
A deemed rate, also known as a default rate, is what a business that has just moved to a new property will often be on. As they have just moved they won’t have a signed contract in place, so will be put on a deemed rate with the current provider of that property. Businesses will usually only be on a deemed rate for a short period of time, until they agree a contract.
On top of the wholesale cost of gas, there are a whole host of different components that come together to form the price you pay for your business gas. The additional charges that make up your business gas bill can be broken down into three main sections: Transportation/distribution, metering and management, and government levies and charges. Very few of the below charges will appear as a separate line on an energy bill, but will instead often be a part of the unit rate or standing charge.
The transportation/distribution costs on your business gas bill can be broken down into a four smaller charges.
This charge is levied by National Grid and Local Distribution Zone operators and covers the cost of making capacity available for each customer. This is charged on a per kilowatt hour basis
This charge is also levied by National Grid and the Local Distribution Zone operators and covers the actual volume of gas transported to each customer. This is charged on a per kilowatt hour basis.
This charge covers the cost of gas that is unallocated to a specific user within the system and is shared among the entire user base. This unallocated usage may be due to illegal extraction or consumption through unregistered supply points from the transportation system.
This charge covers suppliers’ risk management costs and is charged on a per kilowatt hour basis.
The metering and management charge on your business gas bill can be broken down into four smaller charges.
Your gas meter is owned by a meter asset management company, who will charge businesses a rental charge to cover the cost of providing and maintaining the meter and associated equipment.
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This charge will only apply if you have an AMR device attached to your gas meter and cover the cost for providing automated readings.
Your meter needs to be periodically read and checked by a Meter Read Agency operative. This annual, fixed-sum charge covers this cost.
This is usually charged on a per-unit basis, but sometimes standing charges will be used when dealing with SMEs.
Finally, your business gas bill will contain two charges from the government.
Businesses will be charged on a per kilowatt hour basis.
VAT will be charged at the standard rate, which is currently 20%. However, a reduced rate applied to businesses that use less than 4397 kWh per month, or qualify for exemption, such as some charities.
If your business energy contract is coming up for renewal, why not make the switch to Gazprom Energy? With our simple 5 step switching process, you could be just a few clicks away from your next energy deal. To find out more, give the Gazprom Energy team a call today on 0161 837 3395 or visit our contact us page.
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