The energy market is volatile. The ever-increasing costs of gas and electricity mean that you should know about the various bill contracts. Having an understanding of gas contracts will help you make wiser decisions. Similarly, it is also important to understand the important elements that are in the gas bill. So let’s look at these first.
Important elements of a gas bill
The most common things you need to understand about your business gas bill include:
1) Standing charge
This is a fixed amount you have to pay for every day you are supplied gas at your business. This is not affected by the amount of energy you use. But not all business gas tariffs include this standing charge.
However, business gas tariff deals without a standing charge will not be cheaper as they can be covered and charged at your unit rate. So gas tariffs with a standing charge are a much better cost-effective option. But it all depends upon the type of your business and how you use energy.
2) Unit rate
This is the amount you have to pay per kilowatt-hour (kWh) of gas you consume. This rate will vary according to various factors like wholesale energy costs. You should know that recently UK’s biggest gas supplier CNG cease trading. This means you will have o look for alternatives with a higher or lower wholesale energy cost.
3) Contract period
It is important to discuss the contract period with your supplier before you sign it. Large companies usually opt for longer periods, while smaller businesses should use shorter periods to monitor their energy usage. Moreover, you should also know about the end date of the contract.
Common business gas contracts
1) Fixed-rate contract
In this, you will be paying a fixed amount per kilowatt-hour of gas you use throughout the contract. The standing charge and the unit price will remain the same. This is best for a business that needs stability, as market price hikes will not affect your unit rate.
2) Variable-rate contract
In this, the price per kilowatt-hour of gas consumed will depend upon the market activity. This means that the price may increase or decrease throughout the contract period. So this contract is for businesses that will not be affected by increases and can take the risk.
3) Pass-through rate contract
In this, you have the option to take advantage of decreasing third-party costs. Third-party costs are evaluated every six months, and the savings are given to you. This type of contract is best for businesses that want to take advantage of the fluctuating energy market.
4) Time-of-use rate contract
In this, the price per kilowatt-hour of gas consumed will vary depending upon the time of day. This contract urges consumers to use more energy during the off-peak hours to balance demand, which leads to cheaper tariffs. So businesses can benefit from this contract if most of their energy usage is during the off-peak hours.
5) Default rate contract
Also known as deemed rate, it is a type on which businesses with no energy contract are placed. They will be then be charged the default rate by the property’s current gas provider. This default rate is usually higher than the rates given in the other contracts, so you should sign a contract.
Before you sign any contract, you should know about its important elements and the various types of options you have available. This will help you find the best one that suits your company and its need. So if you still have any queries, then it is time to talk with professionals.