Business gas explained: What every business needs to know

Gas is an essential part of running many businesses, from heating premises to powering equipment and production processes.

But understanding what drives your bill, what affects prices and how to manage your costs isn't always straightforward.

This guide explains how business gas works, what you're paying for and the practical steps you can take to make informed decisions about your energy.

In this article:

• Learn the basics of business gas.
• Understand what makes up your business gas bill.
• Discover practical ways to manage your gas costs.

What is business gas?

Business gas doesn’t work like your household gas bill.

One crucial difference is that business gas users are not protected by Ofgem’s energy price cap, unlike domestic users.

Your business cannot afford to sit back and cruise along expecting a cap to keep your costs within a reasonable limit.

Ultimately, you need to make decisions that could affect the bottom line of your business for years to come.

We know that sounds daunting. That’s why Troo exists: to simplify business energy for you.

What makes up your business gas bill?

Your gas bill consists of multiple parts that can be broken into two major categories, with the rough split listed below:

Wholesale gas - 60%

The gas that powers your business takes up more than half of your bill. That shouldn’t be taken for granted.

The precise split will vary for different businesses, but it explains why your bill is so sensitive to wholesale market movements.

You are covering the cost of the gas purchased by your supplier.

Non-commodity costs - 40%

The remainder of your bill covers a range of costs involved in supplying gas to your business. These are known as non-commodity costs - and they aren't always immediately clear.

Examples include:

• Standing charges: Fixed daily charges that contribute towards the costs of supplying gas, including maintaining the network.
• Network charges: The costs of transporting gas through the pipes and infrastructure that connect your business to the gas network.
• Taxes and levies: VAT is 20% for many businesses, and the Climate Change Levy (CCL) may also apply. Reduced rates and exemptions are available to some businesses.

The exact breakdown varies by business and contract. Some charges are fixed, while others depend on factors such as how much gas you use.

Understanding what you're paying for is a useful first step towards managing your energy costs.

What affects business gas prices?

Wholesale gas prices are influenced by supply and demand, while other charges also affect the total amount your business pays.

• When gas supply outweighs demand: prices are likely to fall.
• When gas demand outweighs supply: prices are likely to rise.

Several factors influence gas prices and the costs on your bill:

• Geopolitical conflict: Conflicts and shipping disruptions, such as Russia’s war against Ukraine and tensions between the US and Iran, can affect gas supplies and LNG shipments, creating uncertainty in global markets and pushing prices up.
• Weather: Unusually cold winters lead to additional demand for heating, while low wind electricity generation means gas-fired power plants are required to burn more gas to meet the shortfall.
• Network and policy costs: Charges for transporting gas and funding relevant government schemes also contribute to your overall bill.

No business can control the price of wholesale gas. However, you can control how you respond to those changes and mitigate the impact of volatility.

How to manage your business gas costs

You can control what you pay for your business gas by pulling two main levers:

• Usage: The cheapest unit of gas is the one you don’t pay for. You pay for how much you use. Use less, pay less. This doesn’t mean you should shut down your office boiler and hope for the best. But it may be time to perform an energy audit to identify efficiency savings that don’t impact performance.
• Procurement: You can’t control market prices, but you can choose a deal that suits your business. Look beyond the headline rates and consider contract length, price risk, payment terms and future energy needs.

When should you renew your business gas contract?

Unlike eligible households on standard variable tariffs, businesses don't benefit from the Ofgem energy price cap.

If your contract ends without a new agreement, you may move onto out-of-contract or deemed rates, which are often more expensive than negotiated deals.

Business gas contracts often have strict renewal windows. You should mark the dates in your diary and prepare early to avoid missing out.

It’s helpful to understand your usage, current terms and business priorities before reaching your renewal window so you have an idea what you’re aiming for in advance.

How we can help

Business electricity is complex. We get it. We can support you.

Troo exists to help businesses make sense of their energy needs. We simplify information and help you make smart decisions that manage costs and lead to real change.

We are not here to sell you a quick fix. We're here to understand what matters to you, offer clear advice, and take ownership of the hard parts, so energy becomes one less thing to worry about.

Book a free energy health check today for practical advice on business electricity, gas and water procurement, renewable consultancy and our ongoing management services.