With the increasing complexity of the UK energy market, the independent advice offered by business gas brokers and commercial gas consultants will help many energy buyers find the right commercial gas or business gas contract for their business. You may be interested in finding more information on flexible gas products or how you can access the wholesale business gas price for large industrial or commercial gas supplies, or even commercial LPG gas for your business.
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Every year more and more companies hire the services of an energy broker to help them find a cost effective business gas contract. According to Ofgem over 60% of UK energy and gas contracts are now procured directly through independent energy consultants. So why do so many business rely on energy consultancy firms like Catalyst to find cheap business gas prices for them.
The answer is fairly simple, decision makers and business owners understand that using independent consultants provides an impartial and fresh approach to evaluate and identify opportunities that can add significant value and improve the business bottom line. All of our consultants have a vast amount of experience in achieving substantial results for our customers and our unique approach to each case can often point out areas of significant improvement that only a trained pair of eyes can identify.
Without a doubt the main reason organisations hire our business gas procurement services, is simply because - it helps reduce costs, increases efficiency and provides hassle free and quick access to a vast amount of suppliers, contract types and of course professional purchasing advice. In addition to this we provide unbiased market intelligence to support any of our recommendations.
The wholesale gas market is where large volumes of gas are traded between producers and suppliers. Suppliers want the gas to sell on to their customers in homes and businesses, while producers want steady cash for the energy they have to sell. There are also traders and speculators who want to buy and sell gas to make a profit.
The wholesale market has a significant influence on a consumer’s final bill, with the government estimating that wholesale energy costs make up 47% of the total cost. It is worth noting that over 60% of the increases in household bills since 2010 have come from wholesale price increases.
Suppliers often purchase gas for customer’s years in advance to lock-in prices and ensure they have the gas they require. A margin is then added by suppliers to the wholesale price to provide them with some protection from price changes. These factors can mean that wholesale price changes do not immediately impact consumer bills.
Many factors can influence the prices set in the wholesale market. Oil is often important as many long-term gas contracts are linked to oil prices, while increased demand for heating and light during winter months pushes up prices. Also influential is heightened global demand, which, as a result, contributes to prices rising in the UK.
The GB gas market is both the largest and the most active trading point in Europe. British wholesale gas trading is conducted at the National Balancing Point (NBP), which is a virtual trading hub without a physical location. Trades on the NBP have a minimum size equal to about the average yearly use of 10 households. National Gas Grid is responsible for the management of the gas system as the System Operator for Britain, making sure the amount of gas bought and sold by traders is equal at the end of the day.
There are four main players involved in transporting gas across the country: the transmission system operator; distributors; shippers; and Xoserve.
Gas enters into GB from numerous different sources: offshore production; imports from other countries; gas storage sites and small amounts of onshore production. It is carried to consumers via two systems across Britain, the National Transmission System (NTS) and the local distribution networks (DNs). The NTS is owned and operated by National Grid. It moves gas from where it is produced to either very large users; such as power stations, or into the local distribution networks. Gas moves at roughly 23 mph through the NTS, meaning it takes about one day for gas to move from one side of the system to the other.
Distribution networks transport gas from the NTS to businesses and households. There are four distribution companies operating in GB: National Grid Gas; Scotia Gas Networks; Northern Gas Networks and Wales & West Utilities. The distribution system is spilt into eight different networks, each covering a different area of GB and owned and operated by one of the distribution companies.
In addition to this there are several independent and privately-owned Gas Transporters (iGTs) who operate networks within GB. iGTs are embedded within the local distribution zones and provide connections from the DNs to customers. iGTs have been operating since competition was introduced in 1995, and now possess roughly 1mn connections.
Distribution and transmission companies charge for gas to move through their pipes, with these charges passed onto consumers bills. Ofgem, the energy regulator, sets price controls which limit the total amount of revenues that transmission and distribution companies can earn. The companies then set their tariffs to recover this money from suppliers. Ofgem estimates that distribution charges make up 16% of a customer’s bill and transmission charges 2%.
Gas shippers purchase gas from producers and pay the transporters to convey it across the country to sell to suppliers. Shippers are not responsible for the movement of gas through the system, they only specify where the gas should enter and exit the transport system. Shippers must ensure they insert as much gas as their customers use in order to balance daily. Administration of the flows is undertaken by Xoserve which operates the IT systems that handle financial transactions involving the gas network companies.
Gas is traded at the National Balancing Point (NBP) in GB. This is a virtual trading hub; it is not a physical location but allows for standardised contracts to govern trades, making trading easier for market participants. The NBP is very active and liquid hub, the gas is traded numerous times before being actually delivered to the customer. Trades within the GB gas market are made on a number of standardised different time periods, such as: day-ahead, month-ahead or year-ahead.
Gas trading within GB is carried out in several different ways. Shippers as users of the gas pipeline network must input enough gas every day to match their customers’ needs. National Grid as the system operator oversees that shippers’ trading activity translates to a safe pipeline network. National Grid uses the on-the-day Commodity Market (OCM) to ensure the system safety by buying and selling gas to balance the system. Shippers may also use the OCM for trading to make sure their gas inputs match their outputs within the day.
Electronic exchanges allow the buying and selling of gas over short term and screen based prices. There are also brokers who assist shippers with over-the-counter (OTC) trades, bilateral deals between two parties.
Many different parties trade gas in GB. Suppliers trade in order to buy gas to sell on to their customers, so they want to make sure they have enough gas, and that the effect of price rises is minimised. Traders and speculators within the market trade gas as a commodity in order to make a profit. They do not produce or supply any gas; they make money by buying when gas prices are low and selling when gas prices are higher. Producers sell gas in order to make a profit and fund further operations.
Gas commodity trading has a major impact on customers’ bills; wholesale costs make up roughly half of the final bill. Increases in wholesale prices are passed on from suppliers to consumers. Suppliers’ use of different length future contracts allows them to soften the impact of price changes and delay the passing on of these additional costs to consumers.
A significant proportion of internationally traded gas is done so at prices linked to the oil market. This is because gas is viewed as a substitutable fuel in regards to oil, and is often co-located with oil meaning it was efficient to extract both fuels at the same time.
Gas is transported internationally through pipelines from the production location to the area of demand. Due to the resources required to build a pipeline and the potential issues with transporting gas across multiple countries this has traditionally limited the distance over which gas can moved. It also encouraged long-term contracts as produces wanted a predictable demand to cover their investment and consumers sought continuity of supply.
In recent decades however the gas trade has become a more international one through the increasing sophistication and use of Liquid Natural Gas (LNG). LNG is natural gas that has been cooled until it becomes a liquid. This liquid is then transported in large tanker ships, removing the need to for pipelines. Great Britain sources a significant proposition of its gas imports from LNG, LNG accounted for 33.3% of imported gas in Q2 2013, primarily from Qatar. British Gas signed a £4.4bn deal to import up to 3mn tonnes a year of LNG from Qatar for the next 4 and a half years on 6 November 2013. LNG trading has also led to a more global gas price, Japan’s dependence on imported gas due to the nuclear shutdown following the Fukushima disaster has led to higher prices in the.
In the US shale gas production has had a noticeable impact on gas prices. The increase in gas production caused by the shale revolution has caused gas prices to fall significantly. This price fall is a result of the US’s lack of gas export facilities. As the US has historically been geared towards imports it is unable to export the gas, which has resulted in the shale gas flooding the US market. The US is currently building LNG export facilities, with the aim of exporting from 2015, which will likely drive up US gas prices.
The National Transmission System (NTS) transports gas across the UK from where it is produced or imported to the distribution networks. The NTS is owned and operated by National Grid and is a regulated company, with revenues set by the energy regulator and no competitors due to its status as a natural monopoly. The NTS transports gas to the local distribution zones (LDZs), of which there are 12. There are eight different distribution networks, each of which cover a geographical area of GB, and is owned and operated by one of the UK’s four gas distribution network companies.
In addition to this there are several independent Gas Transports (iGTs) currently operating networks including: GTC Pipelines; Independent pipelines; ES Pipelines; Energetics; Fulcrum Pipelines; British Gas Pipelines; and SSE Pipelines. These iGTs operate networks embedded within the local distribution zones.
iGTs are privately-owned networks that have begun operating since the mid-1990s. iGTs provide connections from the existing gas distribution networks to customers, either directly or indirectly through another iGT. iGTs connect to distribution networks through Connected System Entry Points, and their network charges are regulated by Ofgem under the Relative Price Control. This caps charges for new iGT customers to a level broadly similar to what would be charged from a connection via the distribution network.
iGTs serve both households and businesses, although most of their customers are new build housing estates. iGTs normally offer competitive connection rates compared to the distribution companies, and then recover their costs from customers. Customers whose gas is delivered by an iGT typically pay slightly higher bills as suppliers have to pay both the iGT and the distribution network for gas distribution.
Since competition in distribution begun in 1995 private gas networks have grown rapidly, from under 250,000 in 2001 to roughly 1mn connections. Ofgem estimates that roughly 60% of connections to new premises are now made by iGTs.
Flows into and from the GB gas pipeline system must be balanced on a daily basis. National Grid as operator of the National Transmission System (NTS) has strict rules to make sure the pipeline system operates safely. Too much or too little gas in the pipes can cause safety problems. It manages the task daily because it takes gas one day to move from one side of the system to the other. To keep the system safe it is vital that the flow of gas on and off the system is measured.
There are around 2,000 daily read meters at the largest gas consuming sites. They are termed daily metered (DM) and provide an accurate day-to-day record of gas used at the premises which they transmit on for billing.
The vast majority of the 23mn plus gas meters installed within GB are not read daily though. They are termed non-daily metered sites (NDM).For billing NDM sites rely on submitted meter readings to suppliers. NDMs are normally read on a monthly or longer basis, and rely either on customers submitting their own meter reads or supplier representatives coming to the property and taking a reading. Algorisms are used to estimate daily consumption for all NDM loads so that the overall pipeline network can be kept in balance.
NDM sites can opt for automated meter reading (AMR). AMR can provide up-to-date consumption information and communicate directly with suppliers systems. This should enable more accurate and timely billing. However, AMR information is not at the moment used to help system balancing. Suppliers must install AMR meters at all their large non-domestic customers’ premises, those who use 732MWh or more of gas consumption a year, by April 2014.
The government is aiming to have completed a nationwide roll-out of smart meters to households and small businesses by 2020. Through smart metering it is envisaged that daily consumption information will be recorded for small users too. However, it is not clear at this stage how and when information from smart meters might be used to help system balancing.
While a business receives its bill from its supplier it is actually made up of a number of different costs from a number of different sources. Common principles apply to both gas and electricity bills, which can be broken down into the following broad elements:
The wholesale cost is the basic cost of energy; and represents the largest single component of the final bill. Small businesses will likely be charged a fixed cost per unit consumed which is will be stated before the contract is agreed. Large companies with high consumption may have tariffs that track prices with the fluctuations of the wholesale market.
Suppliers’ price non-domestic contracts individually based on their assessment of the likely costs and their desired profit, which together forms the suppliers’ margin. The final offered margin is based on: the suppliers cost to serve; the duration of the contract; the variability of your load profile; your credit status; and wider market sentiment when your commercial agreement was reached.
These represent the cost transporting your energy across the country. The transmission system operator and distribution companies charge suppliers for this, with suppliers recovering these costs from customers. The prices charged by the networks are regulated by Ofgem, with the charges set by the individual companies to ensure they recover their allowed revenues each year.
These costs stem from government obligations placed on suppliers, which are then passed through to customers. The costs are different for electricity and gas, with the majority of costs applied to electricity bills. Business customers also have the Climate Change Levy added to their bills, a charge applied to per kWh to electricity and gas consumption in order to encourage them to become more energy efficient.
VAT is normally charged in-line with the standard rate, currently 20% on business customers.
Our Business Gas Services Explained
What makes our business gas service stand out from the competitors is our close but independent relationship with our gas suppliers and our ability to fully understand the diverse range of gas products available on the market today.
UK gas suppliers prefer to deal with a set number of consultants who will manage a large portfolio of clients, rather than having to deal with individual clients directly. Suppliers can then focus on there core business activity of service and delivery of products, whilst the consultants add value and additional support to the standard services offered by the supplier.
We offer a comprehensive comparative quote from a wide range of business gas suppliers and we can quickly deliver a range of gas quotes for your exact business requirements, allowing you to quickly compare your current cost, with our range of business gas quotes.
We can then offer practical advice on the conditions of supply with each contract, and recommend the most suitable contract type and length for your requirements. Taking into account your annual consumption we will provide a detailed breakdown on our proposal allowing you to compare any standing charges and gas prices per kWh in line with your actual consumption levels.
Our business gas service is self-funding as we receive an industry set fee from our gas suppliers allowing you to find you the most commercially viable proposition for your energy needs. In addition, our highly focused approach to business gas procurement allows us to provide gas pricing benchmarks and the ability to evaluate and select the best business gas suppliers, contract lengths and terms in line with wholesale gas market activity.
By fully understanding the key drivers that effect short term and long term gas markets we are able to provide professional advice on how to best proceed with your contract requirements in one of the most volatile trading markets in the world.
Our business gas brokers then maintain a close working relationship between client and the gas suppliers, with your own dedicated Account Manager and free monthly energy reports.
For industrial gas users that have a daily read supply or interpretable gas contracts that give National Grid UK the authority to temporarily cut off gas transmission to your site. We can provide both standard and spot market prices from a range of leading UK commercial gas suppliers.
We are more than a simple business gas comparison service, we work with a range of British business gas suppliers to actively source the cheapest commercial gas rates.
We provide a formal quote on your business gas rates and allow you to simply select a supplier form our business gas price comparison chart and your required business gas rate.
Our industrial gas service is self funded as we receive an industry set fee from the suppliers and we determine your current industrial gas costs against a range of OFGEM approved business gas supplier's tariffs to find you the most commercially viable industrial gas proposition.
In addition to this we can provide commercial gas pricing benchmarks and the ability to evaluate and select the best industrial gas suppliers, contract lengths and terms, as we have a highly focused process approach to business gas procurement.