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How Businesses Have Coped With Commercial Gas Price Hike

Over the last year, energy prices have soared, forcing both individuals and companies to find extra money to pay for their gas and electricity. 

This has meant businesses, particularly those that were just getting back on their feet after being forced to close during the pandemic, have struggled with the extra costs. 

Here is how some enterprises have managed to cope with the unprecedented price hike. 

Gas price rises explained

Since the Russia-Ukraine war began, Russia has restricted export of its gas production. This has caused volatility in the energy market, as countries that relied on the gas supply have had to find it elsewhere. 

Additionally, sanctions have led to panic buying, as nations fear Russian president Vladimir Putin will cut off the supply to Europe entirely. 

Consequently, this has forced prices up, even though Russia provides less than five per cent of Britain’s gas. 

There have also been other factors at play, which together have resulted in higher prices.

For instance, there have been problems with other European gas suppliers; Asian and South American countries have been buying more gas than previously, as they move away from coal as their prime energy source; and the UK’s own gas levels are extremely low. 

Additionally, the winter of 2020/21 was colder than usual, which meant the demand for gas increased, reducing supplies. 

How did businesses cope with the soaring prices?

With energy costs spirally out of control, Ofgem put a price cap on consumer bills, which it updated every three months to reflect supplier expenses.

This was followed by the government introducing its own energy price guarantee in September 2022, which was lower than Ofgem’s and meant typical households would not have to pay more than £2,500 per year. 

However, this was not applicable for businesses, which meant they were still subject to paying the 129.4 per cent hike in gas prices from January 2022 to January 2023, according to the Office for National Statistics. 

  • Energy Relief Scheme

Last September, the government announced the Energy Bill Relief Scheme, which offered a discount on wholesale gas and electricity prices. 

However, this was only available until the end of March 2023.

  • Energy Bills Discount Scheme

It was then replaced with the Energy Bills Discount Scheme (EBDS), which will run until March 31st 2024. 

This provides a baseline discount for eligible customers automatically.

It also offers greater support to businesses in Energy and Trade Intensive Industries (ETII), but organisations within this sector need to apply for this discount. 

Furthermore, the Heat Network reduction also offers additional support to heat networks that have domestic customers. 

While businesses need to apply for the latter two discount schemes, the majority of businesses and organisations are eligible for the EBDS. 

  • Find cheaper gas suppliers

As well as taking advantage of the EBDS, it is worth businesses looking around for cheaper gas providers. 

When comparing suppliers, make sure to look at what they charge, their rate types, and whether you are eligible for a five per cent VAT reduction if you use less than 4,397 kWh of gas per month or spend at least 60 per cent of energy for residential use.

  • Pass on costs to customers

No business wants to make their customers pay more if they can avoid it, as it can put regulars off and deter new consumers. 

However, the cost-of-living crisis has affected everybody, including businesses, which means they might have to increase the price of their products or services if they want to stay afloat. 

This is why many enterprises are passing on the additional expense of gas to their customers, while still trying to remain competitive in the market. 

  • Go online

Another way companies have tried to save money if they are finding their energy prices too high is by diversifying and taking their business online. 

Restaurants, for instance, might still have to pay for their commercial gas use to prepare the meals, but they can avoid overheads like venue hire, waiting staff, and interior decorating. 

Although transforming into a takeaway outlet might not have been the original plan, it could mean the difference between continuing to remain open or being forced to close due to being unable to pay bills. 

This could also work for retail businesses and those offering services, such as dog grooming. Being able to operate at home instead of paying for premises means they can reduce their energy bills significantly.

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