Gas Billing Considerations

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Complex systems

Consumers have been billed for decades using a clear and easy to understand system based upon consumption. In most countries there was the cubic meter for gas billing. The cost would linearly increase based on the units of energy being recorded as used by the utility meter. The meter would be read every month and a consumer bill was released.

Current energy billing got more complex mostly due to government regulation. This ended up making consumption not as straightforward as it was before. For instance, the volume of gas used is converted into potential useful energy and that amount is finally billed to the consumer, using a complex mathematical calculus.

Complex billing is one key reason that energy consumption and its true impact is harder to determine. In order to have effective cost reductions it is necessary to understand your current billing and contract terms.

Current contract and billing

It is important to know your current billing system and this is presented both in the utility provider contract as well as it is reflected on your bills. In general, there is much less freedom in choosing a rate plan as is the case for electricity contracts. Fixed energy unit rates, at least for a year, are much more predictable than variable rate ones, so this is the preferred option.

Consumption alone is still the biggest factor in the total cost. Keep in mind that having a way of billing that is similar to electricity brings its own set of challenges. This puts gas and electrical appliances, more or less, on equal terms.

As a consequence, not only the efficiency of a particular class of products is important, but also the actual energy input, making decisions to repair, upgrade or replace certain gas appliances a much more difficult proposition. While electrical appliances are not twice as efficient as the one for gas, there are other aspects that have an influence.

The current gas billing situation makes cost savings much more difficult as it is not centered only on limiting actual consumption but also on looking for comparisons between gas and electrical appliances and choosing electrical ones, if they are more viable or versatile.

Gas billing

Gas billing is almost always based upon a flat rate, determined through gas volume being passed onto the consumer. However, this is initial value is compounded in a calculus, as the actual used gas is converted into an equivalent energy unit input, measured in Kwhs, as for electricity, then billed accordingly.

Partial cost = Demand or service charge + Energy cost
Total cost = Partial cost + Surcharges (Value Added Tax and others)

Demand or service charge

A fixed monthly cost that is established through contract, based on the consumption profile agreed upon. In most cases, this fixed cost is established by the utility distributor and cannot be chosen otherwise. It is typically much lower than the cost for an electrical energy contract.

Energy charge rate (partial cost calculation)

For all intents and purposes, the current billing system uses a flat rate energy consumption with certain adjustments and conversions applied in the same way, virtually regardless of consumption.

In Britain, Europe and Japan, but also in many other developed countries around the world, the metered gas, as measured in cubic centimeters, is adjusted for pressure and temperature and given an adjusted equivalent based on thermal (burning) potential energy release, known as calorific value.

Currently, a KWh of equivalent energy out of gas is priced at roughly HALF the cost of a KWh provided through electrical energy.

Keep in mind that energy unit cost is a derived value based on the pre-determined performance of gas. Production and distribution costs may or may not be separately reflected on the energy bill. A typical billing calculation ends up as below.

Delivered energy = (Gas volume x VC x CV ) / KC
where - Gas volume is amount of metered gas (in m3) - VC is Volume correction factor, typically 1.02264 - KC is KiloWatt/hour conversion rate, always 3.6 - CV is Calorific value, between 38-41 MJ/m3, typically 39.5 MJ/m3

Note that VC, KC and CV values are determined through government regulation and are highly stable over time, the utility provider ensures that gas is delivered as required.

Energy cost = Delivered energy x KWh unit price
where KWh unit price can be, in the future, at a similar amount to an electrical energy derived KWh unit.

Tiered consumption range

Sometimes, this system is being transparently offered to consumers or it is being enforced as their consumption is determined. This way of billing traditionally sets a lower energy unit rate for higher consumers, based on their annual energy use. This depends on country and utility distributor conditions.

An European sample is presented below, although it does not change the actual cost in any meaningful way (less than 1% influence) except for extremely large consumers, not a typical small business or residential consumer.

Due to the very large annual consumption required to reach even the second tier and due to the small discount of energy unit price at each level, the cost is virtually the same for all consumers.

Tier Annual total consumption range Energy unit cost
1 0-300 MW/h full price
2 300-3,000 MW/h .003% discount of full price
3 3,000-30,000 MW/h .006% discount of full price
4 30,000-300,000 MW/h .017% discount of full price

1 MW/hour or MWh is 1 thousand kiloWatts/hour.

Surcharges (mandatory)

The Value Added Tax, or V.A.T. as is commonly known, can change by national government decision. It is typically between 5-25%, depending on country and product or service.

In the future, Carbon Credits may also be considered as a component that influences the end-user energy unit price, proportional to consumption and discouraging large usage, based on potential environment impact cost.


The same systems employed on electricity metering and billing, including various caps may also be applied to gas, in the future, as it is entirely possible to do so as soon as more advanced meters become commonplace onto the market.

With liberalized energy markets in most countries, there is the potential for an additional adjustment either applied in the base energy unit price or separately represented by a fuel cost adjustment as on current electricity bills in some countries. When not present, as is the case here, the energy unit price (in KWh) is established and updated yearly.