A frugal life is an easy life!

After many requests for the formula used by British gas, to work out the amount of money they charge me for gas, I have finally managed to get hold of a copy of what British gas staff are using to calculate and check billing amounts and the figures required for the calculation formula.
It looks complicated, but it's really quite simple once you read through it a couple of times.

Step 1:
Work out how many units the customer has used, since their last bill.

Present reading minus previous reading = number of units used.
(HCF = Imperial units, M3 = Metric units)

Step 2:
Convert imperial units into metric units.

If customer has imperial meter (HCF) then multiply imperial units by 2.83 = Metric units (M3)
If customer has a metric meter (M3) then skip to step 3.

Step 3:
Convert units used on meter to kWh (Kilowatts per hour) - this is the formula British gas use to convert.

M3 x 1.02264 (VCF) x Calorific Value (CV) divided by 3.6 = kWh (kilowatts per hour)

* For Calorific value (CV) on metric meters, press Button A and skip to menu option 16, this will give you the calorific value (this changes every week, normally on Wednesdays at 2am) being used that week.
Once you have the calorific reading, convert this into BTU's - British Thermal Units - by dividing the CV number on your meter by 0.0373 - use this figure in the formula above.
If you have an old imperial meter, then ring British gas and INSIST that they tell you the calorific value being used for that week.

Step 4:
Next we need to work out which kWh are charged at tier 1 and which at tier 2 (Or "unit price 1" and "unit price 2" on your statement/bill, without VAT added)
The tier prices can be found on the British gas pricing website here, they are different from your statement/bill "unit prices" as the tier prices quoted online don't include VAT at 5% (Which we will add on to the total of the bill at the end).

Tier 1 is charged for the first 7.34 kWh per day, all other kWh is charged at tier 2.

Number of days the bill covers x 7.34 = Number of kWh to be charged at tier 1 rate.
Total number of kWh - Number of kWh to be charged at tier 1 rate = Number of kWh to be charged at tier 2.

Step 5:
Calculate the bill.

Tier 1 kWh x tier 1 tariff rate (found on pricing website) = Cost of gas used at tier 1
Tier 2 kWh x tier 2 tariff rate (found on pricing website) =Cost of gas used at tier 2
Add them both together to get the total cost of gas.

*NOTE - This total EXCLUDES VAT.

Step 6:
Add VAT.
Domestic gas customers pay VAT at 5%.

Total bill = Total cost of gas + 5%

* Important notes:

- When working out your gas bill, don't forget to take off any payments/credits you have on.
These credits/payments would be knocked off after you complete step 5.
- The calorific value (CV) used to convert each meter unit to kWh is calculated as follows;

"Gas supplied to customer's homes is passed through a testing station where the calorimeter measurements are recorded.
There are two stations, located at Elton, near Middlesbrough and Halton in the East Midlands. Either station can be used to take the measurements although one station recordings may have a higher Calorific Value than the other. We have provided an undertaking to the Department of Trade and Industry that the lower calorific value will always be used when calculating gas bills.
A British/Scottish Gas representative records the readings given by the calorimeters every Thursday.
These readings are then used to determine the value we will use on bills to be produced the following week. This is done by calculating a rolling average, using each of the previous thirteen weeks lowest recorded values from the calorimeters"

- This process is the same regardless of your british gas tariff, it's a universal process which changes weekly due to the calorific value (CV) readings. As you will see, this means that nobody benefits from a "set price" for their gas.
The other difference in price comes from the "Tier price" which varies dependant on which tariff you are on. Your tier prices can be found on the British gas pricing website.
I have tested tier prices with the help of friends of the website around the country, for prepayment gas tier prices, they all came in exactly the same.