Government has announced details of the Energy Bill Relief Scheme, a huge support package that will cut energy bills for UK businesses by around half their expected level this winter.
The scheme will fix wholesale gas and electricity prices for six months, from 1 October 2022 until 31 March 2023, shielding businesses from crippling costs. It is understood the scheme will be reviewed after three months, with an option to extend support for “vulnerable businesses”.
Who is eligable?
Support will be available for all non-domestic customers, including all UK businesses, voluntary sector organisations (such as charities) and public sector organisations (such as schools and hospitals).
The Energy Bill Relief Scheme will be available to all non-domestic customers who are:
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in a fixed price contract agreed on or after 1 December 2021
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about to enter into a new fixed price contract
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on a deemed/out of contract/variable tariff
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on flexible purchase or similar contract
What is the discount?
Businesses can expect to see discounts applied to their October bills (typically received in November). The government has set a ‘supported wholesale price’, which is a reduced price per unit of gas and electricity. This is equivalent to the wholesale element of the Energy Price Guarantee for UK households.
For all non-domestic energy customers in Great Britain, supported prices have been set at £211 per megawatt (MWh) for electricity and £75 per MWh for gas. For comparison, wholesale costs in England, Scotland and Wales for this winter are expected to be around £600 per MWh for electricity and £180 MWh for gas.
It is important to stress that these are not the final unit rates for non-domestic customers, as they don’t take into account other costs such as transmission and distribution charges, which are non-commodity and vary between supplies.
The relief will include the removal of green levies paid by non-domestic customers. The amount of price reduction each business will receive will depend on factors such as contract type and circumstances.
How will it work?
Suppliers will automatically apply reductions to all eligible non-domestic bills. Businesses do not need to take action or apply to the scheme. We encourage clients to be vigilant for scams.
The government will compensate energy suppliers for the reduction in wholesale gas and electricity prices they are passing onto customers. The discount will be in pence per kilowatt hour (p/kWh) and the support for comparable contracts will be the same across suppliers, however the absolute level of individual bills will vary between contracts and tariffs.
Fixed contracts
Businesses that are entering or are currently in a fixed contract will be discounted the difference between the supported price and the relevant wholesale price for the day the contract was agreed. The government will publish the wholesale prices used for calculating this difference for each day from 1 December 2021.
Providing the wholesale element of the contracted price is above the government supported price, the per unit energy cost will be automatically discounted by the relevant p/kWh. Businesses entering new fixed price contracts from 1 October 2022 will receive support on the same basis.
Fixed contracts that were agreed prior to 1 December 2021, or that are based on wholesale prices below the government supported price will not be eligible for support.
It’s important to recognise that the discount only applies to unit rates. Standing charges will still be billed according to the contract in place.
Variable, deemed and out of contract tariffs
Businesses that are on variable, deemed or out of contract tariffs will be discounted on a similar basis, reflecting the difference between the government supported price and the relevant wholesale price. However these customers will be subject to a ‘maximum discount’, likely to be around £345/MWh for electricity and £91/MWh for gas, subject to wholesale market developments.
If wholesale prices rise above the government supported price and maximum discount, and you are not in a fixed contract, then your energy prices will increase.
Customers that are on variable or flexible tariffs will need to choose whether to enter fixed term contracts. We recommend contracting if you don’t want to be exposed to price variation, which could skew projected budgetary figures.
Buildings connected to heat networks
Businesses are expected to pass on discounts under the scheme to the end user in a reasonable and proportionate way. If you currently manage a block that benefits from a heat network, we strongly recommend that the communal gas/electricity supply is placed into a fixed term contract. Please contact your Energy Manager to discuss how savings can be passed onto heat network end users.
Get in touch
It is important to stress that energy brokers do not have any influence over the unit cost reductions applied under the scheme. If you are currently out of contract and have been waiting for details of the support available, we recommend that you enter a new fixed term contract as normal.
Our team will continue to monitor announcements from the government and will provide updates across our website, LinkedIn and Twitter.
For further information or support please contact your Energy Manager in the first instance. Alternatively, please contact the team on 01279 810 120 or at info@dataenergy.co.uk.