Energy Bill Relief Scheme Released

As communicated by the British Equestrian Trade Association (BETA) on Wednesday 21 September 2022:

Today the government has published details of the scheme to reduce energy costs to businesses in Great Britain. A similar scheme will be established in Northern Ireland, providing a comparable level of support. I have summarised and de-duped the official advice published this morning below, but if you would also like to see the original document Here.

Who is eligible?  All businesses providing you are on a non-domestic contract whether you are on a fixed price contract signed after 1 April 2022, out of contract or on flexible rates.

When will the discounts apply? Discounts will be applied to energy usage initially between 1 October 2022 and 31 March 2023 and should be seen in your October bills which would usually be received in November.

How do I get the reduction for my business? The discount is automatic. Suppliers will apply reductions to the bills of all eligible non-domestic customers so if you get a message asking for your bank details, this could be a scam.  The discount will be applied in pence per kilowatt hour (p/kWh). The p/kWh support will be the same across suppliers for comparable contracts but the absolute level of individual bills will continue to vary across difference contracts and tariffs.

How much will bills be reduced? This is a complicated one as the discount on gas and electricity unit prices and will vary and it will depend on the type of contract you have. I have included some examples below.

The government is setting a baseline “government supported price” which is lower than currently expected wholesale prices.  This baseline price needs to be compared to the estimated wholesale portion of the unit price you would be paying on your contract.

In GB for all non-domestic energy users the govt supported price has been set at:

£211 per megawatt hour (MWh) for electricity               Compared to wholesale costs in GB currently estimated at £600/MWh

£75 per MWh for gas.                                                 Compared to wholesale costs in GB currently estimated at £180/MWh

Please note that the Energy Price Guarantee for domestic customers will be different to the final per unit price paid by businesses due to factors including network charges and the impact of competition between suppliers.

How does it work?        

Fixed Contracts: the discount will reflect the difference between the government supported price and the relevant wholesale price for the day the contract was agreed. The government will publish the wholesale prices we will use for calculating this for each day from 1 April 2022. If your agreed fixed price tariff is above the government supported price you will get support.

If your fixed tariff is based on wholesale prices below the government support then you will not be eligible.

If you are about to sign a new fixed price contract the relevant price reduction will be automatically applied to your bill by your supplier.

If you were lucky enough to have signed your fixed contract before 1 April 2022, you would not have been exposed to the recent rises in wholesale prices, so you will not be eligible for support under the scheme.

For variable, deemed and all other contracts: The discount will reflect the difference between the government supported price and relevant wholesale price, but be subject to a ‘maximum discount’ that will determined at the beginning of the scheme.

If you are on a variable tariff and want to remain on it you will get the reduction subject to the “maximum discount”. This will be calculated by comparing the government supported price with the average of expected wholesale prices for delivery across the 6 months of the scheme. Govt will confirm the maximum discount on 30 September but it is likely to be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments.

If wholesale prices rise above the combined government supported price and maximum discount then your prices will increase.

Businesses on variable / flexible contracts will need to choose if they move to fixed contracts. This is likely to suit you if you don’t want to be exposed to price variation. You will be contacted by your supplier.

If you get your energy through a landlord/ energy service company: The benefits under this scheme should be passed through to you as the end user in a “reasonable” way.

Third party intermediaries (TPIs) / energy brokers have no influence over the per unit cost reductions that will be applied to energy costs under the scheme. You do not have to take out a new contract or change your contract for appropriate reductions to automatically be applied to your bills.

Example 1: A small retail shop

A small retail shop uses around 1 MWh of electricity and 2 MWh of gas each month. They are on a variable contract, giving them a current monthly energy bill of around £1,400 per month. As they are on a variable contract they can receive support up to the Maximum Discount (currently estimated to be £405/MWh for electricity and £115/MWh for gas). Applying the Maximum Discount rates means that their monthly energy bill reduces by around 45%, leaving them with a bill of around £800 per month.

 Example 2: A medium sized manufacturing business

A medium sized manufacturing business uses 200 MWh of electricity and 1,600 MWh of gas each month. They entered into a fixed contract in August 2022, giving them a current monthly energy bill of around £560,000. At the time they signed their contact, wholesale prices for the next 6 months were expected to be higher than the government supported price of £211/MWh for electricity, and £75/MWh for gas, meaning they can receive support under this scheme.

The difference between expected wholesale prices when they signed their contract and the government supported price is worth £360/MWh for electricity and £90/MWh for gas, meaning they receive a discount of £215,000 per month, reducing their original bill by more than 35%.

Reviewing the scheme: Govt will publish a review in 3 months’ time to inform decisions on future support after March 2023.

Suppliers role: Suppliers should contact you over the coming weeks to advise you of the implications of the scheme. You do not have to do anything to obtain the discount but Govt has advised that you may wish to contact your supplier to check that you are getting the most benefit from it.  There will be benefit for some smaller businesses who have recently move off fixed tariffs to switch back to one with the price reduced on the basis of the Government scheme.

Other support for business/non-domestic customers

There is a range of ongoing schemes in place to support businesses with their energy costs. These include:

• the Industrial Energy Transformation Fund (IETF), which consists of £315 million live grant funding that supports manufacturers with high energy use to cut their energy bills and carbon emissions by investing in energy efficiency and low-carbon technologies
• a number of advice and support schemes that businesses may be eligible for, to help to improve the energy performance of buildings and processes and lower their energy bills. Search for local schemes that provide advice and grants
• the UK Business Climate Hub which provides practical steps on cutting emissions and saving money. If businesses are based in England, they may also be able to access support via local Growth Hubs, who they can get in touch with to find out more
• government has committed to freezing the business rates multiplier for a further year, which is a tax cut worth £4.6 billion to businesses over the next 5 years