New support for businesses and public sector organisations facing rising energy bills across the UK have been unveiled by Business Secretary Jacob Rees-Mogg. The plans aim to support growth, prevent unnecessary insolvencies and protect jobs.
The Energy Bill Relief Scheme will see the UK Government provide a discount on wholesale gas and electricity prices for all non-domestic customers. This includes all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals, whose current gas and electricity prices have been significantly inflated in light of global energy prices.
This support will be equivalent to the Energy Price Guarantee put in place for households and will apply to fixed contracts agreed on or after April 1, 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from October 1, 2022 to March 31, 2023, running for an initial six month period for all non-domestic energy users.
The savings will be first seen in October bills, which are typically received in November.
As with the Energy Price Guarantee for households, customers do not need to take action or apply to the scheme to access the support.
Eligibility
The scheme will be available to everyone on a non-domestic contract including:
- Businesses
- Voluntary sector organisations, such as charities
- Public sector organisations such as schools, hospitals and care homes
who are:
- on existing fixed price contracts that were agreed on or after April 1, 2022
- signing new fixed price contracts
- on deemed / out of contract or variable tariffs
- on flexible purchase or similar contracts
Exclusions
The scheme is intended to be of broad application but there may be very limited exclusions, for example businesses that use gas or electricity for the purpose of generating power they are selling back into the grid, such as power stations, pumped hydro or grid-level battery storage.
However, the UK Government warned: “Non-domestic suppliers and consumers must not profit from the scheme other than for its intended purpose of providing relief on necessary energy bills.
“Any such activity will result in support being refundable to government and may be liable to further penalties.”
Amount your bills will be reduced
The UK Government will provide a discount on your gas and electricity unit prices.
To calculate your discount, the estimated wholesale portion of the unit price you would be paying this winter will be compared to a baseline ‘government supported price’ which is lower than currently expected wholesale prices this winter.
For all non-domestic energy users in Great Britain this Uk Government supported price has been set at:
- £211 per megawatt hour (MWh) for electricity
- £75 per MWh for gas
A comparable rate will be set shortly for Northern Ireland.
For comparison, wholesale costs in Scotland, England and Wales for this winter are currently expected to be around:
- £600 per MWh for electricity
- £180 per MWh for gas
The guidance on GOV.UK explains: “The designs of the GB scheme and the separate Northern Ireland scheme will be consistent, and will offer an equivalent level of support, but the impact on users will vary in Northern Ireland in particular since there are only limited numbers of fixed price contracts in the market.”
To ensure consistency between the domestic and non-domestic schemes, the UK Government supported price is based on the implied wholesale element of the Energy Price Guarantee for domestic customers.
It will not be the same as the final per unit price paid by non-domestic customers, which will also reflect other costs such as network charges and operating costs, plus the impact of competition between suppliers.
How it works
Applying the reduction
Suppliers will apply reductions to the bills of all eligible non-domestic customers.
The Uk Government will compensate suppliers for the reduction in wholesale gas and electricity unit prices that they are passing onto non-domestic customers.
The discount applied will be in pence per kilowatt hour (p/kWh). The p/kWh government support for comparable contracts will be the same across suppliers, but the absolute level of individual bills will continue to vary across different contracts and tariffs.
Fixed contracts
For 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.
For variable, deemed and all other contracts
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 be determined at the beginning of the scheme.
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.
The p/kWh government support for comparable contracts will be the same across suppliers, but the absolute level of individual bills will of course continue to vary.
Third party intermediaries
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.
How you will get the reduction
The support will be automatically applied to all eligible bills. You do not need to take action or apply to the scheme.
The savings for energy used in October will be seen in your October bills, which would usually be received in November.
If you have an existing fixed price contract
If you agreed your fixed price contract / tariff on or after April 1, 2022 you will get support if the calculated wholesale element of the price you are paying is above the government supported price.
If your fixed tariff is based on wholesale prices below the government supported price, then you will not be eligible for support.
Your per unit energy costs will automatically be reduced by the relevant pence per Kilowatt Hour (p/kWh) for the duration of the scheme.
If you’re about to sign a new fixed price contract
The relevant price reduction will be automatically applied to your bill by your supplier.
If you are on a default or variable tariff contract
If you are on a variable tariff, and want to remain on it, you will get the reduction, subject to the ‘maximum discount’.
The maximum discount 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. We 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.
If you’re on a flexible purchase contract
Some large non-domestic energy users buy energy using flexible contracts which enable them to decide when to hedge for portions of their demand throughout the term of the contract.
If you’re on a flexible purchase contract, your price reduction will depend on the difference between your monthly weighted average baseload price (determined by your individual hedging approach) and the government supported price. In this case the maximum support available per unit of energy will also be limited by the maximum discount.
If you signed your fixed contract before April 1, 2022
If you signed your fixed rate contract before April 1, 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.
If you are out of contract
If you are out of contract and are waiting to see the details of government support, you should set up your contract as normal. Your supplier will automatically apply appropriate reductions to your energy price for the duration of the scheme.
If you get your energy through a landlord / heat network / energy service company
The Uk Government expects businesses and other organisations to pass on the benefits under this scheme through to the end user in a reasonable and proportionate way. This will ensure support, for instance, to customers of heat networks and park home residents.
Reviewing the scheme
The Uk Government will publish a review into the operation of the scheme in 3 months’ time, to inform decisions on future support after March 2023.
The review will focus in particular on identifying the most vulnerable non-domestic customers and how the UK Government will continue assisting them with energy costs. These are likely to be those who are least able to adjust, for example by reducing energy usage or increasing energy efficiency.
The review will consider:
- how effective the scheme has been in giving support to vulnerable non-domestic customers
- which groups of non-domestic customers (by sector, size or geography) remain particularly vulnerable to energy price rises, taking into account the latest price position and forward curves, alongside other cost pressures
- how to continue supporting these customers – either by extending the existing scheme for some users, or replacing with a different scheme
Continuing support to those deemed eligible would begin at the end of the initial six-month support scheme, without a gap.
It is important that users who are less vulnerable to energy price increases use the six months support provided by the scheme to identify measures they can take to protect themselves against high energy prices.
Read full details on the Energy Bill Relief Scheme on GOv.UK here.
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