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The Government has published its Energy Bill Relief Scheme, providing further details about how it will help businesses across the UK deal with rising energy costs.
From 1st October 2022, wholesale electricity and gas unit prices will be fixed for a six-month period for businesses through the winter and early spring.
Eligible businesses include those:
- on existing fixed price contracts that were agreed on or after 1st April 2022
- signing new fixed price contracts
- on deemed/out of contract or variable tariffs
- on flexible purchase or similar contracts
The scheme is intended to apply to most businesses, but there may be some very limited exclusions.
Unit prices on energy bills will be capped at £211 per MWh for electricity and £75 per MWh for gas. The scheme will be reviewed halfway through its lifespan, with the opportunity to provide more targeted support for those deemed “vulnerable businesses”. It’s not yet clear which sectors will fall under this category.
According to the Government’s official statement on the scheme, the “Maximum Discount” open to businesses is set to be £405/MWh for electricity and £115/MWh for gas, all of which is “subject to wholesale market developments”.
The level of support for your business will vary depending on type and date of contract.
The Government has provided illustrative examples based on recent averages of forward wholesale prices to give an indication of how the support is intended to apply. Of course, the examples may differ from those experienced in practice.
Example of a small retail shop
A small retail shop uses around 1 MWh of electricity and 2 MWh of gas each month. It is on a variable contract, giving it a current monthly energy bill of around £1,400 per month. As it is on a variable contract, it 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 its monthly energy bill reduces by around 45%, leaving it with a bill of around £800 per month.
Example of a pub
A pub uses 4 MWh of electricity and 16 MWh of gas a month. It signed a fixed contract in August 2022, giving it a current monthly energy bill of about £7,000. At the time it signed its contact, wholesale prices for the next six months were expected to be higher than the Government supported price of £211/MWh for electricity, and £75/MWh for gas, meaning it can receive support under this scheme.
The difference between expected wholesale prices when it signed its contract and the Government supported price is worth £380/MWh for electricity and £100/MWh for gas, meaning it receives a discount of £3,100 per month, reducing its bill by over 40%.
Example of a medium-sized restaurant
A medium-sized restaurant uses around 3.5 MWh of electricity and 4 MWh of gas each month. It is on a variable contract, giving it a current monthly energy bill of around £3,900 per month. As it is on a variable contract, it 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 its monthly energy bill reduces by around half.
A similar scheme is being devised for businesses in Northern Ireland, with wholesale energy prices also set to be capped “shortly”, according to the Government. The scheme in Northern Ireland will provide comparable support while acknowledging the “different market fundamentals” of the country’s energy market which is separate from the rest of the UK.
Do small businesses need to do anything to enter the Energy Bill Relief Scheme?
Small business owners are not required to liaise with their energy suppliers. The discounted rates will be applied immediately to bills, with savings accrued in October being felt from the following month.
The Chancellor, Kwasi Kwarteng, is set to unveil his first financial statement, The Growth Plan, on Friday 23rd September, said: “We have stepped in to stop businesses collapsing, protect jobs, and limit inflation.
“And with our plans to boost home-grown energy supply, we will bring security to the sector, growth to the economy and secure a better deal for consumers.”
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