Government announces support to halve business energy bills
21st Sep 2022 / By Alistair Driver
The Government has announced much-needed support for businesses to significantly reduce soaring energy bills.
The new Government Energy Bill Relief Scheme will provide a discount on wholesale gas and electricity prices for all non-domestic customers, including all UK businesses, the voluntary sector and the public sector.
Energy bills for UK businesses will typically be cut by around half their expected level this winter under the support package.
It 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. Support (in the form of a p/kWh discount) will automatically be applied to bills.
To administer support, the Government has set a Supported Wholesale Price, a discounted price per unit of gas and electricity. – expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this winter.
The level of price reduction for each business will vary depending on their contract type and circumstances:
- Non-domestic customers on existing fixed price contracts will be eligible for support as long as the contract was agreed on or after 1 April 2022. Provided that the wholesale element of the price the customer is paying is above the Government Supported Price, their per unit energy costs will automatically be reduced by the relevant p/kWh for the duration of the Scheme. Customers entering new fixed price contracts after 1 October will receive support on the same basis.
- Those on default, deemed or variable tariffs will receive a per-unit discount on energy costs, up to a maximum of the difference between the Supported Price and the average expected wholesale price over the period of the Scheme. The amount of this Maximum Discount is likely to be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments. Non-domestic customers on default or variable tariffs will therefore pay reduced bills, but these will still change over time and may still be subject to price increases. This is why the Government is working with suppliers to ensure all their customers in England, Scotland and Wales are given the opportunity to switch to a fixed contract/tariff for the duration of the scheme if they wish, underpinned by the Government’s Energy Bill Relief Scheme support.
- For businesses on flexible purchase contracts, typically some of the largest energy-using businesses, the level of reduction offered will be calculated by suppliers according to the specifics of that company’s contract and will also be subject to the Maximum Discount.
- A parallel scheme, based on the same criteria and offering comparable support, but recognising the different market fundamentals, will be established in Northern Ireland.
- If you are not connected to either the gas or electricity grid, equivalent support will also be provided for non-domestic consumers who use heating oil or alternative fuels instead of gas. Further detail on this will be announced shortly.
The Government will publish a review into the operation of the scheme in three months to inform decisions on future support after March 2023.
Ms Truss said: "I understand the huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods.
"As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind."
NPA senior policy adviser Charlie Dewhirst said: “This is very welcome news for an industry that is facing eye-watering energy prices over the winter, on top of continued high input costs.
"In the last two years, the sector has lost £600 million and contracted by at least 20%. Energy price inflation has been the final nail in the coffin for some producers but this new scheme will hopefully ease the financial pressures on others who have survived up to this point.”