Energy Bill Relief Scheme expanded by government
The government has expanded the Energy Bill Relief Scheme to include all fixed contracts signed on or after 1 December 2021. Previously, this was only applicable to contracts signed from 1 April 2022.
Energy suppliers are also obligated to ensure the price for customers does not fall below the government supposed price of 21.1p per kWh for electricity, and 7.5p per kWh for gas.
Therefore, when wholesale costs, network costs, environmental levies and supplier margin are all factored in, the price customers pay cannot fall below the government supported price. However, Climate Change Levies and VAT can be added on top of these costs.
For customers on flexible purchase contracts, the government has confirmed further details will be released.
Here is an outline of the Energy Bill Relief Scheme:
All non-domestic customers, including all UK businesses, charities, schools and hospitals are being given a discount on wholesale gas and electricity prices by the government from 1 October 2022.
- All fixed contracts agreed on or after 1 December 2021, are included. Previously, the eligibility was for contracts agreed in or after April 2022.
- It will apply to energy usage from 1 October 2022 to 31 March 2023, running initially for a six-month period for all non-domestic energy users.
- The savings will first appear in October bills (typically received in November).
- The government has set a supported wholesale price – confirmed as £211 per MWh for electricity and £75 per MWh for gas – which is a reduced price per unit of gas and electricity. For comparison, wholesale costs in England, Scotland and Wales for this winter are currently expected to be around £600 per MWh for electricity and £180 per MWh for gas.
- It is important that customers realise this is not the price you pay. The price you pay is a combination of wholesale prices (the commodity costs where the government relief will be applied) and your Transmission and Distribution Costs (non-commodity costs which vary site by site).
- This relief will also include the removal of green levies paid by non-domestic customers and is equivalent to the wholesale element of the Energy Price Guarantee for households. The amount of price reduction each organisation will receive will depend on their contract type and circumstances.
- Non-domestic suppliers and customers must not profit from the scheme. As such, there may be limited exclusions to the relief (business that use gas or electricity for the purposes of generating or storing power).
What if I’m on a Fixed Price Contract?
- Non-domestic customers on existing fixed price contracts will be eligible for support provided the contract was agreed on or after 1 December 2021. As long as the wholesale element of the price the customer is paying is above the Government Supported Price, then their per unit energy costs will automatically be reduced by the relevant p/kWh for the length of the Scheme.
- Businesses entering new fixed price contracts after 1 October 2022 will receive support on the same basis. It is also important to recognise that this applies to the unit rates only. Standing charges will still be billed in addition to these unit rates, according to the contract you have in place with your supplier.
What if I’m on a Flexible Contract?
- For businesses on flexible purchase contracts, the amount of reduction offered will depend on the difference between your monthly weighted average baseload price and the Government Supported Price. This will be determined by your individual procurement strategy and calculated by your suppliers, according to the specifics of your contract. Again, this will be limited to the Maximum Discount (likely to be approximately £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments).
What if I’m on a Deemed Contract?
- Non-domestic customers on default, deemed or variable tariffs will receive a per unit discount on energy costs. This will be up to a maximum of the difference between the Supported Price and the average expected wholesale price over the length of the Scheme.
- The Maximum Discount is likely to be approximately £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments.
- Non-domestic customers on default or variable tariffs will pay lower bills, but these will still change over time and may still be subject to price increases.
- If you are out of contract and have been waiting to see the details of this government support, you should now proceed and set up your next supply agreement as normal. The reductions will be automatically applied by your supplier for the duration of the scheme.
- The government says it is working with suppliers to ensure all non-domestic customers are able to switch to a fixed contract/tariff.
How will it be applied?
- The p/kWh discount will be applied to bills automatically. Businesses do not need to apply for the Energy Bill Relief Scheme to access the support.
- In three months, a review of the scheme will take place and the government will also make a decision on future support after March 2023.
- In particular, the review will look at identifying the most vulnerable non-domestic customers and how they should continue to be supported.
How NGP can help?
For further information or if you need any assistance with your energy strategy, please contact your Business Account Manager.