What it means for you: New Business Energy Bill Relief Scheme

Yesterday, the Department for Business, Energy and Industrial Strategy announced a new Energy Bill Relief Scheme. It applies to all non-domestic energy users, including all UK businesses, as well as the public and voluntary sectors. They announced a discount on the wholesale price element of energy bills.

Here is an outline of the Energy Bill Relief Scheme:

Summary:

  • Fixed contracts agreed on or after 1 April 2022, as well as deemed contracts, variable and flexible tariffs, are included.
  • 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 will set a Supported Wholesale Price – likely to be £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 for this winter are currently expected to be around £600 per MWh for electricity and £180 per MWh for gas.
  • It is important to understand that this is not the price you pay. Your energy bill is a combination of wholesale cost (commodity costs – where the government relief will be applied) and your Transmission and Distribution Costs (non-commodity costs which vary site by site).
  • The relief will 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 business will receive will depend on their contract type and circumstances. Further details are expected to be announced.

What if I’m on a Fixed Price Contract?

  • Non-domestic customers on existing fixed price contracts will be eligible for support if the contract was agreed on or after 1 April 2022.
  • If the wholesale element of the price is above the Government Supported Price, then the 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 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 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?

Stay informed by checking our website and LinkedIn pages regularly.

For further information or if you need any assistance with your energy strategy, please contact your Business Account Manager.

Get in touch at: enquiry@ngpltd.co.uk or call:

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