What is the Energy Bill Discount Scheme?

On Monday 9th January, the government announced the energy bill discount scheme as scaled-back energy support for non-domestic customers from April 2023 to March 2024.

The new support programme named the Energy Bill Discount Scheme will apply a discounted rate for a year under the following criteria:

  • Contracts agreed prior to 1st December 2021
  • Electricity wholesale costs that were agreed over 30.02p per kilowatt hour
  • Gas wholesale rates that were agreed over the 10.07p per kilowatt hour

 

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    How does this discount affect my business energy bills?

    If eligible for the Energy Bills Discount Scheme , the government will apply a discount on your gas and electricity unit prices. Eligible non domestic consumers will receive a per-unit discount on their energy bills during the 12 months from April 2023 to March 2024, subject to a maximum discount. The relative discount will be applied if wholesale prices are above a certain price threshold.

    For most non-domestic energy users in Great Britain and Northern Ireland, these maximum discounts have been set at:

    • Electricity – Discounts of up to £19.61 per megawatt-hour (MWh) when the wholesale prices are above £302 per MWh

    • Gas – Discounts of up to £6.97 per MWh when the wholesale prices are above £107 per MWh If wholesale prices stay below the threshold, the discount is not applied.

    Meter reading

    What is the difference between the EBRS and EBDS?

    During a period of uncertainty in the energy market, the government placed in the EBRS to:
    • Support businesses and public sector organisations such as schools and hospitals by supplying
    a discount on wholesales gas and electricity prices
    • Eligible non-domestic customers facing significantly inflated gas and electricity prices considering global price pressures

    The EBDS, is a continuation of EBRS placed in to further protect businesses against severe energy price increases and therefore, strikes a balance between supporting businesses over the next 12 months and limiting taxpayers’ exposure to volatile energy markets, with total government support
    set at £5.5 billion.

    Am I eligible for the EBDS?

    Similarly, to the EBRS, anyone on a non-domestic contract that was agreed on or after 1st December 2021, also anyone on a variable contract, flexible rate, or out-of-contract rate will be eligible.

    This includes businesses, voluntary organisations such as charities and public sector organisations such as hospitals, schools, and care homes.

    If you have any concerns about your existing contract, would like to understand EBDS in more detail or would like to talk to us about any other contracts that are coming to an end before March 2024, please call us on 0800 007 4001 to speak to our Customer Services Team.

    When does government energy support end?

    The Energy Bills Discount Scheme runs for a year, from April 1, 2023, to March 31, 2024, replacing the Energy Bill Relief Scheme that aided businesses and organizations from October 1, 2022, to March 31, 2023.

    Frequently asked questions

    Within the electricity graph, we can see that under EBRS base support was 21.1p/kWh and the new base support under the EBDS is 30.2p/kWh. The earlier maximum threshold was 55.60p/kWh and under the new EBDS, it is 32.16p/kWh. This, therefore, reduces the volume of discount available and increases the wholesale cost to become eligible. Similarly, within the gas graph, we can see that under the EBRS base support was 7.50p/kWh and the new base support under the EBDS is 10.70p/kWh. The earlier maximum threshold was 16.60p/kWh and the under the new EBDS, it is 11.40p/kWh. Wholesale commodity costs fluctuate regularly, affected by supply and demand, economic factors and temperature.

    At Utility Bidder, we recommend speaking to an expert to understand the best choice for your business at the point of renewal. Call us on 0800 007 4001 to find out more about wholesale costs and the impact of EBDS on your business.

    How is the discount calculated?
    As a working example, if an electricity contract was agreed after 1st December 2021 at 70p per kilowatt hour, but the make-up of this was
    40p wholesale cost, only 40p will become eligible for the discount.
    Under the new discount scheme, the maximum discount any customer can receive against their electricity wholesale cost is 19.6p.
    However, the threshold wholesale unit cost must exceed 30.02p to qualify for this discount. The difference is discounted. In this example,
    9.8p will be discounted by EBDS. This is a discount of 25% on the wholesale cost and a 14% discount on the overall cost.
    Example Pence per kWh
    Unit price £0.70 Non-wholesale cost* £0.30 Wholesale cost £0.40 Government threshold £0.302 Maximum discount £0.098 Non-wholesale costs £0.30 Wholesale cost with discount £0.302 Total charge £0.602 Total reduction of unit price -14% Total reduction of wholesale cost -24.5%

    *NOTE: non-wholesale charges can fluctuate depending on your agreement.

    The government have stated ‘The discount will reflect the
    difference between the government-supported price and the
    relevant wholesale price”. Securing a contract at a period
    of lower wholesale costs will be beneficial but you will only
    receive help from the EBDS if prices rise significantly. Get in
    touch with one of our energy experts today to discuss your
    needs further. Should you stay on a variable contract or keep
    it outside of a contract? This is your decision, but what might
    help is understanding how the two contract types can affect
    your business in the short and long term.

    If you secure an energy contract before March 2024, and the wholesale price is above the threshold, the discount will be applied. You can secure a contract up to 12 months before your current contract comes to an end, so by keeping a keen eye on the market and having an energy expert on hand, you will be able to navigate the best time to secure your next contract which may have a lower wholesale cost than the threshold – meaning you will not benefit from EBRS but will secure a lower rate that will be applied as soon as your new contract starts for the duration of the agreement.

    Unfortunately, you won’t be eligible for the scheme. However, any contracts secured before this time are likely to have a much lower wholesale cost than the current market provides.

    Speak to your supplier – they might be able to recommend
    payment plans or alternative plans that could aid your situation.
    Your supplier would rather know if there were going to be
    difficulties making payments so we suggest making the call to see
    if there is anything they can assist with.
    Looking at alternative ways to increase your viability for business
    support – Managing business credit risk needs to be a priority on
    your list. To request other support from a lender, gain better rates
    and improve your opportunities for funding availability, a strong
    credit rating will support this. We work with specialist partners
    who can review your credit rating and make suggestions on how
    your credit rating can be improved/repaired quickly. This will help
    you to gain access to more supplier prices which may be cheaper
    in the long term and may also remove any upfront deposits that
    might be needed.
    Save on your energy consumption – Locating where your business
    is using the most energy may help shape when and how you use
    your appliances. We have put together a handy tool that helps you
    find the whereabouts of your business that is costing the most.
    There may be some surprises in there that if adjusted, influence
    your spending.

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