Energy Bill Relief Scheme

What does the government energy bill relief scheme mean for your business?

On the 8th of September Liz Truss announced that Government will be taking action to support businesses who are facing unprecedented energy price rises. The details have now been released, but what does this mean for you and your business?
We have put together some questions we are receiving through our channels and the answers which could help in understanding the energy bill relief scheme.

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    What is the new Energy Bill Relief Scheme for Business?

    The Department for Business, Energy and Industrial Strategy (BEIS) has announced further details of the financial support that will be provided to businesses to manage energy costs this winter following the Prime Minister’s statement pledging help for businesses on 8th September.

    All businesses with a non-domestic energy account including the voluntary sector and public sector organisations such as schools and hospitals will be eligible for the support through the Energy Bill Relief Scheme (EBRS), which will apply for six months from 1 October 2022 to 31 March 2023.

    What are the discounts on the Energy bill relief scheme?

    What are the discounts on the Energy bill relief scheme?

    This depends on whether you are on a fixed or variable contract.

    For anyone who is on fixed price contracts that were agreed upon from the 1st of December 2021 onwards, the government will cap the wholesale part of your bills for electricity and gas to 21.1pence and 7.5 pence per kWh.

    For those that are on a variable contract, a maximum discount of around 34.5p per KWh for electricity and 9.1p per KWh for gas will be applied. These maximum discounts are still being assessed by the government.

    Remember whilst the wholesale commodity cost is the biggest part of your bill, the discount will only apply to this part of your bill – so the total you will pay will still be higher than the discounted levels due to non-commodity costs that are also applied.

    How is the discount applied?

    The scheme discount is applied to the wholesale commodity cost only. The wholesale commodity cost makes up around 70% – 80% of your energy bill. The remaining 20%-30% of costs are made up of what we call ‘non-commodity’ charges. Non-commodity charges are made up of a mix of taxes, levies, distribution costs and network charges, none of these is included in the discount.

    What happens to the rest of my bill?

    Other than wholesale costs, the one other area where your bill will be adjusted is the Green Levy charge. The government have scrapped this charge between October 2022 and March 2023 as additional support to reduce business energy costs. This charge is included within the non-commodity part of your bill. All other non-commodity costs (although these fluctuate) will remain the same.

    I’m in a fixed contract what do I do?

    Nothing! If you are eligible your supplier will automatically make bill adjustments and contact you.

    What do these prices mean for my business energy bills?

    Again, this is dependent on your contract and how much you are contracted to pay – however, the government have suggested that most who have entered into contracts recently or are on variable contracts will see their energy bills drop by around 30% to 40%.

    Who is eligible for the Energy bill relief scheme?

    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. There are a few exceptions, for example, companies that use gas or electricity to generate power that they then sell back to the grid (like power stations).

    I’ve signed a fixed contract before the 1st of December 2021 that is either live or due to go live, what does this mean for me?

    You won’t be eligible for the scheme sadly. However, you may be eligible for further budget support the government is due to announce.

    What happens after 6 months?

    The government will review the scheme within three months, from the outcome they will then announce if there will be extended support after March 31st, 2023, for vulnerable businesses and sectors such as hospitality.

    What will my savings look like?

    This is hugely dependent on what type of contract you are on, and how much you are being charged for the wholesale cost. It’s more likely that contracts agreed upon more recently, or those on variable prices will see the biggest savings (circa 40% according to government projections). We have provided an example to illustrate the potential savings that could be gained.

    Business Energy saving calculator

    I’m currently in a variable contract/ I am out of contract, what should I do?

    The government have stated ‘The discount will reflect the difference between the government-supported price and the relevant wholesale price’ which will be confirmed on 30th September and is likely to be around 40.5p KWh for electricity and 11.5p KWh for gas.

    Should you stay on a variable contract or retain it outside of a contract? Ultimately this is your decision, but what might help is understanding how the two contract types can impact your business in the short and long term:

    Advantages of retaining variable/ deemed rates Vs Fixed:

    1. We don’t think there are many advantages, but if the wholesale costs fall significantly over the coming months, by waiting to lock into a new fixed price contract you may get a better rate. However, most analysts and the government themselves are expecting both volatile and high prices to remain for many months if not years. It’s key to note that out of contract/ deemed rates vary supplier by supplier.  We advise that you take time to understand your suppliers charges and that these can be moved upward at any point to reflect the increasing wholesale costs.

    Disadvantages of retaining variable/ deemed rates Vs Fixed:

    1. You potentially have less protection if wholesale prices go up than you do on fixed price contracts
    1. The unpredictable, unstable market will prove challenging for forecasting cash management. The volatility is causing frequent changes in wholesale prices. On a fixed plan, you can effectively budget for the term of the energy contract (including the six-month relief).

    We are struggling to see many benefits to businesses retaining deemed or variable tariffs at this time, wholesale electricity and gas prices peaked at an all-time high at the end of August 2022 with the market continuing to be highly volatile, changing on an hourly basis, experts are predicting this to continue for the near future.

    Check out our business insights page to see the wholesale costs for gas and electricity since March 2021, with indications of how the scheme will support the energy costs for businesses.

    I still cannot afford to pay these prices, what can I do?

    Speak to your supplier – they might be able to advise you on payment plans or alternative plans that could aid your situation. Your supplier would rather know if there are 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 additional 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 required.

    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 identify the whereabouts of your business that is costing the most. There may be some surprises in there that if adjusted, make a difference to your spending. Check out our business energy-saving calculator to see where your energy spend is going.

    Electricity wholesale prices

    Above are the wholesale costs for electricity since March 2021, with indications of how the scheme will support the energy costs for businesses:

    Get Quotes For Fixed Price Contracts

    Its been incredibly difficult for the government and suppliers to adopt a complete price cap like we have seen in domestic due to the way that business energy operates and its many nuances. We expect more suppliers to release price books over the coming days. Its important that people speak to their energy broker to get the best advice on what type of contract to enter, and who with.

    Chris Shaw, CEO, Utility Bidder

    Disclaimer: Views contained on this page are Utility Bidder’s however they do not constitute certainty of market movements. Energy prices are volatile and could go up or down.

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