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What is the Energy Bill Relief Scheme?
As per the Government announcement on the 21st September, the Energy Bill Relief Scheme will provide energy bill relief for non-domestic customers such as businesses, charities and public sector organisations such as schools, hospitals and care homes in the form of a discount. The discount will be applied to energy usage between 1 October 2022 and 31 March 2023.
Are all non-domestic energy users eligible?
Yes, but the level of discount applied will vary depending on the type contact you are on and whether or not you are on fixed, flexible or out of contract/ deemed rates and the date that your contract was signed. The discount will apply to existing fixed price contracts that were agreed on or after 1st December 2021, new fixed price contracts signed from 1st October as well as those organisations on deemed/out of contract or variable tariffs or on flexible purchase or similar contracts.
What will the discount be?
As per the Government guidance, for all non-domestic energy users on fixed contracts the Government supported price will be set at:
- £211 per megawatt hour (mWh) for electricity (21.10p per unit)
- £75 per mWh for gas (7.50p per unit)
For variable, deemed and all other contracts, the discount will be subject to a ‘maximum discount’ (£345/mWh for electricity and £91/mWh for gas).
Organisations that are on fixed contracts will therefore be able to take advantage of more of a discount.
How will this work in practice?
There is a common misconception that 21.10p is the rate that you will pay for your energy if you are on a fixed contract and it will be this and only this. In fact, the relief available from the government only covers the wholesale costs of the energy used which makes it a little more complicated to work out and plan what your bills will be going forward. It’s important to bear in mind that suppliers are not applying a broad-brush approach as they do with domestic, business energy has more components to consider.
From the conversations we have had with our supply chain we understand that some will apply the discount on your monthly invoice, in the form of an additional line on your invoice and some will automatically apply the discount to the unit rate line on your bill. This means that it won't always be easy to see clearly what the discounted rate would be for the given period. However, what we do know is that the discount calculation will be carried out once and the same discount will be applied throughout the rest of the supported period, so once you have received your first bill with the discount applied you should be able to budget for the rest of the supported period (until 31st March 2023).
It’s also important to note that suppliers are manually working this out per contract and depending on the billing systems that they have in place and how they structure their invoices, the time that it will take to process invoices and how this will be illustrated may vary.
TOP TIP: Keep an eye out for your October invoice which should be issued in the next few weeks to see how/if the discount has been calculated. In some instances, this may be applied retrospectively.
If you have any questions about your bill, please get in touch on the contact details below.
I’m on a fixed contract - How will my discount be calculated?
The discount that the customer is eligible for will be based on when they signed their contract and will apply to any contracts that have been signed since 1st December 2021. The amount of discount applied for the supported period will be calculated via a supported price (not a cap) and a set of reference wholesale prices – the difference between those two numbers will result in a discount.
What is a reference wholesale price?
BEIS have provided a table which outlines the reference wholesale price on a daily basis since the qualifying period from 1st Dec 2021 as a guide (the reference wholesale price varies due to market fluctuations). Click to access the table:
If this discount is applied crudely, for those that secured contracts before they became excessive, the unit rate would actually fall below the government supported price. To stop this from happening suppliers will apply a floor price mechanism.
What is a floor price?
This means that the effective retail unit price for a customer’s gas and electricity (inclusive of wholesale, network, policy and supplier costs, but exclusive of VAT and Climate Change Levy) does not fall below the government supported price for each once their discounts have been applied.
Where do third party costs fit in?
Third Party costs cover network, policy and supplier costs and are often referred to as non-commodity, non-wholesale or non-energy costs. Prior to the energy crisis, we spent a lot of time talking to our clients about the impact that non-commodity costs have on the overall cost of their energy bills and in most cases this was approx. 62% of the overall cost. However, due to the spiralling costs of wholesale energy over the past two years, the non-commodity costs only make up approx. 20-30% of the bill. With the EBRS only being applied to the wholesale cost, its important to remember that you will still be billed for the non-commodity costs, regardless of the level of discount being applied.
The below diagram demonstrates the percentage split of wholesale costs and non-commodity costs with the Energy Bill Relief Scheme applied:
For further information, please see government update as follows: https://www.gov.uk/guidance/energy-bill-relief-scheme-help-for-businesses-and-other-non-domestic-customers.
As you can see, the EBRS is not a simple process. We're here to help so please get in touch with us on 03330 433 233 or [email protected] if you have any queries on your energy bill. In the meantime, we will continue to liaise with our supply chain and let you know as soon as we have any further updates.
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