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Update to our original article on the Energy Bill Relief Scheme as follows:
We have been made aware of two significant updates to the Energy Bill Relief Scheme since it was announced on the 21st September 2022, when the UK government first announced the steps that they would take to support non-domestic energy customers against the rising cost of energy in the form of an Energy Price Guarantee.
Initially the Government Press Release stated as follows: “The Energy Bill Relief Scheme will see wholesale energy prices for all firms capped for six months from 1 October. It will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial 6-month period for all non-domestic energy users. The savings will be first seen in October bills, which are typically received in November.”
However, there has been two key changes since then. The first change to note is the amount that those on variable/ deemed rate contracts will be capped at. Initially the amount of this ‘Maximum Discount’ was likely to be around £405/MWh for electricity and £115/MWh for gas but this has now improved and will be around £345/MWh for electricity and £91/MWh for gas and will reflect the difference between the government supported price and relevant wholesale price.
Secondly, the date for eligibility has been pushed back to 1st December 2021 which means that if you signed a contract on or after 1st December 2021 you will be eligible for the Energy Bill Relief Scheme for the period of 1st October 2022 to 31st March 2023 at present.
So what does this mean for you and your business?
If you are already on a fixed contract
Under the scheme, wholesale prices are expected to be fixed for all non-domestic energy customers at £211 per MWh for electricity and £75 per MWh for gas for six months, a discounted price per unit of gas and electricity and less than half the wholesale prices anticipated this winter.
If you signed your contract before 1st December 2021, it’s understood that you will not be eligible for relief. However, if you signed your contract on or after 1 December 2021 April 2022 then you will be eligible, and support (in the form of a p/kWh discount) will be automatically applied to bills.
It’s worth noting that, in addition to the government supported wholesale rate, you will continue to pay the following:
• Government levies known as non-commodity costs which vary from supplier these could vary from supplier to supplier
• Standing charges, these could vary from supplier to supplier
• Any risk that the individual supplier feels necessary to build into the contract
If you are on default, deemed or variable tariffs
If you are in a variable contract (on out of contract rates/deemed rates) then support will be capped at a discounted rate. This will be up to a maximum of the difference between the Supported Price and the average expected wholesale price over the period of the Scheme. The amount of this Maximum Discount is likely to be around £345/MWh for electricity and £91/MWh for gas, subject to wholesale market developments. So, if you are on default, deemed or variable rates you will pay reduced bills for the six-month period, but these will still change over time and may still be subject to price increases.
Customers entering new fixed price contracts after 1 October will receive support on the same basis therefore at this stage, to ensure that you are not vulnerable to fluctuations in the market and for budget certainty we are recommending to our clients that they will be at a significant advantage if they are on fixed rates
Therefore, our advice would be, if you haven’t already done so, speak to your consultant to negotiate a fixed contract.
If you’re on a flexible purchase contract
Some large non-domestic energy users buy energy using flexible contracts which enable them to decide when to hedge for portions of their demand throughout the term of the contract.
For those that are on a flexible purchase contract, your price reduction will depend on the difference between your monthly weighted average baseload price (determined by your individual hedging approach) and the government supported price. In this case the maximum support available per unit of energy will also be limited by the maximum discount.
What will happen after 31st March 2023?
The scheme will run for an initial 6 months and will be reviewed after 3 months. It’s thought that further support will be provided for the most-vulnerable non-domestic customers. We will update you as when we know more.
What do you need to do now?
Suppliers are now undertaking the necessary work so that we are able to fully brief our clients on how this will impact their individual energy bills and contracts from October. The Government is working with suppliers to ensure that those not currently in a contract are given the opportunity to switch to a fixed contract/tariff for the duration of the scheme if they wish.
We will keep you updated as and when we know more.
To read the full Government update – please see press release here.
