The Energy Bill Relief Scheme

Effective from 01/10/2022, the Energy Bill Relief Scheme provided a discount on wholesale gas and electricity prices for all non-domestic consumers. This included public sector organisations, voluntary sector organisations like charities, and businesses.

The scheme came into effect on 01/10/2022 and was always intended to run until 31/03/2023.

The UK government was always clear that the EBRS was designed as a temporary six-month measure to offer a good level of protection non-domestic consumers from soaring energy costs, cutting the cost of power bills and providing them with the certainty they needed to plan through the acute crisis this winter.

There was no way that the government could carry on offering this level of support and it was intended as a bridge to allow businesses to adapt. The latest data shows wholesale gas prices have now fallen to levels just before Putin’s invasion of Ukraine and have almost halved since the EBRS scheme was announced.

The new Energy Bills Discount Scheme (EBDS) therefore strikes a balance between supporting businesses over the next 12 months and limiting taxpayer’s exposure to volatile energy markets, with a cap set at £5.5 billion of government support based on estimated volumes.

The EBDS will run for 12 months from 01/04/2023 to 31/03/2024. Further information on the EBDS is available here

Do I qualify for the discount?

The government have said that the discount will be applied to all fixed term contracts agreed on or after 01/04/2022 that qualify for the scheme, as well as customers currently on out of contract and on variable or flexible tariffs.

How long will my bill be protected for?

The scheme will run for a period of 6 months from 01/10/2022 to 31/03/2023 with a review after 3 months.

What will the discount look like on my bill?

The supplier will show a p/unit (p/kWh) discount on your next bill after the 01/10/2022. It will not be a % discount but a p/unit (p/kWh) discount.

To calculate your discount, the estimated wholesale portion of the unit price you would be paying this winter will be compared to a baseline ‘government supported price’ which is lower than currently expected wholesale prices this winter.

For all non-domestic energy users in Great Britain this government supported price has been set at:

  • £211 per MWh for electricity (equivalent to 21.10p/kWh)
  • £75 per MWh for gas (equivalent to 7.50p/kWh)

For comparison, the government have however stated that they expect the wholesale cost of electricity to go as high as £600/MWh (60p/kWh) and £180/MWh (18p/kWh) for gas.

How it works

Suppliers will automatically apply reductions to the bills of all eligible non-domestic business customers.

The government will compensate suppliers for the reduction in wholesale gas and electricity unit prices that they are passing on.

The discount applied will be in pence per kilowatt hour (p/kWh). The p/kWh government support for comparable contracts will be the same across suppliers, but the absolute level of individual bills will continue to vary across different contracts and tariffs.

For fixed contracts the discount will reflect the difference between the government supported price and the relevant wholesale price for the day the contract was agreed. The government will publish the wholesale prices we will use for calculating this for each day from 1 April 2022.

For variable, deemed and all other contracts, the discount will reflect the difference between the government supported price and relevant wholesale price, but be subject to a ‘maximum discount’ that will determined at the beginning of the scheme.

What do I do now?

Businesses on variable / flexible contracts or coming to the end of a fixed term contract will need to choose if they move to fixed contract or not. This is likely to suit you if you don’t want to be exposed to price variation.

If you do agree to a new fixed term contract for say a 12 month period the first 6 months will be protected by the discount scheme and the remaining months would be at the agreed price without any protection on the wholesale cost element of your bill.

By agreeing a contract you are protecting your business from any further whole price rises as if you stay on an out of contract tariff you will get a reduction on the “maximum discount” which will calculated by comparing the government supported price with the average of expected wholesale prices for delivery across the 6 months of the scheme.

The government will confirm the “maximum discount” on 30 September 2022 but it is likely to be around £405/MWh (40.5p/kWh) for electricity and £115/MWh (11.5p/kWh) for gas, subject to wholesale market developments.

If wholesale price rises above the government supported price and maximum discount then your prices will increase.

Some examples of scheme in practice

The level of support for each organisation will vary depending on type and date of contract.

These are illustrative examples based on recent averages of forward wholesale prices and may differ from those experienced in practice.

Example 1: A Pub

A pub uses 4 MWh (4,000 kWh’s) of electricity and 16 MWh (16,000kWh’s) of gas a month. They signed a fixed contract in August 2022, giving them a current monthly energy bill of about £7,000. At the time they signed their contact, wholesale prices for the next 6 months were expected to be higher than the government supported price of £211/MWh (21.1p/kWh) for electricity, and £75/MWh (7.5p/kWh) for gas, meaning they can receive support under this scheme.

The difference between expected wholesale prices when they signed their contract and the government supported price is worth £380/MWh (38p/kWh) for electricity and £100/MWh (10p/kWh) for gas, meaning they receive a discount of £3,100 per month, reducing their bill by over 40%.

A school uses 10 MWh (10,000kWh’s) of electricity and 22 MWh (22,000kWh’s) of gas a month. They signed a fixed contract in July 2022, giving them a current monthly energy bill of about £10,000. At the time they signed their contact, wholesale prices for the next 6 months were expected to be higher than the government supported price of £211/MWh (21.1p/kWh) for electricity, and £75/MWh (7.5p/kWh) for gas, meaning they can receive support under this scheme.

The difference between expected wholesale prices when they signed their contract and the government supported price is worth £240/MWh (24p/kWh) for electricity and £70/MWh (70p/kWh) for gas, meaning they receive a discount of £4,000 per month, reducing their original bill by 40%.

Example 2: A School

Example 3: A Medium Sized Restaurant

A medium sized restaurant uses around 3.5 MWh (3,500kWh’s) of electricity and 4 MWh (4,000kWh’s) of gas each month. They are on a variable contract, giving them a current monthly energy bill of around £3,900 per month. As they are on a variable contract they can receive support up to the Maximum Discount, currently estimated to be £405/MWh (40.5p/kWh) for electricity and £115/MWh (11.5p/kWh) for gas.

Applying the Maximum Discount rates means that their monthly energy bill reduces by around half.

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