On the 21st September, Business Secretary Jacob Rees-Mogg unveiled plans for a new government scheme to help businesses, charities and public sector organisations with rising energy costs. The support—coined the Energy Bill Relief Scheme—is broadly equivalent to the Energy Price Guarantee recently established for households.
The Energy Price Scheme Explained
Initially being introduced for six months, the scheme will provide non-domestic energy customers (including businesses, hospitals, schools and charities) with a discount on wholesale gas and electricity prices. To administer support, the government has set a “Supported Wholesale Price,” less than half the energy prices originally anticipated for winter.
This supported price will be set at £211 per megawatt-hour (MWh) for electricity and £75 per Mwh for gas. To put this into context, a pub that uses 4MWh of electricity and 16MWh of gas a month could cut its bill from around £7,000 a month to £3,100, according to the government.
The scheme will apply across England, Scotland and Wales. Equivalent support for Northern Ireland is expected to be announced shortly.
The Scheme’s Implementation
The way the scheme is administered will depend on the tariff type. For customers on new fixed price contracts agreed on or after April 2022, the new “supported price” will be applied directly. For those on default or variable tariffs, a per-unit discount on energy costs will be provided, up to a maximum of the difference between the supported price and the average expected wholesale price.
Businesses aren’t required to take action; the changes will be applied automatically from October, with reductions visible in November bills.
Next Steps
The government will publish a review of the scheme to inform further decisions on future support from March 2023. It’s anticipated that such support will take the form of tailored assistance for certain vulnerable sectors.
Although the government’s announcement may come as a relief to businesses struggling with energy bills, it’s by no means a catch-all solution. Those on default tariffs—while paying reduced bills now—may continue to see energy costs rise. Additionally, the government’s supported price is a base cost to which suppliers could include additional surcharges. As such, it’s wise for businesses to review their energy contracts and consider if fixed-price deals would be beneficial. Organisations should also consider strategies for cutting costs and brace for further economic issues in the short to medium term.
For further details on the scheme, visit the government website.
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