As many businesses are already aware, this month the Business Energy Bill Relief Scheme (EBRS) will be coming to an end. This will be getting replaced with the government’s newest scheme, the Energy Bill Discount Scheme (EBDS). The EBDS will run longer than the current business support (April 1st 2023 to March 31st 2024). However, the new scheme reduces the amount of support available for businesses.
Why is the government reducing the amount of support businesses receive?
The EBRS was announced as part of Liz Truss’s strategy to lessen the burden of high energy bills for non-domestic energy customers. However, in January the chancellor announced at a meeting with business leaders that the current level of support for companies was too expensive for any government to sustain.
Therefore, Hunt announced that although businesses will still receive help, there will be a major reduction in the level of support available. This is to limit the taxpayers’ exposure to volatility in the energy market.
How does the EBDS scheme work?
With the EBDS any business that signed a fixed contract after the 1st December 2021 will be eligible as well as those on a fixed, variable or deemed rates contract. Suppliers will automatically apply any reductions to energy bills from April 1st 2023.
Your business will only receive support on energy bills if you are paying above the threshold prices that have been set out by the government.
The thresholds and maximum level of discount are:
- For gas, the threshold is 10.7p/kWh, with a maximum discount of 0.697p/kWh.
- For electricity, the threshold is 30.2p/kWh, with a maximum discount of 1.961p/kWh.
This means that if you currently pay under the threshold for your gas and electricity you will not receive any government support on your energy bills.
For example, if your business was paying a fixed rate of 10.5p/kWh for gas and 22.5p/kWh for electricity then you would not receive any discounts on your energy bills.
Whereas, if you were paying 15.5p/kWh for gas and 35.5p/kWh for electricity then you would receive a discount of 0.697p/kWh on your gas bill which would leave you paying 14.803p/kWh. In this situation, you would also receive the full discount for your electricity bills which would be 1.961p/kWh, leaving you paying 33.539p/kWh for your electricity.
The amount of discount you receive will be based on how expensive the rates you are paying for your energy are.
See the below illustration for an example of the rates you could be paying for your energy:
(Image from Energy Live News)
What does this mean for business energy bills?
Where businesses would currently benefit from wholesale energy prices being capped at a certain amount by the EBRS (21.1 p/kWh for electricity and 7.5 p/kWh for gas.), this new support measure will offer a lot less support for companies as the bar for eligibility has been raised significantly.
The government have said that this new support scheme is supposed to prepare businesses to transition to a new higher energy price environment to avoid them coming to a cliff edge, which would be a likely scenario for many businesses if support was fully taken away.
Businesses now must be a lot more proactive when it comes to their energy bills to ensure high energy prices don’t affect the way you run your business.
What are the key differences between the two schemes?
The biggest difference between the two support packages is what it is costing the government, the EBRS has been estimated to cost around £ 18 billion for the 6 months it has been running, whereas the EBDS is estimated to cost around £5.5 billion for the whole year this is running.
Another massive difference between the two is the eligibility bar and threshold to qualify for the discount. Due to a lack of support, businesses need to be a lot more vigilant to high energy prices.
With the pressures that certain businesses have faced from the energy crisis, the government have also introduced a separate support scheme for Energy and Trade Intensive Industries (ETII). Eligible ETII customers will have to apply for higher support as energy suppliers will not automatically apply extra support to their energy bills.
Businesses within industries such as manufacturing and construction often use a lot more energy and the nature of their business makes it harder for them to pass on price rises to their customers as they have to remain competitive across other markets such as the EU.
For ETII customers the threshold and maximum discounts are set out below:
- For gas the threshold is 9.9p/kWh and the maximum discount is set at 4.0p/kWh
- For electricity the threshold is 18.5p/kWh and the maximum discount is set at 8.9p/KWh
See more, about whether your business is qualified for this support here.
How can Resolve Energy support your business
Although wholesale energy prices began to fall at the beginning of 2023, which was a result of mild temperatures this winter, consumer prices are not likely to fall as quickly. Not only are consumer prices not guaranteed to fall, but the trends in the wholesale market could also be quickly reversed throughout the year due to a global rise in gas demand and an everchanging geopolitical landscape.
Your business needs to ensure that they are signing or renewing its energy contracts when the energy prices are at their most stable. At resolve energy, we have a team of energy experts that can advise you on the best time to sign or renew your contracts based on our market insight. If you know your business energy contract is coming to an end soon, get in touch today to see how we can help you.
If you are worried about your energy bills, we would advise you to get in touch as soon as possible to avoid facing price spikes throughout the year.
If you're looking to save money on your energy bills then why not get in touch today? The relationships Resolve Energy has developed with over 24 of the UK’s biggest business energy suppliers allows our energy experts to source the best business energy rates available for your company right when you need them. Request a free quote today and start saving money on your energy.
