The Energy Bill Relief Scheme (EBRS) is a government scheme that supports organisations with rising energy bills. The scheme aims to help firms struggling with their energy costs and encourage economic growth. There was much concern about whether this scheme would continue beyond its current date of 31 March 2023. But the government have recently announced that the Energy Bill Relief Scheme is not being extended – it will be replaced with a new Energy Bills Discount Scheme. Here we look at the history of EBRS and the transition to the latest discount scheme.
What is the Energy Bill Relief Scheme?
The EBRS was first published in September 2022 – a chaotic month of political change. The global impact of the war in Ukraine on wholesale gas prices had added to the increases in the cost of energy for all UK consumers. The scheme gives discounted gas and electricity unit prices for those on non-domestic contracts. This includes businesses, voluntary organisations like charities and public sector organisations like hospitals and schools. Initially, the scheme was only open to those in fixed-price contracts signed after 1 April 2022. But after pressure from consumers, this was amended to include fixed contracts signed from 1 December.
On 1 November, the legislation was passed. This stated that the government would discount the wholesale price of both Gas and Electricity for usage between 1 October 2022 and 31 March 2023.
How does the Energy Bill Relief Scheme work?
For all eligible consumers, the discounts are automatically applied by their supplier. Businesses need not apply for the discount, and suppliers will reclaim the difference between their wholesale purchase price and the discounted rate directly from the government. One of the benefits of using an energy consultancy is bill validation to ensure that these discounts are correctly applied. As with all refunds and support schemes, scammers have seized the opportunity to attempt to get business bank account details under the pretence of “processing” a refund.
The supported wholesale price for electricity was set at £211 per megawatt-hour (MWh) or 21.1p per kilowatt hour (KWh). This was nearly £400 per MWh cheaper than the wholesale cost when the rate was agreed upon. For gas, this was set at £75 per MWh or 7.5p per KWh, which was more than £100 per MWh cheaper than the wholesale price.
What did the Government say about the Energy Bill Relief Scheme?
The current Chancellor, Jeremy Hunt, kept the scheme as part of his first budget. But the unprecedented package of support estimated to cost the taxpayer £18 billion was unlikely to continue in its current form after 31 March 2023. There had been speculation that it would be more targeted to vulnerable industries and/or smaller businesses. However, this has been described as a difficult task, determining what a vulnerable sector is and where to draw the line on business size. Another option that had been mentioned was a lower energy cap – however, we now have official confirmation of the new Energy Bills Discount Scheme!
The Chancellor has also written to the regulator Ofgem because of his concern that the recent reductions in wholesale energy prices are not being passed on to consumers. He has also requested an update before his Budget on the regulator’s review of the non-domestic energy market. The review looks at if there is a need for further action for non-domestic customers. This follows reports of customers needing help with the availability of tariffs, ongoing standing charges, and contract renewal terms.
Why is the Energy Bill Relief Scheme not being extended?
The level of support offered was always only going to be short-term, allowing businesses time to adapt to the increase in energy prices. But support at such a level would put real pressure on the UK government spending, and ultimately this cost falls to the UK taxpayer. Wholesale gas prices had fallen and are now around half the price they were when the scheme was introduced. So the new scheme is designed to continue supporting businesses while simultaneously limiting the cost to UK taxpayers. A cap on the exposure to the taxpayer has been set at £5.5 Billion. But the new scheme, which will start on 1 April 2023 and run until 31 March 2024, will reassure businesses against the risk of prices rising again. It will also give them the ability to predict their energy costs better.
The new Energy Bills Discount Scheme
The new scheme begins at the end of the current EBRS on 1 April 2023 and will be in place until 31 March 2024. Consumers will see a unit discount of up to £6.97/MWh applied to their gas bill, and a unit discount of up to £19.61/MWh applied to their electricity bill. However, these discounts will only apply above a wholesale price threshold of £107/MWh for gas and £302/MWh for electricity. So businesses who are paying less than this level will not receive the discount. Like the EBRS, these discounts will be applied automatically, and companies do not need to apply for their discount.
An additional level of support will also be provided to businesses, mainly in the manufacturing industries that are the most energy and trade-intensive (ETII). Often these businesses cannot increase their cost to customers due to international competition. These businesses will receive a capped maximum unit discount of £40.00/MWh for gas and £89.10/MWh for electricity. Again, these discounts will be subject to a price threshold of £99/MWh for gas and £185/MWh for electricity and only apply to 70% of energy volumes. Businesses may have to register for this higher level of support, and these details have not yet been released at the time of writing.
What can I do to prepare my business for energy price changes?
With the current wholesale energy price volatility, the new scheme offers business consumers some certainty over their energy costs until 31 March 2024. It will help businesses that signed contracts before the recent falls in the wholesale price. It will also offer reassurance against the risk of prices rising substantially again. But it’s always a good idea to be aware of changes that might affect your business. Working with an energy consultancy can ease the pressure of the changes in the energy market. We are the experts in energy so that you can focus on your business. We can also help answer your questions and concerns on the current EBRS and the new Energy Bills Discount Scheme. Get in touch with us today to discuss how we can help you – whatever your industry or the size of your business.