Lowering bills, cutting carbon
10 Jan 2023
From 1 April 2023, businesses across the country will see some significant changes in the way business energy support is provided. The UK government has confirmed that businesses will receive reduced support for their energy bills under a new initiative known as the “Energy Bill Discount Scheme”, as the Treasury attempts to cut the cost of compensating for soaring gas and electricity prices.
The government’s current business energy support package, which began in October, capped the unit cost of wholesale costs* for gas and electricity for all businesses until the end of March. The cap level was set at 21.1p per kilowatt hour (kWh) for electricity and 7.5p per kWh for gas.
From 1 April 2023, this ‘cap’ system will be replaced by a ‘discount’, with non-domestic energy users in the UK receiving a reduction in the wholesale element of their overall unit rates of 0.697p per kWh for gas and 1.961p per kWh for electricity. In order to qualify for this discount, the wholesale element of the bill will have to be over 30.2p per kWh for electricity and 10.7p per kWh for gas.
These changes will be in effect until 31 March 2024. The government expects the support to cost the taxpayer around £5.5bn over 12 months from 1 April 2023 (compared with the estimated £18bn for the support offered for the six months from 1 October 2022.
To see how the support scheme changes affect your business, download our simple Excel calculator.
For many businesses, this will mean a very significant reduction in support.
The Federation of Small Businesses said in response to the announcement: “Today’s decision to all but eliminate help through the Energy Bill Relief Scheme (EBRS) is a huge disappointment for small businesses. For those struggling, the discount through the new version of the scheme is not material. Many small firms will not be able to survive on the pennies provided through the new version of the scheme.”
Big manufacturers who typically have much higher bills will receive a bigger discount. To qualify, businesses have to be classed as ‘Energy and Trade Intensive Industries‘. Eligible companies will receive a bigger discount of 8.91p per kWh for electricity and 4p per kWh for gas. They’ll also have to meet a lower threshold to receive the support, paying a minimum of 9.9p per kWh for the wholesale element of their gas bills and 18.5p per kilowatt hour for electricity.
Despite the extended support, it is important to note that many businesses that are already struggling will likely find it even harder to pay their bills.
Customers do not need to apply for their discount – suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.
The Chancellor has written to Ofgem asking for an update in time for the Budget (15th March 2023) on the progress of the regulator’s review into the non-domestic market. He has asked for their assessment of whether further action is needed to secure a well-functioning market for non-domestic customers following reports of challenges certain customers are facing, including in relation to the pricing and availability of tariffs, standing charges and renewal terms, and the ability of certain sectors to secure contracts.
If you’re worried about any of these issues, talk to us to find out how we can help with your business energy.
For further information on the changes to the existing Energy Bill Relief Scheme, see the government website.
* Energy bills are made up of a range of costs, including those associated with maintaining the energy grid, and transitioning towards a greener, more reliable energy system. Both the original business energy support package introduced from 1 October 2022, and the new one replacing it in April 2023, only apply to the cost of the energy itself, known as the wholesale costs, rather than these other charges.