Retailers will be breathing a little more easily after support for businesses facing rising energy bills in Great Britain and Northern Ireland was unveiled by the government this morning.
Through a new Government Energy Bill Relief Scheme, the state will provide a discount on wholesale gas and electricity prices for non-domestic customers – including all UK businesses, charities and public sector organisations – whose current gas and electricity prices have been significantly inflated in light of global energy prices.
The support will be equivalent to the Energy Price Guarantee put in place for households.
The scheme will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts.
It will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial six-month period for all non-domestic energy users.
The savings will be first seen in October bills, which are typically received in November, the government said.
As with the Energy Price Guarantee for households, customers do not need to take action or apply to the scheme to access the support. Support (in the form of a p/kWh discount) will automatically be applied to bills.
To administer support, the government has set a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this winter – which is a discounted price per unit of gas and electricity.
This is equivalent to the wholesale element of the Energy Price Guarantee for households.
It includes the removal of green levies paid by non-domestic customers who receive support under the scheme.
The level of price reduction for each business will vary depending on their contract type and circumstances.
Non-domestic customers on existing fixed price contracts will be eligible for support as long as the contract was agreed on or after 1 April 2022.
Provided that the wholesale element of the price the customer is paying is above the Government Supported Price, their per unit energy costs will automatically be reduced by the relevant p/kWh for the duration of the Scheme.
Customers entering new fixed price contracts after 1 October will receive support on the same basis.
Those on default, deemed or variable tariffs will receive a per-unit discount on energy costs, up to a maximum of the difference between the Supported Price and the average expected wholesale price over the period of the Scheme.
The amount of this Maximum Discount is likely to be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments.
Non-domestic customers on default or variable tariffs will therefore pay reduced bills, but these will still change over time and may still be subject to price increases.
The government said it is working with suppliers to ensure all their customers in England, Scotland and Wales are given the opportunity to switch to a fixed contract/tariff for the duration of the scheme if they wish, underpinned by its Energy Bill Relief Scheme support.
For businesses on flexible purchase contracts, typically some of the largest energy-using businesses, the level of reduction offered will be calculated by suppliers according to the specifics of that company’s contract and will also be subject to the Maximum Discount.
A parallel scheme, based on the same criteria and offering comparable support, but recognising the different market fundamentals, will be established in Northern Ireland.
The government said it will publish a review into the operation of the scheme in three months to inform decisions on future support after March 2023.
The review will focus in particular on identifying the most vulnerable non-domestic customers and how the government will continue assisting them with energy costs.
Prime Minister Liz Truss said: “I understand the huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods.
“As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind.
“At the same time, we are boosting Britain’s homegrown energy supply so we fix the root cause of the issues we are facing and ensure greater energy security for us all.”
