Government outlines plans to help cut energy bills for businesses

New support for households, businesses and public sector organisations facing rising energy bills in Great Britain and Northern Ireland has been unveiled by Business Secretary Jacob Rees-Mogg  (Wednesday 21 September).

Through a new government Energy Bill Relief Scheme, the government will provide a discount on wholesale gas and electricity prices for all non-domestic customers (including all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals) whose current gas and electricity prices have been significantly inflated in light of global energy prices. This support will be equivalent to the Energy Price Guarantee put in place for households.

It 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 6 month period for all non-domestic energy users. The savings will be first seen in October bills, which are typically received in November.

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. This is why the government 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 the government’s 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

If you are not connected to either the gas or electricity grid, equivalent support will also be provided for non-domestic consumers who use heating oil or alternative fuels instead of gas. Further detail on this will be announced shortly.

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.”

Responding to the Energy Bill Relief Scheme announced by government today, Councillor Andrew Western, Chair of the Resources Board at the Local Government Association, which represents more than 350 councils across England and Wales, said: “The inclusion of councils in the Government’s six-month energy price guarantee announced today is a positive step which should help mitigate against some of the extra costs councils face this year as a result of spiralling energy costs.

“Alongside energy bills, councils are also facing massive increases in costs due to spiralling inflation and National Living Wage increases both this year and in future years. This is forcing councils to reset budgets leading to cuts to local services just to meet their legal duty to balance the books.

“Further government support will be needed by councils and residents to cope with these ongoing pressures and to protect the services that our communities rely on every day and will be vital to help residents cope through the cost-of-living crisis.”

Support for households

The announcement follows the launch of the Energy Price Guarantee for households in Great Britain, under which a typical household will pay on average £2,500 a year on their energy bill for the next two years from 1 October.

The scheme limits the price suppliers can charge customers for units of gas and electricity, taking account of the Exchequer temporarily funding for two years environmental and social costs, including green levies – worth around £150 – which are currently included in domestic energy bills.

The guarantee supersedes the existing price cap and is expected to save the average household £1,000 a year based on current energy prices from October.

It also comes in addition to the announced £400 energy bills discount for all households and together, they will bring costs close to where the energy price cap currently stands.

Targeted support

The government also announced further details on the separate Energy Bills Support Scheme (EBSS) to ensure that the £400 discount to households starting from October will also be available to the 1% of households who would not otherwise have received this support.

Additional funding will be made available so that £400 payments will be extended to include people such as park home residents and those tenants whose landlords pay for their energy via a commercial contract.

The government will introduce legislation to make sure landlords pass the EBSS discount on to tenants who pay all-inclusive bills.

The government will also provide an additional payment of £100 to households across the UK who are not able to receive support for their heating costs through the Energy Price Guarantee. 

This might be because they live in an area of the UK that is not served by the gas grid and is to compensate for the rising costs of alternative fuels such as heating oil