The government has unveiled new measures to support small businesses struggling with rising energy costs.
Through the new Government Energy Bill Relief Scheme, the government will provide a discount on wholesale gas and electricity prices for all UK businesses customers. Similar to the Energy Price Guarantee put in place for domestic customers, it will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts.
The Government Energy Bill Relief Scheme 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.
The support will be automatically applied to bills so business owners do not need to take action or apply to the scheme.
The government-set Supported Wholesale Price is expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this and 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:
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.
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.
A review into the operation of the scheme will be carried out in three-months time to inform decisions on future support after March 2023 and will focus on identifying the most vulnerable non-domestic customers and how the government will continue assisting them with energy costs.
Announcing the scheme, Business Secretary Jacob Rees-Mogg said: “We have seen an unprecedented rise in energy prices following Putin’s illegal war in Ukraine, which has affected consumers up and down the country and businesses of all sizes.
“The help we are already putting in place will save families money off their bills, and the government’s plans for businesses, charities and public sector organisations will give them the equivalent level of support. This, alongside the measures we are taking to boost the amount of domestic energy we produce to improve both energy security and supply, will increase growth, protect jobs and support families with their cost of living this winter.”
Prime Minister Liz Truss added: “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.”
Association of Convenience Stores chief executive James Lowman praised the scheme. “We strongly welcome the Government’s support package which will provide a lifeline for the UK’s local shops, enabling them to keep trading and serving their communities.
“We will continue to work closely with the Department for Business, Energy and Industrial Strategy on longer term solutions to the energy crisis facing convenience stores and other businesses, including ways to incentivise investment in energy efficient technology.”
Government Energy Bill Relief Scheme: What you need to know
How much of a discount?
The level of price reduction for each business will vary depending on their contract type and circumstances however 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.
Who does it apply to?
All 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 and that the wholesale element of the price the customer is paying is above the Government Supported Price.
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
When does it happen?
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.
What do I need to do?
Nothing. The support will be automatically applied to bills so business owners do not need to take action or apply to the scheme.
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