New support for households, businesses and public sector organisations facing rising energy bills has been launched by the Government, in the form of the Energy Bill Relief Scheme.
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.
In response to the government’s announcement of the energy price cap for businesses, Rob Whiteman, CIPFA CEO, said: “Today’s announcement of government help with energy bills for businesses and public sector organisations will come as a big relief to many.
“Local authorities and other public sector organisations were facing eye-watering rises in energy costs, while needing to continue to deliver essential services. This cap will provide some certainty for the next six months and allow them to plan their finances.
“But the question on every public sector CFO’s mind will be what happens next. This price cap expires at the end of the current financial year, making it extremely difficult for public bodies to plan for the next one.
“There is no end in sight to Putin’s energy squeeze on the West and the UK remains a long way from energy independence.
“Public bodies, as well as consumers and businesses, need a long-term energy strategy to give them assurance and certainty – and affordable bills. Government must also ensure that any energy strategy doesn’t come at the expense of important net zero goals.”