A new scheme to help businesses with their energy bills is set to be introduced.
On 9 January 2023, the Government confirmed the Energy Bills Discount Scheme (EBDS) will come into force from 1 April 2023 and will run through to 31 March 2024.
It provides continued support in place of the Energy Bill Relief Scheme (EBRS) – a six-month temporary measure designed to protect non-domestic consumers from rising energy costs - which ends on 31 March.
The EBDS is welcome news for businesses who had hoped for continued support, though this is at a reduced rate.
Who is eligible for the Energy Bills Discount Scheme
As with the original scheme, the new scheme will be available to everyone on a non-domestic contract including:
businesses
voluntary sector organisations, such as charities
public sector organisations such as schools, hospitals and care homes
who are:
on existing fixed-price contracts agreed on or after 1 December 2021
signing new fixed-price contracts
on deemed/out of contract or standard variable tariffs
on flexible purchase or similar contracts
What is the reduction?
The Government will provide a discount on gas and electricity unit prices, as per the existing scheme.
Non-domestic consumers meeting the eligibility criteria will now receive a per-unit discount on their energy bills during the 12-month period from 1 April 2023 to 31 March 2024, subject to a maximum discount.
Discounts will be applied if wholesale prices are above a certain price threshold. For most non-domestic energy users in Great Britain and Northern Ireland, these maximum discounts have been set at:
Electricity - £19.61 per megawatt hour (MWh) with a price threshold of £302 per MWh
Gas - £6.97 per MWh with a price threshold of £107 per MWh
It has been confirmed that the discount will be calculated as the difference between the wholesale price associated with an energy contract and the price threshold. The discount is phased in when the contract’s wholesale price exceeds the floor price until the total discount per MWh reaches the maximum discount for that fuel.
Some non-domestic energy users are especially vulnerable to high energy prices due to their energy-intensive and trade exposure, (known as Energy and Trade Intensive Industries or ETIIs) and these sectors will receive a higher level of support, subject to a maximum discount. This discount will only apply to 70% of energy volumes. The maximum discounts and price threshold for these sectors are:
Electricity - £89 per MWh with a price threshold of £185 per MWh
Gas - £40 per MWh with a price threshold of £99 per MWh
How does it work?
Suppliers will automatically apply reductions to the bills of all eligible non-domestic customers. Eligible ETII customers will have to apply for the higher level of support.
Suppliers will be compensated by the Government for the reduction in wholesale gas and electricity unit prices that they are passing on to non-domestic customers. The discount applied will be in pence per kilowatt hour (p/kWh).
The p/kWh Government support for comparable contracts will be the same across suppliers, but the level of individual bills will continue to vary across different contracts and tariffs.
The level of support for each organisation will vary depending on the type and date of their contract.
Example 1: A pub
A typical pub uses 16 MWh of gas and 4 MWh of electricity each month. Under the new scheme, it could receive up to £2,280 of taxpayer-funded support in the 23/24 financial year.
Example 2: A small retail shop
A typical small retail store uses 2 MWh of gas and 1 MWh of electricity each month. Under the new scheme, it could receive up to £403 of taxpayer-funded support in the 23/24 financial year.
Example 3: A medium-sized manufacturing business
A medium-sized manufacturer uses 1,600 MWh of gas and 200 MWh of electricity each month. Under the new ETII scheme, it could receive up to £687,120 of taxpayer-funded support in the 23/24 financial year.
For more advice watch our webinar Managing your business through the cost of living crisis or please get in touch on 0808 144 5575 or via email; help@armstrongwatson.co.uk.
